Outmaneuver: Outthink—Don’T Outspend

By Alex Verjovsky and Jeffrey Phillips

Look at any industry, in any market, and youll find the same attrition strategy playing out everywhere. Companies compete with one another in a mindless race to the bottom, matching feature for feature, which commoditizes markets and drives down prices and margins. Ultimately, no one winsnot even the consumer, as quality, service, and differentiation suffer. Yet there is another way: maneuver strategy.

Maneuver relies on speed, agility, insight, and innovation to win the most in any market at the least possible cost. Unlike attrition, maneuver never seeks to attack an incumbent in head-to-head competition. Instead, maneuver uses reconnaissance and insights to identify weaknesses and uses three strategies (preemption, dislocation, and disruption) to attack those vulnerabilities. Using speed and agility, a maneuver strategist wins new spaces before competitors become aware of the opportunity or disrupts the well-laid plans and efficient operations of competitors.

As the pace of change accelerates, as speed and agility become more important than size and strength, as new entrants disrupt existing markets, attrition strategy seems outdated. Maneuver strategy, with its focus on speed, agility, and innovation, is the right strategy for the new emerging markets.

• Language: English
• Publisher: Xlibris US
• Release date: Jan 15, 2016
• ISBN: 9781514440285

Alex Verjovsky

Jeffrey Phillips Jeffrey Phillips leads OVO Innovation, an innovation consulting company in Raleigh, North Carolina. Jeffrey has led strategy and innovation projects in a number of industries, including pharmaceutical, high tech, financial services, insurance, medical products. He is the author of three books, including Relentless Innovation, and writes the popular Innovate on Purpose blog. Alex Verjovsky Alex Verjovsky brings over twenty years’ experience in the consulting and technology sectors as both a consultant and entrepreneur. His most recent company, Castor Fields SAPI, reached over twelve billion dollars in sales. Prior to Castor Fields, Alex founded BioFuel Alternatives, a pioneer in the biodiesel market. Alex is a graduate of Columbia Business School.

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Copyright © 2016 by Alex Verjovsky / Jeffrey Phillips.

Library of Congress Control Number:   2016900387

ISBN:      Hardcover      978-1-5144-4916-5

                Softcover        978-1-5144-4029-2

                eBook             978-1-5144-4028-5

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

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Rev. date: 01/15/2016

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CONTENTS

Introduction

What Is Maneuver?

Preemption

Reconnaissance

Maneuver Methodology

Dislocation

Disruption

Capabilities That Enable Maneuver

Conclusion

Author Bios

Appendix One

Appendix Two

Appendix Three

Appendix Four

ACKNOWLEDGMENTS

Alex: I want to thank those people who helped realize the concept of maneuver theory in business.

To my coauthor, Jeffrey Phillips, who has been a colleague and friend for many years.

To Moshe Goldberg, a friend, a mentor, and if I may say, a second father figure to me. Thank you for all the advice and help you have given me for close to twenty years.

To my son Aaron Verjovsky for helping me build the methodology and for helping Jeffrey and me proofread the entire manuscript.

To Yolanda Palomo, John Jarvis, Jaime Contreras, Moises Tiktin, and Professor Bruce Craven for helping me read through some of the chapters. Your advice was duly noted.

To sergeants major of the army David Mahluf and David Ben Ari, you both are like brothers to me.

To my late parents, Moises and Teresa Verjovsky, who instilled in me a love of learning and reading.

To my son Yonatan for making me laugh each and every day.

Finally, to my wife, Betty, who, for the last thirty years, has been guarding my flank. Without her, this book and many other projects would have never happened.

Jeffrey: This book is dedicated to my kids—Helen, Rachel, and Jacob, who will have the opportunity to fix the mistakes our generation has made. Hopefully, these ideas will give you guidance.

And to Catherine, who keeps the trains running on time. I couldn’t do what I do without you.

INTRODUCTION

We live in an unprecedented era of abundance and choice. In any retail establishment or website, you’ll find a range of choices for almost any product you can imagine. The array of choices seems almost endless. As consumers, we have become accustomed to a significant number of choices in the products or services we consume. But take a step back, and take a closer look, and what you’ll discover is that the range of choices is actually fairly limited. Most consumer products are produced to match other products feature to feature, down to the smallest details. Today, every transoceanic airline offers a flatbed seat in its premium cabins. Most hotels brag about their mattresses or infinity pools. The pattern repeats itself, regardless of the industry. This is not simply a coincidence, and as you will see, it has become the norm.

As the number of comparatively equivalent products increases, product manufacturers have a choice. They can create new, differentiated products, or they can change the value proposition of the existing product by increasing their marketing efforts or reducing prices (both of which result in lower margins).

While there is an apparent abundance in choice, most industries are moving toward an increasing commoditization. That commoditization signals that most market participants prefer to compete head-to-head, feature to feature, based primarily on price. However, a number of aggressive, nimble competitors are using speed, agility, insight and innovation to compete in completely different ways and are experiencing inordinate growth and profits. We’ll examine the strategies that make companies like Zara, Tesla, Netflix, and others so successful in a sea of sameness.

Head-to-head competition only makes sense if a competitor can drive another out of the market, but increasingly few companies can completely dominate a market, and even if they can, there’s enough oversight to ensure that markets remain competitive. We call this mindless, toe-to-toe, feature to feature competition attrition. Attrition strategies and tactics, along with a lot of other business concepts, were inherited from the military. attrition_no_type.jpg

Modern business strategy owes a lot to the military, but too often businesses have adopted only a small portion of what the military can teach. The overwhelming reliance on attrition is a good example. While attrition is a strategy, it is not the only strategy and isn’t practical in many settings. We believe that another, often overlooked or ignored military strategy, maneuver strategy, maneuver_no_type.jpg should be adopted by business leaders seeking new ways to compete, to avoid commoditization, and to win at the least possible cost. In this book, we’ll introduce the ideas and tactics behind maneuver and demonstrate examples of successful maneuver from military campaigns and from the business world. We’ll examine how companies like Zara and Tesla are adopting strategies and tactics that were first used by generals like Genghis Khan and King Leonidas. We’ll see that rather than outfighting or outspending competitors, good strategists OutManeuver™ their opponents. Further, we’ll compare and contrast attrition and maneuver and describe why we believe the time is right to adopt far more maneuver strategies and tactics. First, let’s define our terms and present a little context.

Merriam-Webster defines attrition as attrition_no_type.jpg

the act or process of weakening and gradually defeating an enemy through constant attacks and continued pressure over a long period of time.

Throughout history, armies clashed in violent conflicts. Most of the winners were able to outlast their opponents, not necessarily outfight or outthink them. Trench warfare in World War I and broad frontal assaults in the US Civil War provide excellent examples of attrition strategy. Attrition warfare seeks to grind down an opponent and render that opponent ineffective in the battlefield. As military leaders became business executives in the late nineteenth and early twentieth centuries, they translated attrition strategies into a business context. And in certain situations, attrition is a perfectly acceptable business strategy.

However, as market circumstances change, as trade barriers fall and new market competitors arise, change accelerates, and technologies proliferate, business strategies have failed to keep pace. We believe maneuver strategy offers a way out of costly, bloody competition.

Maneuver concepts aren’t new. Sun Tzu, writing in approximately 500 BC, documented many of the maneuver strategy tenets in The Art of War. Over the centuries, invading armies ranging from the Mongols to the German Wehrmacht have used maneuver concepts to not only defeat opponents but to surprise and overwhelm them. Modern militaries, as well as business executives, frequently overlook or ignore maneuver strategies because they aren’t as chivalrous as head-to-head conflict, and maneuver requires far more market insight than attrition strategies. Attrition is also favored, we believe, because maneuver requires enablers like speed, agility, and innovation that larger, traditional market incumbents often lack.

We define maneuver as: maneuver_no_type.jpg

using speed, agility, insight, and innovation to win the largest victory at the least possible cost, using one of three strategies:

1. Taking a valuable, unoccupied space before competitors are aware the space exists (known as preemption)

2. Attacking an incumbent in a way that forces the opponent to fight with less than its full capabilities and on the attacker’s terms, causing the opponent to vacate part or all of a valuable position (known as dislocation)

3. Disrupting an opponent’s detailed scheduling or planning, distracting an opponent from efficient execution, delaying a timely launch, creating confusion or havoc in an opponent’s capabilities (known as disruption)

As we’ve noted, many of the key elements in maneuver theory are not new. Carl von Clausewitz, one of the leading military strategists of the nineteenth century, documented many of these concepts in his book, On War, which even today still informs military thinking. While the ideas behind maneuver have existed for at least 150 years, many of the lessons learned from wars in the twentieth century suggested attrition was the appropriate strategy. Only during the most recent wars in Afghanistan and Iraq have the concepts of maneuver become more relevant in a military setting, and we believe it is also the time for maneuver to be preeminent in business strategy. Two important reasons relate to speed and inertia.

Why Attrition Gives Way to Maneuver

Since Henry Ford developed the mass production line, the prevailing strategy that most corporations follow is to scale quickly, drive down costs of production, and lock up market share, all in the service of discouraging competitors from entering the market. In this strategy, size matters. Size allows an incumbent to reach a lot of customers and spread the costs of production. However, with size comes bulk, bureaucracy, and eventually, inertia. Large businesses frequently become slow, dull, or complacent. They lose the ability to act quickly and often resort to a defensive posture, protecting market share rather than proactively attacking new segments or markets. Nimble, faster competitors can attack larger or slower competitors more easily, where and when they choose.

Not long ago, it was conceivable that a company could lock up its customers, defend market share, and win with scale. General Motors at one time had close to 60 percent share of the US auto market and seemed unbeatable. It could afford to compete head-to-head with other car companies and either drive them out of business or acquire them. But as GM grew, it became slow, complacent, and unresponsive to market dynamics, leaving the door open to new competitors. These new competitors, primarily Japanese companies like Honda and Toyota, preempted GM in the market for fuel-efficient cars and disrupted GM’s operations and market share. Simply put, what had worked for GM for decades made GM unable to see that the market had changed. Fuel efficiency, economy, and product quality became as important as the brand. The emergence of a consumer segment that wanted a less expensive, more dependable high-quality car that got better gas mileage became a valuable but unoccupied position that Japanese competitors were able to enter and dominate. In this case, speed and agility become far more important than size and scale.

When speed and agility are important, maneuver is far more attractive than attrition, especially because maneuver wins at a much lower cost. Yet maneuver requires more strategy and insight than attrition and often demands a different business model. Maneuver values insight, intelligence, decisiveness, speed, agility, and innovation—factors that may not be present in a company focused on attrition. And given the emerging competitive factors and increasing pace of change, the enablers we listed for maneuver will help companies compete in the new globalized marketplace, far more than size and cost will.

As we examine current competitive conditions, we believe market conditions favor companies that can compete based on speed, agility, and innovation. Consumers are far more demanding and have higher expectations. New and frequently unexpected competitors arise from unusual positions. Uber and Airbnb are two examples of new entrants that are disrupting old-line established competitors using maneuver tactics. The pace of change continues to accelerate. These factors and others demonstrate that speed and agility and the ability to innovate will become far more valuable than the ability to overwhelm a competitor and compete feature to feature. If our assessment is correct, then maneuver should become a far more attractive strategic option, yet maneuver is not well understood. We hope this book will convince you of the efficacy and power of maneuver.

Throughout this book, we’ll examine both military and business case studies to illustrate why maneuver is so valuable and how it works, highlighting three maneuver strategies: preemption, dislocation, and disruption. We’ll demonstrate how any company of any size can implement any of or all these strategies at any planning level within the company. We’ll present a methodology to help you identify your opponent’s critical weaknesses, which can be easily attacked through maneuver tactics. We’ll review business model, cultural, and hierarchical changes needed to implement maneuver strategy and describe the kind of insight and intelligence necessary to act on maneuver opportunities. Finally, we’ll present key enablers for maneuver and compare their importance in an attrition strategy and a maneuver strategy. The outcome will show what’s needed to win in emerging global markets.

In this book, we’ll use a combination of military and business case studies to identify the relevant points of maneuver strategy. We promise you won’t need to be a military historian to read and understand the points we are making. You won’t find any maps with arrows that illustrate where a particular army was dug in or have to decipher intricate military acronyms. What you will find are stories drawn from case studies that demonstrate how companies have leveraged maneuver strategies and tactics to enter new markets, discourage or defeat competitors, and gain more market share and outsized profits, typically at a far lower cost than using attrition strategies.

By the time you’ve finished this book, we expect you’ll agree that attrition isn’t just a poor strategy, but it is the absence of strategy and that you’ll decide to commit at least a portion of your strategic thinking to maneuver strategy and tactics.

WHAT IS MANEUVER?

There are few stories Hollywood loves more than a feisty underdog battling a powerful enemy. Whether it’s Erin Brockovich suing corporate polluters or a platoon of paratroopers fighting against overwhelming odds in Band of Brothers, we cheer for the underdog, and Hollywood knows it. Our culture celebrates the small, unlikely victories that are won against seemingly impossible odds. While head-to-head competition against a much larger opponent is courageous and even honorable, it is usually brutal, bloody, and in the end, damages and weakens both sides, in warfare and business competition. While we celebrate the underdog, the reality is that most attrition battles are won by the side with the most resources. Yet head-to-head, feature-to-feature competition overlooks a wealth of other strategic options. As we’ll see, one noted expert even claims that head-to-head competition is evidence of a lack of strategy rather than intelligent competition.

Is it smart when two or more companies present virtually identical products to the same customer base, relying only on price as a differentiator? Have large corporations paid lip service to differentiated strategies, increasingly relying on cost-cutting and efficiency to overcome inadequate strategic thinking and subsequent implementation? Unfortunately, we believe the answer is yes, and dependence on these outdated tactics has blinded executives to other, viable strategic options. This strategic blindness often starts in the modern military, where strength and technical advantage carries much more cache than agility and speed. Some military lessons trickle down and have a positive influence on business practice, but in this instance, the military lesson reinforces a very limited perspective. In the recent past, when competitive conditions were more stable, predictable and slow to change, attrition lessons were useful. But as the pace of change increases, new competitors emerge, and market conditions shift, modern businesses need to discover new ways to compete.

Corporate strategies and hierarchical business models are based on military experience, because for many years, the military was the largest organization. For example, the US military was the largest organization in the United States until the end of the civil war. Because of their size and distribution, militaries had to create effective means to develop and communicate strategy, implement command structure, and ensure efficient operations. Not surprisingly, these strategies and structures were later adopted by private corporations, starting with the railroads, which blossomed after the civil war. These new corporations recruited top military officers to become corporate executives. From that time forward, the military has often been a source of insight and strategy for commercial businesses. The concepts that flow between private industry and the military include ideas about organizational hierarchy and command and control, as well as concepts around training, logistics, and strategy. Military strategy has informed political and commercial thinking for years. The question we should be asking now is, Have our businesses learned the right lessons and applied the best strategies, or have we blindly followed the strategies that were successful for the military without understanding the conditions that made them successful?

Linking business strategy with military strategy is not new. It dates back to the ancient The Art of War, written in China almost two thousand five hundred years ago, and continues through military strategy books written by Clausewitz and Jomini in the eighteenth century. Academics and business leaders have translated these military tomes and others and applied them to business settings. Sometimes, however, some of the best ideas are ignored or overlooked. Too often the lessons of attrition were emphasized, while lessons about maneuver were overlooked, in our opinion. Most business competition is taking place toe to toe, strength against strength, with little consideration given to potential alternatives or options. In an age where chivalry is dead and asymmetric warfare is commonplace, businesses have much to learn about how to position themselves to win any competition with the least investment, the least risk, and the least cost. Examining military strategies will lead us to better ideas about organizational strategy, operations, and tactics. Let’s review an example from history that highlights the rationale for maneuver over attrition.

Why the Greeks Won at Thermopylae

The story of King Leonidas and the 300 at Thermopylae is tailor-made for the cinema. The Greek stand at Thermopylae includes a number of strategies that modern businesses can learn from and adopt, hopefully to better outcomes than the 300 experienced. In the narrow context of the battle, the Greeks didn’t win anything at Thermopylae. Leonidas, the Spartans (and other Greeks) who fought with him were annihilated. But their sacrifice at Thermopylae and their strategy paved the way for a later Greek victory at Plataea over the Persians. What’s more instructive than the noble sacrifice by the small band of Greeks is Leonidas’s strategy. What the Spartans won at Thermopylae was the gift of time, and they won time by forcing the Persians to fight on a battlefield where the Greeks could negate the strengths of the Persian army. Leonidas knew from the start that his small army could never defeat the Persians. His goal was simply to stop the momentum of the Persians and buy time for the rest of the Greek people to rise. Leonidas used preemption to force the Persians to fight where the odds favored the Greeks, and in doing so, he dislocated some of the Persians’ advantage in technology and size. Further, the battle at Thermopylae disrupted Xerxes’s plans. These three strategies and the accompanying tactics enabled Leonidas and the Greeks to convert the Persians’ strengths into critical weaknesses.

Don’t worry if you don’t understand terms such as preemption, dislocation, and disruption. We will explain them in detail later.

If you know