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TABLE OF CONTENTS Acknowledgments 1. An Introduction to Judo Strategy PART I: PRINCIPLES OF JUDO STRATEGY 2. Movement: Don’t Invite Attack, Define the Competitive Space, and Follow Through Fast 3. Balance: Grip Your Opponent, Avoid Tit-for-Tat, and Push When Pulled 4. Leverage: Leverage Your Opponent’s Assets, Partners, and Competitors PART II: MASTERS OF JUDO STRATEGY 5. Jeff Hawkins and Donna Dubinsky: Mastering Movement at Palm Computing 6. Rob Glaser: Maintaining Balance at RealNetworks 7. Halsey Minor and Shelby Bonnie: Maximizing Leverage at CNET Networks PART III: RESPONDING TO JUDO STRATEGY 8. How to Beat a Judo Master: From Judo to Sumo Strategy 9. A User’s Guide to Judo Strategy Appendix: List of Interviews Notes Index About the Authors |
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Metaphors play an important role in business. They simplify a complex world, help organize facts and intuitions, and allow you to express ideas in a lively, thought-provoking way. Moreover, metaphors can be great motivational tools because they are usually easy to understand and hard to forget. Scott McNealy, the CEO of Sun Microsystems, admits that he often finds himself "turning to metaphors and analogies, borrowing images from sports and even war to drive home my business strategy and motivate the troops." McNealy believes that "the companies that succeed will be the ones that…employ great metaphors and analogies to define their business and tell their stories." This book is built on two broad metaphors that we hope readers will find compelling in thinking about the strategic challenges their businesses face. Our primary metaphor comes from the sport of judo, which originated in late nineteenth-century Japan. Judo requires quickness, agility, and the ability to outmaneuver the competition. Most important, in judo, unlike many martial arts, true strength comes from turning your opponent’s weight and power to your advantage. We picked up on this idea while conducting interviews at Netscape in the summer of 1997. When we asked Netscape’s head of engineering how he could ever hope to compete successfully with Microsoft, given the dominant position of Windows, he gave a very judo-like answer. "You can either look at Microsoft’s operating system as an asset," he said, "or you can think of Windows as a liability that slows Microsoft down." The very fact that Microsoft was so committed to Windows, he argued, created opportunities for Netscape to use Microsoft’s strength to its advantage. As we reflected on this concept, the judo metaphor became increasingly compelling as a means for thinking about how companies could overcome larger rivals. The same skills used by judo masters, we came to believe, could help businesses become more effective competitors. We originally wrote about these ideas in Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft. But that project only whetted our interest in further exploring judo’s potential for competitors both large and small. Our first step was to do our homework on judo. In addition to reading up on the subject, we observed judo classes and competitions, interviewed judo masters in the United States, and traveled to Japan to speak with experts on both judo and sumo (our other principal metaphor). But we must admit that neither of us was willing to take judo (or sumo) classes. We only wanted to take the metaphor so far! Next, we explored the management literature and learned that judo has long been used as a metaphor in business and academic circles. Many business executives were in the habit of casually describing their tactics as "judo" or "jujutsu." And the judo metaphor had already surfaced among both economists and students of strategy. Gary Hamel and C.K. Prahalad, for example, made reference to the sport in their classic Harvard Business Review article on strategic intent, writing "Competitive innovation is like judo: upset your rivals by using their size against them." Yet no one, to our knowledge, had tried to use judo as the basis for a systematic way of thinking about strategy. Thus, our challenge became to discover if judo-like techniques were really being used by managers, and if judo delivered value as a metaphor for developing and communicating strategy. We began by identifying examples of judo-like business behavior in both the past and the present. Between the spring of 1999 and the fall of 2000, we interviewed more than fifty executives, many of them CEOs and company directors, some multiple times. (All unattributed quotations in this book are drawn from these interviews, which are listed in the Appendix.) In several cases, we also spoke with executives at companies competing with firms in our sample. After spending a couple of days at RealNetworks, for example, we interviewed the CEO of Microsoft and key managers in Microsoft’s streaming media business. Similarly, as part of our analysis of CNET, we met with the CEOs of the company’s biggest rivals, IDG and ZDNet. In one important case, we were unable to rely primarily on interviews for our analysis. What we describe as sumo strategy—making the most of your strength and power—can be a very sensitive topic for the very large companies that are most likely to profit from these techniques. Consequently, we drew heavily on public information and government documents, as well as selected interviews, in writing this section of the book. Fortunately, the Department of Justice has created an extensive online archive of documents filed as part of the case against Microsoft that began in 1998. These materials were invaluable in our research. We were pleased that numerous managers seemed to use judo strategy, although like Molière’s Monsieur Jourdan, who didn’t realize he was speaking prose, they generally did so without using the term. Some of the companies we studied employed judo techniques with extremely positive results. Other companies started out looking like success stories but found it difficult to execute their strategies over time. This made it possible for us to study why judo techniques worked and why they sometimes failed. Our results largely confirmed our hypothesis that judo strategy can help many companies succeed against stronger players. But it also confirmed our suspicion that judo strategy is not a universal remedy. We don’t try to reveal any corporate secrets in this book. In accordance with Harvard Business School rules, we promised the executives we interviewed that they could review their quotes and veto the release of any proprietary information. The vast majority did not request any changes in the wording or our usage of their quotes, and in only one case were we asked to remove confidential information. A couple of companies inevitably cleaned up their CEOs’ prose, but we feel comfortable that our research and message have remained intact. We have organized the book in three distinct parts to allow readers to focus on those elements of judo strategy that interest them most. The first four chapters of the book systematically apply the judo metaphor to business strategy. We take the core principles of judo—movement, balance, and leverage—and explore specific techniques companies can use to gain an advantage over the competition. Every technique is supported with examples from real-life companies and managers, often drawn from the old economy as well as the new. The second section of the book details how three companies have put judo strategy into action. We looked for black belts: judo masters who were the best practitioners of the art. Our choices were Jeff Hawkins and Donna Dubinsky from Palm Computing and Handspring; Rob Glaser from RealNetworks; and Halsey Minor and Shelby Bonnie from CNET Networks. Palm was part of our research design from the very first—since David Yoffie had learned about the business from Donna Dubinsky while their daughters were attending preschool together in 1995. RealNetworks was not part of our original plan, but after a couple of meetings with Rob Glaser, we were impressed with his command of judo-like techniques. Similarly, CNET was not on our original list, but after our first meeting with Halsey Minor, we realized that CNET used leverage at nearly every stage of its drive to success. Finally, the last section of the book offers guidance to two groups of readers: those who want to know how to fight back against judo strategists, and those who want to learn more about putting judo strategy into action. We have tried to make this discussion accessible and potentially valuable for all managers—whether you’re part of the old economy or the new, an established player or the new kid in town. If you too find value in using metaphors to shape your thinking about strategy, we think you will enjoy this book. |
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EXCERPTS FROM "CHAPTER 1: JUDO STRATEGY" "[Judo] depends for success upon the skill of using an opponent’s own weight and strength against him, thus enabling a weak or light individual to overcome a physically superior opponent." --Columbia
Encyclopedia, 6th edition A Tale of Two Companies In the spring of 1994, a little-known company called Mosaic Communications opened its doors in Mountain View, California. Six months later, the tiny start-up had become Netscape Communications, the hottest company in the white-hot high technology world. Netscape’s flagship product, the Navigator Web browser, dominated its market from day one. Co-founder Marc Andreessen became the first of the cybercelebrities, showing up in People as well as Time. And in August 1995, a scant sixteen months after its founding, Netscape delivered the Internet’s first moonshot IPO. But Netscape’s star fell nearly as quickly as it had soared. On December 7, 1995—Pearl Harbor Day, as history buffs immediately recalled—Microsoft unleashed a declaration of war, making Netscape "ground zero," in the words of John Doerr, one of Netscape’s original backers and a member of its board. Under relentless attack, Navigator’s market share soon began an irreversible decline, while fears about Netscape’s ability to compete with Microsoft drove its share price into the ground. By the end of the decade, Microsoft was king of the browser business, and Netscape survived only as a division of AOL. Moreover, all across the new economy, being "Netscaped" had become a four-letter word. Two years before Netscape was born, another company set up shop a few miles up the road in Los Altos, California. After treading water for a few years, Palm Computing shipped the Pilot, a handheld electronic organizer, in April 1996. The giants of computing and consumer electronics, including Apple, Microsoft, Hewlett-Packard, and Sharp, were already fighting for the category, and any one of them could have crushed Palm. So the company’s founders, Jeff Hawkins and Donna Dubinsky, held their breath in the months following the Pilot’s release. By the end of 1996, however, it was clear that Palm had created a star. Like Netscape’s Navigator, the Pilot dominated its market within a year. But unlike Netscape, Palm went from strength to strength. Despite Microsoft’s repeated efforts to take over the market, Palm’s share remained close to 70 percent after four years, and first-day trading valued the company at $53 billion when Palm went public in March 2000. Palm was not only alive and kicking, to borrow from the Apple lexicon, Palm was "insanely great."
An Introduction to Judo Strategy Why did Palm succeed where Netscape failed? What distinguishes challengers who build successful businesses from those who fall by the wayside, despite an auspicious start? Which strategies hold the most promise for companies facing powerful opponents, and which approaches are most likely to lead to defeat? These are questions that all ambitious businesses eventually face. Stories like those of Netscape and Palm, where a tiny upstart confronts one of the largest companies in the world, throw the challenge of competing with stronger opponents into stark relief. However, even large corporations may find themselves in similar situations if they expand beyond their base. The strongest, battle-hardened competitor can be at a severe disadvantage when trying to enter into a market where a powerful incumbent holds sway. So what strategy is most likely to succeed when strength or size is not on your side? Whether you're large or small, the answer is not to oppose strength with strength, as Netscape ultimately chose to do. Instead, study the competition carefully, avoid head-to-head battles, as Palm did, and use your opponents' strength to your advantage. This is the lesson at the heart of judo strategy. … The Origins of Judo Strategy The roots of judo strategy lie in "judo economics," a term coined by economists Judith Gelman and Steven Salop to describe a simple strategy for entering a market dominated by a large opponent. Like most journal articles, their paper is strewn with assumptions, diagrams, and math. But behind the equations lies a simple idea: If you mount a full-scale attack on a stronger incumbent, your opponent will fight back—say, by slashing prices—and almost certainly win. However, you can avoid this outcome by pledging to be satisfied with a small slice of the market. In this case, self-interest will lead the incumbent to accommodate entry, rather than launch a price war that would spoil the market as a whole. Gelman and Salop called this entry strategy "judo economics" because it shows how a small company can use a larger opponent’s size to its own advantage. By reducing the threat that it poses, the attacker induces the incumbent to tolerate its presence, rather than fight back. JUDO ECONOMICS—A SIMPLE EXAMPLE The basic model makes a few important assumptions: the incumbent faces a single challenger, the challenger has no cost advantage, and the incumbent must charge all customers the same price (i.e., price discrimination is impossible). Based on these assumptions, the logic works like this: Assume that the incumbent supplies ten customers with widgets for $50. If you offer to supply the entire market at $40, the incumbent will be forced to match your price or lose all of its sales. By contrast, if you only have enough capacity to sell to one customer, the incumbent will find it more profitable to accommodate your entry by sticking to his original price and selling to the remaining nine. The idea behind judo economics—turning your opponent’s size into a disadvantage—has a lot of intuitive appeal. But judo economics has important limitations as well. First, it is very difficult to implement. It’s one thing to say that you won’t threaten bigger competitors. It’s quite another to convince them that you mean what you say. Moreover, judo economics looks far less promising once the assumptions behind the original model are relaxed. If, for example, the incumbent faces not just one entrant, but a long line of potential challengers, he’s much more likely to fight anyone who steps into the ring. In this way, he can establish a reputation for toughness and deter other players from taking him on. But the greatest weakness of judo economics is that it sets its sights too low. Judo economics may allow you to survive, but only at the cost of staying small. For most managers and companies, this is not enough. You don’t want to skulk around the sidelines; you want to get out there and win. Winning, of course, can take different forms, depending on the competitive dynamics of your business. If you’re in a winner-take-all industry, winning means ending up on top. If your sector can support several strong players, it means becoming one of the Big Three. In tougher environments, winning may take a more limited form: building a profitable business in a market where the vast majority of challengers fail. In this last case, judo economics may be of some help, but should your ambitions range higher, it has little to say. Judo strategy picks up where judo economics leaves off by providing a set of tools that allow you to do more than just survive--they show you how to thrive and grow. The goal of judo strategy is not just to gain a toehold in a market. It is to establish a growing and ultimately profitable position. Management sage Peter Drucker describes a concept he calls "entrepreneurial judo" in similar terms. "Entrepreneurial judo aims first at securing a beachhead, and one which the established leaders either do not defend at all or defend only halfheartedly," he writes. "Once that beachhead has been secured, that is, once the newcomers have an adequate market and an adequate revenue stream, they then move on to the rest of the ‘beach’ and finally to the whole ‘island.’" Drucker identifies the critical problem: How can you move beyond your beachhead once competitors have been alerted to your attack? Judo strategy provides the mind-set and the techniques that make it possible to defeat larger and stronger opponents. Moving beyond judo economics, judo strategy goes back to the original source for inspiration--back to principles that judo masters have been teaching for more than a hundred years. |
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