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Winning strategy games

Sometimes strategy is about competing. It isnt the only way to play the game but its a choice that is available to you. You may want to choose from a variety of classic strategies to win decisively. It is even more valuable to create a virtuous cycle of growth and advantage.

Frequency: Consider different games regularly. Key participants: You and your team.

Strategy rating: ****

The founders of Zara, who became one of the worlds richest married couples, believe in staying very close to what customers want. And by what the customer wants, they mean what customers buy and wear. Traditionally, high street fashion gamble on two annual collections. Each gamble taken more than a year ahead. Each outsourced to the cheapest possible manufacturer, often thousands of miles away. Zara doesnt like guessing or waiting.

To win at this fast-fashion game, Zara made its own rules. New products replace old products twice a week. Customers find this compelling. Zara looks carefully, and quickly, at what is hot and what is not. They drop what doesnt sell, and replace it with variations of what is popular. They send people to fashion shows to send back photos for inspiration. These are compared with a huge database of previous products, to speed up design and manufacture. The results attract fashionistas on a budget, but also royalty and movie stars.

Around eighty per cent of their clothes are made locally, to keep the design-to-sale cycle under 30 days. Only particularly complex pieces are made further away, and Zara has rigorous standards for employees in all factories. Their stores aim to create

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a multi-mirrored wardrobe experience, where customers can create their own looks without noise or interruption. They want customers to get what they want, to keep them coming back for more. This is how Zara wins.

Objective

It is easy enough to talk about competitive advantage but it is often difficult for businesses to get beyond such simple concepts as having the lowest costs or having a unique product feature.

After youve done the hard work necessary to have a competitive advantage, it can be even harder to maintain your advantage. Someone else can reduce the price by improving productivity, finding cheaper employees or just by accepting lower margins. Or a competitor simply copies your unique product feature.

How can you turn temporary advantages into decisive advantages?

What can you do to create space between you and your competitors?

How can a virtuous cycle of growth and advantage be established?

Thinking like a strategist (see Part one) is essential to seeing how to connect a stream of actions in ways that competitors dont understand and cannot match. Each successful action leaves you in a better place to take the next action. You gather more resources and more possibilities with which you can con-struct even greater improvements and further difficult-to-copy benefits.

This isnt about breaking laws or being unethical. It isnt about being greedy either. Its about connecting the dots. Its about moving from basic advantages and value offered to the customer to deep advantages and value. This is good for customers and can only be achieved by creating decisive advantage.

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Context

While the exact combination of strategies you use will have to be unique, there are components, example strategies you can work with. There is less written about them than other aspects of strat-egy, which emphasises their value to you as a strategist.

Overwhelming competitors with focused energy can create the space you need. If your company is unleashed in an organised and focused way it will come as such a surprise to your competitors that they are unable to respond.

Exploit exceptions that your competitors dont understand or are not motivated to look after. Looking after non-customers is one approach to finding exceptions (see page 215). Going into the field and looking for insights, problems and contradictions is another (see pages 217 and 193).

Threating the profit of competitors is a way of distracting them and weakening their cash position but can also leave you in a negative game where you each progressively lose money. Its one way of encouraging a competitor to retreat, leaving you to enjoy less competition, but there are other more positive approaches.

Creating your own version is all about improving on existing ideas. You might start with a basic copy but pretty soon you imag-inatively move your idea beyond the original concept. Target did it to Walmart who did it to K-Mart. Apple did it to Microsoft with their iPad Tablet. Uber are doing it to every taxi company with a customer experience deficit.

Breaking compromises is part of exploiting exceptions and creat-ing your own version. If you can find a rule that everyone keeps, and then successfully break that rule to the benefit of your custom-ers, you have the start of a decisive advantage. Four Seasons hotels used free toiletries for guests as the basis for enduring success. First, because no other hotel offered the same benefits, and second, because they gained a reputation for great customer service. More recently, Airbnb have broken the rules to turn homes into (unique) hotels where everyone belongs everywhere.

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Challenge

Each of the hardball strategies above and others like them is difficult. To overwhelm a competitor requires a level of organi s-ation that is hard to achieve. And you have to take a risk that this is the right time and the right gamble.

Similarly, threatening the profit of competitors can be very costly. The ideal is to use it defensively to keep them away from your areas of profit. Or to only threaten profit in market segments they are happy to leave because they appear unattractive to them. This creates a dilemma for your competitor, who knows you want the market but doesnt want to compete.

Exploiting exceptions, creating your own version and breaking compromises all rely on the ability to have fairly unique insights. These insights come from a combination of creativity and exper-tise that require investment of time and money. Your first efforts may be less hard to copy than you had imagined or less valuable in creating demand than you had hoped.

Use the strategists toolkit as part of team activities to play out scenarios in which you move from where you are now through successive phases of competitive advantage. Each time imagine how advantages at one stage can open up possibilities for the next stage.

Success

Youll know that youre getting better when you are confident at speaking about different kinds of strategic games. You will learn to use the strategists toolkit to identify opportunities that your com-petitors will find hard to exploit.

You will recognise the dangers of such hardball strategies to your own company. And you will think about your response to them. How will you deal with threats to your profits? How can you re-act effectively to attempts to overwhelm you? Who are the most likely competitors to play those games? What areas are you being led away from because they appear unattractive?

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Your team will start to view strategy as a mixture of thinking, plan-ning and playing. There are games to be played that make the best of your thinking and planning, without which they are wasted.

Strategists measures of success

Individual games are understood in relation to general strategy.

Teams use the games to play scenarios through as part of planning.

You do not rely on negative games and instead use your knowledge to be ready for attacks from competitors.

Cumulative, decisive competitive advantage is created.

Pitfalls

Some strategies are played just to damage competitors. They be-come so negative that whole markets become locked in a negative spiral of reducing returns. If you rely too heavily on negative strat-egies your company may spend too little time on improving your own offer through innovation. You may also damage your brand reputation and risk attracting the attention of government.

Strategists checklist

Explore how competitive advantages could be developed into a stream of advantages that reinforce your competitive position.

Consider actions that put your competitors at a disadvantage and give you time and resources to invest in improving your products and services, or to invest in talent or resources.

Start to think about strategy as a series of connected actions rather than as stand-alone plans.

Draw up a strategic campaign with your team to increase focus and commitment on the creativity necessary to establish a longer-term advantage (and contribution).

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Be careful not to depend on negative competitive strategies. Their purpose should be to protect positive strategies.

Consider your response to competitors who use this kind of strategy against you. Being aware can avoid competitive traps and dead ends.

Related ideas

George Stalk and Rob Lachenauer argue in their book Hardball that competitive advantage is no longer enough because it is so short-lived. The more important focus is to transform momentary advantage into perpetual advantage. This moves from a kind of blue ocean strategy (see page 189) into a resource-based advantage over time (see page 177).

Perpetual advantage combines what you do and where you do it. In their latest book, Playing to Win, A.G. Lafley and Roger Martin urge strategists to ask: Whats your winning aspiration? Where will you play? How will you win? What capabilities must you have? And what management systems are required?

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