Monday, November 27, 2006

Life lessons from Judo

How do you compete with opponents who have size, strength, and history on their side? Perhaps one can pick up some lessons from Judo, a traditional Japanese contact sport

Southwest Airlines is perhaps the world’s most valuable airline. When it entered the market in the 1970s, it was up against severe odds. The US airline industry was already crowded with strong players. Southwest had two choices: compete by the rules already laid down by the older airlines. Or try out something new. Southwest chose the latter. All the major US carriers at that time used the traditional hub-and-spoke systems supported by enormous terminals in major cities, complex reservations systems, and variegated fleets that were carefully calibrated to the mix of routes that each airline served.
Southwest chose to serve smaller airports instead. It offered no connecting flights, assigned seating, or meals; and it operated an all-737 fleet. This made it possible for it to keep fares 50% to 60% below its rivals. United, Delta, and American Airlines could match Southwest’s pricing but never its financial performance because the cost of maintaining their core assets dragged profitability down.
Southwest used what we call a judo strategy. Instead of taking rivals head-on, it decided to rely on speed, agility and creative thinking to craft strategies that make it difficult for powerful rivals to compete. Successful challengers use judo strategy to prevent opponents from bringing their full strength into play. Judo strategists avoid conventional forms of competition, such as head-tohead struggles, that naturally favour the large and the strong. The three strategic principles that lie at the heart of this approach are movement, balance, and leverage.


Judo strategists use their agility to move into a position of relative strength while evading attack. They keep a low profile and avoid head-to-head battles that they’re too weak to win—a technique we call “the puppy dog ploy”.
Consider the rapid rise of Capital One. It became one of the biggest and most profitable credit card issuers in the US in less than 10 years, thanks largely to its ability to remain “extremely confidential and very, very hush-hush,” as one former executive explained. By avoiding product announcements and other publicity in favour of direct marketing campaigns, Capital One made it nearly impossible for competitors to imitate its highly targeted products. Consequently, the company faced little direct competition in many of the market segments it pioneered.
In contrast, Netscape, the company that pioneered the web browser, rejected the puppy dog ploy in favour of “mooning the giant”. Netscape drew attention by posing as a giant-killer early in the game by attacking Microsoft head-on and predicting that the web would make Microsoft Windows obsolete. This aggressive stance raised Netscape’s profile, and for a while, the start-up’s fortunes soared. But the company’s bravado helped awaken Bill Gates to the importance of the internet market, which ultimately sealed Netscape’s fate.


While the puppy dog ploy is largely about defence, other judo strategy techniques bring offense into play. A key example is “pull when pushed”, which exploits the strategic principle of balance. In judo, seasoned competitors know better than to push back against an advancing opponent. Instead, they sidestep the charge and use their opponent’s momentum to pull him down. Similarly, companies can throw their competitors offbalance by embracing their initiatives rather than responding in kind.
Consider Drypers, an upstart that captured a big piece of the US diaper business from Procter & Gamble in the 1980s. When Drypers entered the market in Texas, P&G bombarded the state with coupons for $2 off a package of Pampers—more than twice the usual 75 cents. Drypers could not afford to do the same. But CEO Dave Pitassi, who had just finished reading a book on judo, came up with a creative response. Rather than match P&G’s offensive, Drypers piggybacked on its rival’s attack. The company launched a state-wide advertising campaign to tell consumers that P&G coupons could be used on Drypers, and sales shot up. In a matter of weeks, Drypers had added as much as 15 points to its marketshare in some stores. Within two months, the company was running at full capacity. By harnessing its competitor’s momentum, Drypers had used P&G to underwrite its own promotional campaign.


By leveraging your opponent’s assets, partners or competitors, you can transform a competitor’s strengths into sources of weakness. A company’s greatest assets can often become its greatest liabilities. Whether intangible, like brand names and intellectual property, or tangible, like property and plant, “assets collect risks around them,” as Michael Dell, Dell Computer’s visionary chairman and CEO has said. Anything that represents a significant investment can become a barrier to change. And by exploiting these barriers, you can find the leverage you need to win. That’s exactly what Southwest Airlines did.
As these examples show, judo strategy is fundamentally about developing a deep understanding of your competitors and espying the potential weaknesses that lurk among their strengths.
This is no science. There is no easy formula for victory. Instead, judo strategy demands discipline, creativity, and the flexibility to mix and match techniques. But the power and promise of this approach are equal to the investment it demands, for by mastering the principles behind judo strategy, you can use your competitors’ strength to bring them down.

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