Business Learnings from The Art of War by Sun Tzu (5th Century BC)

• December 28, 2020

This is what Wikipedia says about The Art of War:

The Art of War is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The work, which is attributed to the ancient Chinese military strategist, Sun Tzu, is composed of 13 chapters. Each one is devoted to an aspect of warfare and how it applies to military strategy and tactics.

Here is a link to the Wikipedia article: https://en.wikipedia.org/wiki/The_Art_of_War

It is one of those evergreen books that inspired Chinese military strategists and even philosophers ever since it was written as well as Western military strategists since it was translated, first into French at the end of the 18th century and into English in the early 20th century. Much of the book’s teaching can easily be applied to business because business and war, from a pure strategy point of view, are not all that different. In the end, war is about control of land and population; business is about attempting to control your market. In war, there is an opponent; in business, there is competition. You have to crush the opponent or competition wins. Simple? Not really.

Nevertheless, The Art of War is a short book, it takes an hour or so to read. An hour I would greatly encourage everybody to spend while thinking about how the teachings contained within the book apply to your business. Now, some of the chapters have a very different style than other chapters, so it is pretty clear that there is more than one author involved here, and some chapters lean more toward a common-sense angle than other chapters. But that really does not matter; it is still very worthwhile to read and engage with this book from a business perspective.

As I reread the book, I found this paragraph, number 18 in Chapter 3 of the book particularly profound:

“Hence the saying: ‘If you know yourself and know the enemy, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained, you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.'”  

Let’s decompose this paragraph and find out how it applies to business:

If you know yourself and know the enemy, you need not fear the result of a hundred battles.

This sentence applies to the companies that are the market leaders in their market. The companies who know how to beat the competition and do it well; know better than the competition how potential buyers make their purchase decisions, how buyers perceive the product or service choices they have, and how buyers perceive the various brands or competitors in the market and know the actual monetized value of their product or service. But they also know themselves; know their true strengths and weaknesses, they don’t believe their own press releases and they internalize the truth about their market, and they train their staff accordingly; product development and those who define services truly know what drives the sales and revenue, and sales and marketing know the profile of the customer that will generate the highest sales and revenue. They don’t believe in the corporate gut feeling generated from only listening to their customers but proactively research perceptions, preferences, and the ever-important monetized value that both customers and potential customers (the latter is where future growth will come from) associate with the company’s and competition’s products or services.

They know all of this better than the competition, they act on the knowledge, and because of that, they are in command of the market.

If you know yourself, but not the enemy, for every victory gained, you will also suffer a defeat.

Unfortunately, most companies fall into this category. They think they know themselves better (and to some extent, most companies do, just not as well as the market leaders), but they often miss important insights about their customers or market. They collect data from their customers by talking with them or communicating with them through other channels. There are a couple of issues with this type of approach. First, every company goes out to the market with a particular position and marketing message. Some portion of the market will accept that message, and a portion of those will become customers. What companies don’t get from communicating only with customers is what would make non-customers become customers; maybe different features or different prioritization of features will drive more non-buyers to become buyers, perhaps if the company’s sales and marketing effort focused on a different market vertical, the conversion of non-buyers would increase, maybe if other marketing and sales messages were used, sales would increase, perhaps a different pricing structure would make the company’s product or services more appealing to a larger portion of the market and thus lead to increased sales and revenue?

Or to simply put it – communicating only with customers is like talking in an echo chamber! You don’t learn much from one of those, do you?

Surprisingly, this is what most companies do. When I speak to potential clients of my firm, most of them assume our work will be carried out for their customers only, and it always takes some effort to explain we work with a market, not only customers to our clients. Furthermore, when we show a client a gap analysis between “the market” and “what the client believes about the market,” there are always surprises contained within that data collected. Gaps reduce a company’s competitiveness and, many times, prevent the company from becoming the market leader.

And finally, in the third sentence of the paragraph:

If you know neither the enemy nor yourself, you will succumb in every battle.

Pretty obvious what that means; if your company is a startup, the company will die when investors’ funds run out. If the company is well established, it means that a shift in the market, a shift in buying behavior, the competitive landscape, or maybe when a new piece of technology will become available, any of these will kill the company outright.

So, in light of the learnings that you can glean from The Art of War, the choice is pretty straightforward. Gaining a better understanding of the market and ensuring that the entire company knows and acts on that real market understanding and not some corporate gut feeling is the key to market leadership! So are you ready to take up the challenge?

Per Sjöfors
Founder
Sjöfors & Partners
www.sjofors.com