Leadership: Outsmarting Your Competitors

Eric Schmidt, the innovative CEO of Google.com who keeps his group of wizards on their toes 24/7, was never in the US Army, but he sure knows how to execute the war games exercise.

Sander A. Flaum

"We operate as if [on] a train with three of four wheels off the rails," he says. "There's little in the way of corporate hierarchy. Everyone wears several hats. The speech I give every day is: 'This is what we do. Is what you are doing consistent with that, and does it change the world?'"

Google exemplifies how far a company can go to win a stronghold and maintain it, building an effective strategy to stay on top—and ever changing to outsmart and stay ahead of its competitors.

Strongholds set the standard—in terms of products, price, performance, and reliability—for competitors to challenge. That challenge can be formidable, thanks in part to unexpected moves by the competition.

Earlier this year, we saw Toyota surpass reigning market leader General Motors and venerable Ford, the model of American manufacturing ever since it invented the assembly line. Ah yes, Ford Motor Company. A quick aside to note that innovation requires more than lip service: In TV ads that ran from 2005 to 2006, former Chairman and CEO Bill Ford, obviously not a war games proponent, used the word innovation about once every eight seconds, branding innovation as "the compass that guides this company going forward." Within months, Ford suffered a record loss of $12.7 billion, in no small part because Toyota totally outmaneuvered Ford with its real-life innovations. It moved into the Ford stronghold step by step, adding innovative capabilities, resources, and momentum along the way. Toyota began with small cars (not a priority for Ford at that time), then moved to luxury models, and finally zeroed in on core profit zones for US manufacturers: SUVs and trucks.

Knowing your competitors' history and anticipating their next move is key to successfully invading a competitive stronghold and defending one's own. If "invading" conjures up a military mode, it's intentional. Today's savvy business leader operates from a virtual war room, where the focus on what the "enemy" is up to is as intense as it is on how to improve the bottom line. How weak are your competitors' people? Are they suffering financial problems, distractions from potential layoffs? The key: Avoid an overfocus on your own business and never stop being paranoid and opportunistic.

The military model extends to running "test flights" for new products and strategies by assembling a team of diverse thinkers with varying points of view to evaluate which way to go. It may take courage to invite dissension and disparate ideas. But it's far better than doing things the same old way, day after day—the surest way to invite enemy raids.

Here's a fundamental question for the war room: Do I grow, or do I grab a piece of my competitors' market share? There's no magic bullet here, only different scenarios and different questions that can help determine the right way to go.

Ask: What might I yield and what might I repurpose to favorably reconfigure market share? It can be a tough call! Lowe's and Home Depot seesawed when trying to secure specific market segments. Initially, Home Depot targeted do-it-yourselfers used to shopping at construction-supply stores while Lowe's focused on women and created a mix of the retail and warehouse looks. Since then, each has made inroads into the other's turf, blurring the differential.

Bic and Gillette suffered years of costly price wars competing for market share of cigarette lighters and disposable razors before Gillette abandoned lighter sales to concentrate on its successful launch of the Sensor cartridge razor. Within a year, Gillette had captured two-thirds of all razor sales and further differentiated its stronghold in cartridge razors from Bic's plastic products.

Summing up, the essential strategies of building and maintaining a stronghold beg these questions: Where will my company dominate? What must we concede to rivals? How will we stay alert to our shifting landscape?

War gaming, scenario planning— whatever the politically correct term is today—really works! The key is to know the names of the enemy leaders, research their successes and failures, and build a strategic plan to outflank them.

Now let's take that hill!

Sander A. Flaum is managing partner of Flaum Partners and chairman, Fordham Graduate School of Business, Leadership Forum. He can be reached at sflaum@flaumpartners.com