This exhibition presents the tools that organizations give the content of the book The Art of War for the creation of strategies, considering risk as a source of competitive advantage and having systemic thinking as the basis.
1. Introduction
The increasing competition in globalization forces organizations to carry out better strategies to face the evolution of the capricious world markets. The book The Art of War by Sun Tzu, despite being over two thousand years old, is a bastion of suggestions for shaping strategies. Sun Tzu invokes you to win the war without a fight. Both in the book and in this material this idea has a relevant meaning if you think of the organization as a system. It is suggested to the reader to become familiar with the book from which an unusual exegetics is attempted.
This material has four other parts. The second of them refers to the generalities of the systems and will be the starting point to identify the benefits offered by the recommendations of the Sun Tzu book. Then, in the third part, the usefulness of taking advantage of risk by converting threats into opportunities is explained and, finally, the key recommendations that The Art of War gives to create strategies together with the conclusions are the fourth and fifth parts respectively.
2 Systems
Before presenting systemic thought, it is essential to understand the idea of a system that will serve in subsequent paragraphs, pointing out that the depth of this topic is beyond the scope of this exposition. Greater rigor in content can be found in.
System. It is a set of at least two elements such that they are related in some way and such that the disturbance of one element affects the whole. The set must be contained in another system that in this material is called supersystem.
The illustration is the representation of a system made up of elements A, B and C. The lines are the relationships that unite the elements and the total is contained in a larger whole that is the supersystem. In a system, each element has properties that it loses when it is separated from the whole, and the total has some properties that no particular element has. A company is a system.
Assets and shareholders are two of its elements and a relationship of interest is the return on assets or ROA.
Once the concept of system is understood, the conditions to advance in systemic thinking are adequate. The basic ideas that are stated below are those of analysis, knowledge, synthesis and understanding.
Analysis and knowledge. The analysis begins when what is to be studied is decomposed and then the parts taken separately are explained. Finally the separate parts are added to explain the whole. The result of this process is knowledge.
Synthesis and understanding. The synthesis begins by identifying a system that contains the object to be studied. In a second stage, the behavior or properties of the system or any container are explained and finally the object is explained in terms of its function within the system. The result of this process is understanding. For systemic thinking, synthesis precedes analysis but does not reject it, both concepts complement each other.
To land the ideas outlined, imagine a politician who wants to explain the rejection in Congress of a tax reform. With the analysis tool, the politician would begin studying the congress based on the parliamentary factions and then divide the total even further in the observation of the deputies. The aggregate of the studies grants knowledge of the limited professionalism of the deputies as the cause of the rejection of the reform. With the synthesis, the rejection of the fiscal reform in the political system is located first, the conditions of the same would be explained and then the functions and repercussions of the fiscal reform. The result is the understanding of the rejection of the fiscal reform due to a political system incapable of creating majorities coupled with the unprofessionalism of the deputies.
The ideas presented up to this point are justified because, although not scientifically, Eastern cultures have used the concept of system to organize their thinking and since the well-known Sun Tzu book emerged in China, it is possible to find some ideas of systemic thinking in The recommendations of The Art of War in Strategy Creation.
To end this second part, a principle of systemic thinking is enunciated:
Systems principle. Optimizing each part of a system does not imply that the system will operate optimally. A simple example of the above is obtained when considering the Real Madrid soccer team that has hired the best players in the world and has not obtained the expected achievements. On the other hand, another Spanish team, Valencia, with a smaller squad, won the Spanish soccer league 2003-2004 and was champion of the 2004 UEFA Cup. Fortunately for Real Madrid, the formula it has followed is not necessarily the worst.
3 The risk
From a traditional approach, risk is understood as a possibility of harm or threat. In this regard, classical risk management contemplates risk detection in the first instance, later, the risk must be measured and then based on established criteria, decide whether the risk is retained, transferred, avoided or reduced. Finally, the evolution of risks is monitored.
In the competitive approach, risk is seen as a possibility of loss or threat but it is also seen as an opportunity so it can be exploited. An example of this is in the fire, which as such represented a threat to human beings but was later exploited and can now be managed in favor. For companies, an incipient technology is the threat of a new competitor but it is also the opportunity for a new business that can be migrated in the long term. Other examples are in the presence of sexual harassment in a company because a woman who is harassed has less productivity and at the same time the harasser is injured so the company has two workers who are not as productive as they should be.
Certainly the difficulty of reporting harassment is important, but for the firm, its prevention represents the use of risk with respect to competition, since it will have better workers in a society that discriminates against women. So, without forgetting the possibilities of losses or threats, risks can represent a source of competitive advantage and their administration must contemplate their exploitation. More depth on risk tapping and new risk management is at and on sexual harassment can be found.
With system concepts and a new risk mindset, it's time to make way for Sun Tzu's recommendations for strategy creation.
4 recommendations from the sun tzu book
The recommendations presented below are useful in creating a strategy. The first two justify the invocation of the concepts of system and risk. The following recommendations are more common and easier to observe. It is of interest to indicate that all the appointments are made to avoid too many footnotes.
- Recommendation 1. The strategy is created for a supersystem. From the following quote from the chapter on siege planning and systemic thinking this recommendation can be assimilated.
"Therefore, a true master of the martial arts defeats other enemy forces without battle, conquers other cities without besieging them and destroys or after nations without spending much time"
This means that the relationships within a system that contains various subsystems such as the company, suppliers, customers, cluster, regional pole, among others, must be understood. In this way it is neither fought, nor besieged and is not destroyed to enhance the survival of the organization. In addition, the principle of the systems that avoids the optimization of the elements and promotes the optimization of the total must be remembered. Understanding relationships may imply the need for disappearance or creation of elements for the system, but that would not be the strategy but part of its implementation.
The understanding of relationships becomes evident repeatedly when Sun Tzu proposes observing one's own forces, those of the enemy, the climate, the terrain, the river bed and the distances for which systemic thinking is done in which seeks to understand the relationships between the elements to influence or decide from them.
- Recommendation 2. Turn threats into opportunities. In the spirit of not wearing out in fights or in the creation of remedies or palliatives, a risk must be converted into an opportunity as suggested by the following quote on the use of spies:
"You must search for enemy agents who have come to spy on you, bribe them and induce them to come over to your side, so that you can use them as double agents."
When enemy spies are turned into allies, a risk has been taken advantage of, since a threat has been turned into an opportunity. China is a good example of the above. Certainly Chinese products are displacing domestic manufactures in the US market and under the negative concept of risk this represents a great threat. However, the displacement of national merchandise derives from the growth of a new market, the Chinese one, so there is an opportunity to export to China and to diversify exports.
- Recommendation 3. Formal or informal leaders are essential in the implementation of the strategy. Encouraging leaders as well as implementing performance measures is essential in monitoring the strategy. Sun Tzu states this in the following quote about planning a siege:
"Generals are servants of the nation. When its service is complete, the country is strong. When their service is poor, the country is weak. ”
“… There are three ways in which a civilian government leads the army to disaster. When a civilian government, ignoring the facts, orders its armies to advance or withdraw when they should not… ”.
It is important to know that to control the domain it is enough to control its leader. If a superior takes the role of a subordinate who is a leader, then the results may be unfavorable. It is common that when changing the boss in the same firm, an employee remains totally or partially subordinate to the immediate previous boss, so the study of formal structures is not enough and informal powers should be valued along with the unwritten rules.
- Recommendation 4. Workers count. Unlike machines, people have feelings, beliefs, and obviously personal goals. A company employee must be proud of the functions he performs and must also be aligned with the strategy. In light of the above, motivation and communication are main components. The following quote from the chapter on force justifies these claims:
“Getting soldiers to fight by allowing the momentum to do its job is like rolling logs and rocks. The logs and rocks remain immobile when they are in a flat place, but they roll on an inclined plane… ”.
It is everyday to find the partner of the useless boss along with the stagnant subordinate who does all the work. This figure is harmful because you have a stunted superior and that provides little value in the company in addition to not enhancing the skills of the subordinate.
- Recommendation 5. The strategy is achievable. When creating a strategy, objectives and goals must be built on realistic assumptions and calculated risks. The quote from the chapter the armed struggle supports these statements:
"Thus, an army perishes if it is not equipped, if it does not have provisions or if it does not have money"
Overly optimistic goals or objectives can lead to frustration if you do not have the arguments to fully comply with what is established, and pessimistic behavior can create panic and distractions.
- Recommendation 6. Respect for legality and the environment. The strategies must be compatible with legality and with the environment. This compatibility will be called minimal ethics and this derives from the prestige of the organization, but it must always be clear that long-term value creation is sought through sustainable competitive advantages. The following quote from the chapter on battle order reveals that Sun Tzu suggests the least ethic.
“Those who use weapons well cultivate the road and observe the laws. Thus they can rule prevailing over the corrupt. ”
The boom in healthy products and organic food dictate promising courses in the North American and European markets, emphasizing class respect for the human body.
- Recommendation 7. The term. The term to maintain a standing strategy is variable and depends on the type of business, the resources, among others. For Sun Tzu, the time for a battle should not be long, as it causes wear. If a firm maintains a strategy, even an effective one, this strategy will tend to be as efficient as possible, so some innovation or paradigm shift can cause large losses. The following quote from the middle of the battle chapter shows it:
"When you are in the midst of battle, even if you are winning, continuing too long in it will discourage your troops and dull your sword…"
It is useful to attend the hackneyed phrase "learn to unlearn" which means the breakdown of paradigms. The example is taken in the Ford model T, which was black. Over the years and due to competition, the model's effective strategy became efficient, so Ford had to admit cars of colors other than black, but without canceling the growth of competition.
- Recommendation 8. Respect the times. When carrying out a strategy, you must have sanity in the times since too much speed in the fulfillment of goals or objectives can lead to premature wear or the collapse of the organization.. The following quote from the chapter on armed struggle shows this idea:
"If you travel light and non-stop day and night, traveling twice your usual distance, and if you fight to gain an advantage thousands of kilometers away, your military leaders will be taken prisoner."
An example is taken in the cost on the continuity of a company for the desire to maximize profits in the short term.
- Recommendation 9. Innovation. The creation of sustainable competitive advantages is fundamentally explained in innovation. From the chapter on force we have:
"When a battle is waged directly, victory is won by surprise"
The strategies should facilitate the development of new ideas that allow to increase the competitive gap with the competitor who is the immediate pursuer or, decrease it with respect to the leader. One formula is the sum of R&D.
- Recommendation 10. Detect the changes that may occur in the long term. The strategy must have measures to prevent changes in the environment. The following quote has been taken from the chapter on military maneuvers:
If the birds take flight, there are ambushes in place. If the animals are scared, there are attacking troops. ”
This precaution has the effect of a vaccine against new technologies or substitute products because when these appear the company will be ready to receive them on the market and the case of Peter Senge's boiled frog will not be repeated.
Despite the importance of the book The Art of War, Sun Tzu does not suggest, among other things, ideas such as horizontal integration that is currently very relevant. However, with recommendation 1, systemic thinking is used, so these situations are a consequence of this recommendation.
5. Conclusions
Of the ten recommendations that have been presented, the first two are the most important as they extol the benefits of systemic thinking, emphasizing the detection of relationships between the elements of the organization and the potential source of competitive advantage that represents the risk that enables the conversion of threats into opportunities. The following eight recommendations are natural but no less important. However, the strategist must consider them after understanding the relationships and risks between the elements of the system that the organization represents.
References
Sun Tzu. The Art of War. Thomas Cleary version. 1993. EDAF
Russell L. Ackoff. Ackoff's paradigm. Systemic administration. 2002. Limusa.
Deloitte & Touche. IMEF. Comprehensive business risk management. 2003. IMEF.
IPADE. Sexual harassment in the company: how to prevent it. 2001. IPADE.
Garduño, Roberto. Deputies doubt that Fox has read Kafka. The Day. December 18, 2004.
Senge, Peter. The Fifth Discipline. Granica Publishing House. 1998.
Notes
ROA stands for Return on Asset
President Fox called the deputies foolish for not approving the structural reforms. The result of this offense increased the differences between the executive and legislative branches.
In the 2003-2004 season Real Madrid was eliminated from the Champions League, lost the Copa del Rey to the modest Zaragoza team and did not win the Spanish soccer league.
Understanding risk as an opportunity represents a change in the mentality of the professionals of the act that traditionally treat risks that can only produce losses.
Efficiency refers to doing things well. Eg making a faulty engine well. Efficiency is doing good things like building an engine with as few failures as possible.
