Kenans

498 views
454 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
498
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Kenans

  1. 1. A STRATEGIC PARADIGM BASED UPON “ON WAR” WALTER O. EINSTEIN, Ph.D. Charlton College of Business University of Massachusetts Dartmouth Dartmouth MA, 02747 woeinstein@comcast.net A paper submitted to the tenth Annual Meeting of the American Society of Business and Behavioral Sciences Las Vegas, NV Feb 20 – 24, 2003 Management II Strategic Management
  2. 2. A STRATEGIC PARADIGM BASED UPON “ON WAR” Abstract This article illustrates parallels in the work of modern strategic management scholars as presented in current college strategy texts with the philosophies of war as expressed by Carl Von Clausewitz in his 18th century masterpiece “On War.” Through the use of a modern strategic management process model and interchangeable terminology between war and business, a clear portrait of how the activities in war mimic those in modern business strategy becomes evident. The process of considering these two elements provides an opportunity to realize how managing business activities really involves ideas that are not new, but only interpreted for various uses. The article closes with a process model using war terminology to conclude that the parallels that have been discussed really do exist and that old ideas can become new. These “old” ideas still can be used to achieve success just as they have in the past. There is nothing new under the sun.
  3. 3. A Strategic Paradigm Based Upon “On War”1 There is nothing new under the sun! Modern business strategy is about trying to do something as a firm…get market share…launch a new product…build on competencies… gain a competitive advantage. Business leaders today face growing uncertainty and seek more than an advantage, they must “overcome” the competition. One way to do that is to follow the common strategic planning paradigm… “Gain the strategic advantage by being be better than the competition.” Another paradigm is to compel our competitors to do our will. Carl Von Clausewitz proposed such a strategy in 1793! Carl Von Clausewitz’ enlightening philosophies of war in his 18th century masterpiece “On War” (Von Clausewitz, 1943, 1976) 2 are so closely linked with modern business strategy that a review to compare “ON War” with the current thinking in strategy offers an opportunity for strategic planners to realize that war strategy is a direct parallel to business strategy. There are lessons in “On War” applicable to the modern business environment. As one reads Von Clausewitz’ work, it becomes apparent that many of the factors and considerations during war times become analogous to competition as a whole and more specifically to competitive strategies employed routinely in business processes. The similarities between war strategy and business strategy, and war theory and business theory are of particular interest since Von Clausewitz’ insight might enable businesses to improve their strategic skills. In order to present the similarities of war and business strategy, some key terminology becomes interchangeable. The term “war” used in Von Clausewitz’ work, may be replaced by “business activity.” “Enemy” will be replaced with “competitors” and an “attack” will be called a “business-level maneuver.” The fact that these terms are so easily interchangeable again illustrates the comparative nature of these functions. Almost immediately, Von Clausewitz, (1943, 19) defines war as “an act of violence to compel the enemy to do our will.” Taken literally, this certainly does not apply to business strategy. However, peering beyond the surface of this definition, if “business maneuver” is substituted for “violence” and “our competitors” for “the enemy,” this definition applies. A business maneuver should compel our competitors to do our will, can be translated to mean that business activities, similar to war, use strategic tactics and plans that attempt to persuade competitors (the enemy) to behave in a manner of our choice and not their own. Von Clausewitz’ definition of war is similar to the resource allocation strategies described by Mc Grath, Chen & Macmillan (1998). They show that in business, firms can allocate their resources in a manner that compels competitors to also divert their resources, but to the advantage of the firm. Hence, with sufficient and relevant information regarding the competitor, firms are able to 1 My special thanks to Karen Raposa and Patrick Sullivan, two MBA graduate students who made many insightful contributions to this article and to whom I dedicate the paper. May they both gain professionally from their blending history with current business thinking. 2 Carl Von Clausewitz published the original book in 1793. Since then there have been several translations into English. The 1943 edition was available at the University of Massachusetts library and the 1976 edition was purchased through Amazon.com. There are significant grammar differences and modest structural differences between the two editions. The substance of the two is the same. Only direct quotes are cited to differentiate the two volumes.
  4. 4. manipulate the actions of their competitor and as a result they can have higher returns. Persuading and/or controlling competitors are the key to strategic success, but are difficult to accomplish. To elaborate on the notion of a parallel between war and business activities, various modern models of business philosophies and strategies are compared and contrasted with war philosophies and strategies. These interpretations follow the pattern of the strategic management process compiled from various models as illustrated in Figure 1. Von Clausewitz discusses each activity in this process as part of the imperatives of war and it will become obvious that since the first battle ever occurred in the history of the world, the basic concepts that govern the battles and strategies of war, govern the battles and competitive activities in business today. Establish Direction Strategic Analyze the Competitiveness Competitor  Mission  Strategic Intent  Competition The Balanced  Initiatives  Environment Scorecard Implementation Strategy Formulation  Corporate Governance  Corporate Level Strategies  Structure &  Business Level Strategies Control  Strategic Leadership  Innovation Sustained Competitive Advantage Figure 1. The Modern Strategic Management Process (edited on 21 Jan 2006 by WOE) Establish Direction (Intent) Hitt, et.al. (1997) argue that competitive actions are highly influenced by environmental elements, both external and internal. Thus, an intense evaluation of these elements is necessary to better understand what makes a firm’s competitors act and/or react. Thompson & Strickland (2001) present factors of the remote or external environment consisting of the socio-cultural, demographic, economic, political/legal, technological, and global factors. These factors are virtually uncontrollable, by a single firm, as well as by an army, but both must be aware of their potential influence on their activities. An evaluation of the external or remote environment according to Von Clausewitz means that armies must be aware of the three key human components of influence involved in decision- making that include concerns of civilians, concerns of the commander and his army, and
  5. 5. concerns of the government. Concerns that rise from civilians affected by war are analogous to concerns of employees and other stakeholders who must handle changes that result from strategic business maneuvers. The concern of commanders and armies is comparative to those of the CEO and senior executives in a firm. Finally, the government and lawmaker influences during war are similar to the policies and rules within a firm. All of these components will influence how decisions are made by commanders in war and by executives in business. The task or internal environment consists of four key elements that a firm wishes to control. “Firms attempt to understand their external environments by gaining information about competitors, customers, and other stakeholders in the external environment” (Hitt, et. al. 1997, p. 42). These include “competitors,” called the enemy by Von Clausewitz; “customers,” called allies; “creditors,” usually seen as the total military force of a nation; and “employees,” who are represented by the officers and men. . Controlling these elements involves understanding what the firm does well and then comparing the internal strengths and weaknesses to the competitors. This involves conducting a value chain analysis, a company capability profile, and a strategic position and action evaluation. An effective value chain analysis can result in a firm creating a unique way to perform its activities that will make it extremely difficult and costly for its competitors to imitate. (Porter, 1998) In order for this to happen, the establishment must perform a company capability profile to assess its internal environment for particular strengths and weaknesses that must be addressed. Finally, a strategic position and action evaluation takes into account the firms financial strengths and competitive advantages with respect to the strength of its industry and the overall environmental stability. In fact “the strategic-management process is based on the belief that organizations should continually monitor internal and external events and trends so that timely changes can be made as necessary.” (David, 2001, p 7) A combination of evaluating remote environments and using the above-mentioned tools to compare and contrast task environments among competitors would enable a firm in business and an army in war to strategically position itself for success. Developing strategic business maneuvers requires a firm to decide upon and clearly state its strategic intent. Without intent and purpose, actions have no direction or focus. This can be life threatening in war and detrimental to a firm’s strategic position. Von Clausewitz describes the focus of an establishment as its strategic intent. And that intent must be determined in order to decide upon appropriate actions. Intent shapes long-term goals and ideas about where a firm wants to be positioned under ideal circumstances. (Hitt, Ireland, & Hoskisson, 1997) It does allow for creativity along the way since external conditions change over time. However, strategic intent is in place to propel leaders and subordinates in directions that support the vision of the organization. Von Clausewitz, (1943) clearly illustrates how to control or conquer competitors when he states how a firm must have a clear target “in order to direct tactics at points that will do the most harm” (p. 22). Strategic intent is imperative for successful battles and effective competitiveness. Mission Statements A mission statement in business and war is imperative for established employees and troops to understand the purpose of the firm’s business activities. Barney (1997) shows that a well written, concise mission statement provides long-term direction and indicates where a firm
  6. 6. intends to be positioned in the future. Von Clausewitz (1943) supports the need for a clearly stated mission statement when he explains how “weak motives to action will ultimately allow an army to be swallowed up by its opponents” (p. 13). A mission statement must explain the purpose of the establishment and identify the goals of its operations within that establishment. An overall strategy for a firm should be created based on objectives that can be derived from the mission statement. Von Clausewitz (1976) defines the mission statement of war quite succinctly; “the aim of warfare is to disarm the enemy” (p. 85). In business, organizations today develop a ‘vision statement’ which answers the question: What do we want to become?” (David, 2001) Like in business, war requires a mission statement that defines what is to be achieved by engagements and what is the desired end result. Goals and Philosophies Once a mission statement has been established, the goals and philosophies of an organization can be determined. The mission explains “what” a firm intends to do, but the goals illustrate “how” the firm will accomplish the “what” of the mission statement. In business activities, as well as war activities, all members involved must be aware of what they are aiming to conquer. Without a clear target, there is no steady direction of force. Harrison & St. John, (2002) show that forces become scattered and the establishment becomes weak. Von Clausewitz, (1943) explains how “a lack of focus results in chance and uncertainty that leads to the need for rapid changes in plans” (p.33). Von Clausewitz (1976) also talks about the need for focus not only with the lower levels of the organization but also in terms of the top-level leaders as well. “Incredible though it sounds, it is a fact that armies have been divided and separated countless times, without the commander having any clear reason for it, simply because he vaguely felt that this was the way things ought to be done” (p. 240). Ongoing changes in plans lack the clear aim that comes from providing goals and philosophies that can propel a firm to reach a specific target. Goals can affect organizational structure, leadership style, climate, motivation, and behavior and are therefore critical to the overall success of all strategic activities. Clearly, Von Clausewitz has supported all the key functions that are necessary to bring together the focus, aim, and direction necessary for an establishment to begin to consider some type of plan of action. Von Clausewitz actually describes strategy by explaining it as a combination of activities that attain objectives. Thompson & Strickland (2001) state “Objectives represent a managerial commitment to achieving specific performance targets – they are a call for results that connect directly to the company’s strategic vision and core values” (p. 42). With an established statement of “what” (intent and mission) a firm plans to accomplish and a description of “how” (goals and philosophies) a firm plans to do it, it becomes necessary to evaluate the external and internal forces affecting the firm and those who are competing against it before creating a strategic plan of action. Strategic Competitiveness A critical function in war and business activities is the gathering of information. It is imperative to gain as much knowledge as possible about the enemy and his country. This translates to collecting detailed information about competitors and the nature of their being. The foundation of all action and planning is built upon this knowledge. (David, 2001) However, there is always the risk that the information is incorrect. Especially if competitors are not publicly owned and are therefore not required to share financial information. Von Clausewitz
  7. 7. recommends reviewing information about the enemy with suspicion. Depending upon how the information is obtained, a large portion of decision-making should be based on instincts, inner senses, and judgments. In fact this reliance on ‘instincts’ can be critically important since “managers generally operate from assumptions about their industry’s future and beliefs about their own firms situation.” (Thompson & Strickland, 2001, p 106) A leader and commander must be able to rely firmly on these abilities when deemed necessary. Ultimately, both Von Clausewitz and other strategic management scholars appear to agree that planning a strategy should include the use of a combination of concrete evidence and some instinctual or “gut” feelings about the enemy. Once appropriate information has been gathered, competitive action planning must be considered. This involves a typical “what if” case scenario analysis. A firm must have a reasonable idea of what their competitor’s actions and reactions to specific forces will be. (David, 2001) For example, if an army is known for its ability to divide and conquer, it is more likely to face armed competitors who are ready to respond to this type of an attack. This behavior can involve carefully planned strategic maneuvers that create an advantage for the establishment. On the other hand, those firms that choose to take less risk may simply use tactical maneuvers to fine-tune their activities. (Barney, 1997) Von Clausewitz explains this as a choice in how an establishment wishes to relate to the manner at hand and how it wishes to use its forces toward an end. Tactical maneuvers are easier to implement and usually decrease the likelihood of a competitive response. The type of maneuver chosen by a firm will determine the overall outcome of the battle. Von Clausewitz discusses the element of continuous surprise as a key force in competitive rivalry and this theory is supported by Chen (1996, p 109) when he explains how “the greater the number of competitive moves a firm initiates, the better its performance.” He goes on to explain that these continuous attackers and early responders gain market share at the expense of their competitors. Von Clausewitz (1943, p142) claims that “surprise is the means to the attainment of numerical superiority.” The element of surprise causes competitors to expend their forces at rates they may not have planned for and results in a loss of assets that they may not be able to recover. The two components that Von Clausewitz feels explain the lack of resistance by opponents are the improbability of success and the excessive price required to pay for it. Chen refers to these factors as resource similarity in interfirm rivalry. When a competitor attacks another and does not face resistance, it may be due to one or both of these components. As Chen describes it, (1996, p 14) a firm’s awareness of the resource similarity with a defender and the defender’s capability of responding will play a key role in the firm’s decision whether to attack” or respond to an attack. Von Clausewitz, (1943, p 21) describes the Chen theory when he states how “when one opponent cannot completely overthrow (disarm) another, the motives to peace will be based on the probability of future success and the expenditures of force that will be required.” This applies directly to how competitive forces influence business activities since competitors can only remain in the industry if they can succeed. Without success, there is no capital, and without capital, there is no way to invest in competitive artillery (forces). With success there is the
  8. 8. opportunity to leverage past successes towards future opportunities. (Barney, 1997) This scenario will ultimately result in the disarmament of an opponent, as would be the case in war. In war and in business it is important to divert the enemy’s resources. One such strategy is a thrust, which is a “direct attack on a competitive arena which makes competitors withdraw resources because they decide that further commitments to that arena will be too difficult and expensive” (McGrath, et. al., 1998). Similarly, Von Clausewitz claims that opponents surrender or fail to resist because they foresee the unlikelihood of success or the high costs to put forth such effort. Both Von Clausewitz and McGrath, et. al. claim that opponents will resist or divert resources if the probability of success is low or the costs that are incurred will exceed the benefits. Ultimately, there are four elements that impact the ability of an establishment to respond to its opponents: size, speed, innovation, and quality. (Thompson & Strickland, 2001) The size of the firm will have an effect on the overall dynamics of competitive activities. This can also relate to the ability of a firm to respond to action in a timely manner. (Hitt, et.al., 1997) The larger the firm, the more difficult it may be to create a quick reaction plan. It is also important for a firm to be consistently innovative to stay ahead of competition and to exceed expectations in the quality of its performance. Since war is comparative to business activities, and the enemy is the competitor, competition is the overall driving activity. Competition sparks the need for valuable business activities; and without an enemy, there is no war. When a competitor exists, there is a need for activity improvements or a firm will lose its strategic position and be out of the game. Ongoing improvement of business activities is key to staying on top of competition and requires consistent forward motion and change. As Von Clausewitz stated, (1943, p 240) a competitor must “always keep his enemy in view and must be aware of his enemies position at all times.” According to Porter’s five forces, competing forces can be in equilibrium when there is no threat of entrance to or exit from the industry (Porter, 1998). However, competition fluctuates within industries based on the actions each firm takes against others. Von Clausewitz, (1943, p 158) said it well when he claimed that “whoever has forces in place and allows them to lie idle while others are fighting is a bad manager of forces and should be using all forces to the fullest of their capacity” to remain in the game. Formulate the Strategy According to Von Clausewitz, the only way to overthrow an enemy is to disarm him. Competition will not cease to exist as long as competitors have ammunition and artillery. Competitive strategies are driven off of this concept and generally fall in two categories, growth and competitive according to Harrison & St John (2002). “Growth strategies are concerned with increasing the size and viability of the company over time.” “Competitive strategies, on the other hand, are concerned with how the firm intends to position itself” ( p 58). In war, both of these types of strategies are concerned with disarming the enemy. Understanding this concept means that as a competitor, a firm must maintain motives and valuable activities that prevent it from being swallowed up. Lack of knowledge about opponents and their potential and plans can result in disarmament and loss of power.
  9. 9. An underlying intent of all competitors must be to implement different techniques that increase the need for opponents to expend their forces. This is also seen in business with the need for multiple strategies and plans to attain success. “In effect, an organization’s strategic plan is a collection of unified and interlocking strategies.” (Thompson& Strickland 2001. p 70) In war, Von Clausewitz explains three maneuvers for accomplishing this: invasion, direct tactics, and wearing out, all of which can be applied to business. A full-blown invasion on a competitor’s territory can be implemented without intent for even obtaining ownership. The purpose of the invasion may be to simply do damage in a general way that will have a long-term affect on the competing firm. On the other hand, direct tactics involves choosing points in an opponent’s territory that will do the most harm. In business, this would involve understanding your competitor’s value chain activities well enough to know what areas you as a competitor could improve upon that would do the most long-term damage to your opponent. There are two ways to damage your opponent in the context of the value chain analysis. One “is to perform an activity in a manner that is superior to competitor’s performance or perform an activity that competitors cannot complete.” (Hitt, et.al., 1997, p93) Above all, Von Clausewitz finds wearing out of the enemy to be the most effective. This involves continuous action including evaluating value chain activities within one’s own firm on a consistent basis. With continual improvement, competitors will be pressed to constantly try to catch up and will not be able to exceed the abilities of the attacking firm. The most effective strategy may be one that takes numerous approaches. Both modern theorists and Von Clausewitz stress the same long-term effect of strategy in war as in business: to disable, neutralize and win over the enemy or competitor. Von Clausewitz emphasizes the need to disarm the enemy. On the other hand, today’s strategy writers state that in global competition, a competitor quite often desires to exhaust or divert the resources of a competitor. Like Von Clausewitz’ maneuvers of invasion, direct tactics and wearing out, McGrath, et. al. (1998) proposes the ideas of thrusts, feints, and gambits in the business world. Thrusts, as previously mentioned, are attacks by a firm on a competitor, which leads the competitor to remove resources from an area that is a competitive strength to the firm. The competitor withdraws resources because otherwise the strategy would be too complex or costly. Therefore, the firm maintains its competitive advantage. A feint is a resource allocation strategy in which the firm attacks an important area of the competitor, but not as critical to the firm, so that the competitor redirects resources away from the firm’s vital area and into the less critical area. One again, the firm is attempting to capture the market share in its vital area (McGrath, et.al., 1998). A gambit involves a firm pulling resources out of a particular area so that the competitor therefore pushes resources into this area in an attempt to gain an advantage. This is done with the intention that the competitor withdraws resources from the firm’s vital area, which therefore enables the firm to capture the competitive advantage in its target area since there is now less competition (McGrath, et.al., 1998). Clearly, both Von Clausewitz and McGrath want the opponent to expend their resources and people.
  10. 10. The three branches of business that Von Clausewitz explains as functions of war are tactics, strategy, and marching/implementation. These are the actual processes required to develop, control, and promote new activities. They are also required to improve upon existing activities in order to maintain a competitive advantage. Von Clausewitz describes tactics as the process of individually arranging and conducting engagements, and strategy as combining engagements to attain objectives. Jay Barney (1997)defines both strategies and tactics in much the same manner. He defines tactics as “actions that firms undertake to implement their strategies” and strategy as a “means through which firms accomplish mission and objectives” (p. 11). He also discussed marching as the actual execution of a strategic plan and the actual instrument of strategy. The combination of all three of these forces directly relates to strategy formulation and implementation. If tactical measures actually relate to the manner in which forces are used, then Von Clausewitz is actually describing the need to formulate strategies based upon whether the establishment is at the business unit level or one of the troops in war, or if it is at the corporate level or the government itself in war. This is the key to designing strategies that affect those forces that will have the most impact on the firm. For example, if the government or corporation (parent company) is formulating a strategy, it will be focusing on an overall goal that will benefit the interests of its most important stakeholders, including the shareholders of a corporation. “Each of these stakeholder groups expects those making strategic decisions in a firm to provide the leadership through which valued objectives will be accomplished.” (Hitt, et.al., 1997, p 25) This expectation requires decision-making that will affect all troops or business units governed by the parent firm. The choices of an overall grand strategy at this level may include retrenchment, stability, or expansion dependent on the various stakeholders. The choice will be based upon the goal of the corporation or government and will ultimately trickle down to affect the business units or troops. The troops or individual business units will formulate their strategies based on those individuals or groups that they are serving and the actual needs of those groups. Once a group has been identified as a target group with a need, the establishment must find a way to position itself to succeed in that arena. However, there may be competing groups within any one situations and “these groups’ objectives often differ from one another, sometimes placing managers in situations where trade-offs have to be made.” (Hitt, et.al., 1997, p 25) In business, this will include cost strategies or differentiation strategies, and in war, this will include stable ongoing strategies or surprise attack strategies. The proper choice of a strategy can provide a competitive advantage in business and in war. Implement the Strategy As in war, the implementation of tactics and strategy in business is critical. In fact implementation of strategies is critical, Successful implementation is driven by a combination of corporate governance, structure & control, and strategic leadership. Without governance, constraints and controls being placed on an organization, implementation of strategy becomes difficult to manage. In addition, strategic innovation and leadership play a critical role in determining the success or failure of implementing strategy.
  11. 11. Corporate governance. The ability of a business to be successful in implementation is driven to some degree by its form of governance. The text Strategic Management Competitiveness and Globalization, Hitt, et.al., (1997) highlights the importance of the relationship between successful implementation and corporate structure. “Selecting the organizational structure and controls that result in effective implementation of chosen strategies is a fundamental challenge for managers, especially top-level managers” (p 346). Clearly, the link between governance and implementation is a critical issue to consider. Additionally, there are other questions to consider. Who are the stakeholders of a particular business or army? What is the agenda of those stakeholders? In a business, the board of directors and the major shareholders may drive the strategic direction and implementation of the strategy. “The central role of the board of directors in the strategic management process is to critically appraise and ultimately approve strategic actions plans.” (Thompson & Strickland, 2001, p 27) Within an army, the rules of the engagement and implementation of the strategy is also driven by an important stakeholder. Within business, the governance body generally has a strong incentive to monitor management closely, review and ratify decisions, and set CEO compensation. These members of the governance body are composed of insiders, related outsiders and outsiders. These decision- makers approve new expenditures and approve significant strategic direction changes. In war, the same types of decision-makers approve the assets and strategic direction a general can use to wage battle. Von Clausewitz describes this when he talks about the size of the army. “In practice, the size will be determined by the government. This decision marks the start of the military activity – it is indeed a vital part of strategy – and the general who is to command the army in the field usually has to accept the size of his forces as a given factor.” (1976, p 231) As with business, those controlling authorities allocate assets for the implementation of war, whether it is the board of directors, president of the country or the king. Structure & Control. Within the business environment there are many forms of corporate governance that have evolved over time to meet the needs of the strategic environment. In fact it is considered vital to match an organization structure to the execution of strategy. (Thompson & Strickland, 2001) Jeffrey Harrison closely paraphrases this when he says, “an organization’s structure should be designed to support the intended strategy of the firm” (Harrison & St John, 2002, p. 102). The organization forms vary by the type of needs the organization faces as it competes in the market. The organizational form could be simple where there is one head of the organization that makes all the decisions and assesses the outcomes of the decisions. Von Clausewitz talks about this structure when he talks about strategic decision making in war. “The strategist must go on the campaign himself. Detailed orders can then be given on the spot, allowing the general plan to be adjusted to the modifications that are continuously required. The strategist, in short, must maintain control throughout.” (1976, p 207) In business and war, there is a need for the generals to be intimately aware of and have first hand knowledge
  12. 12. of the battlefield. This parallels the simple structure of organizational design that many businesses have used to manage strategy. However, as many businesses have come to learn it is difficult to manage strategy as new markets are entered and the organization grows. As new markets are entered the need for a change in structure of the organization may become apparent. It is important to keep in mind that “an organizations structure should be designed to support the intended strategy of the firm” (Harrison & St John, 2002, p 102). The larger the organization and the more diverse the markets, the more difficult it is to effectively manage with a simple structure. There are other choices for functional structures within business. The structure is the design of the organization that allows it to make war. The functional form and the cooperative form are two examples of structures that exist in business and have utility in the military. The functional structure is readily seen in organizations with vice presidents of finance, production, accounting etc. reporting to the CEO of a company. This is also readily seen in military structures with the commanding general having various functional units reporting to him. Each reporting senior officer in the general’s command is the equivalent of a vice president of a functional unit. This is needed due to the complexity of the engagement as the forces expand. Von Clausewitz (1976) talks about this complexity when he says that strategy is simple. “Everything in strategy is simple, but that does not mean that everything is easy” (p 209). If the simple structure is employed then one commander is responsible for all facets of each engagement. Von Clausewitz (1976) continues by saying “Great strength of character as well as great lucidity and firmness of mind, is required in order to follow through steadily, to carry out the plan, and not be thrown off course by thousands of diversions” (p 209). The complexity of numerous engagements is why more complex structures exist in both business and war. The simple structure although quite effective for smaller engagements or battles needs to be enhanced to a more complex structure as the size of the war grows. Hitt, et. al. (1997) describes the evolution of business structure when he says, “Strategic competitiveness can be attained only when the firm’s selected structure is congruent with its formulated strategy” (p 347). As in business, the structure and organization of armies must be in line with its selected strategy. In many respects superiors make decisions. The degree that this is the case depends upon the structure of the organization. Some firms encourage empowerment and autonomous decision-making while others depend upon top-down management. For decisions that are critical to the long-term success of a firm, consultants may be necessary to assure an objective view and critical assessment of the company’s activities. Von Clausewitz encourages the use of consultants in war since it is nearly impossible for leaders to set themselves apart from the destructive environment they encounter during battle. This is usually the case in business as well. It is extremely difficult for leaders in a firm to critically evaluate the operations they may have been responsible for creating; especially if these activities are no longer beneficial and may actually be the cause of the firm’s demise. Strategic Leadership As in war and business, strategic leadership is a critical component of successful strategy implementation. “One make or break determinant of successful strategy implementation and execution is how well management leads the process” (Thompson & Strickland, 2001, p 348). Strategic leadership is the driving force behind strategic change and represents the means by which one achieves strategic change. We believe strategic leadership is the ability, the right, and
  13. 13. the method of control to anticipate, envision, maintain flexibility, and empower others to create strategic change…willingly. David (2001) adds: “Leadership includes developing a vision of the firm’s future and inspiring people to work hard to achieve that vision” ( p 135). Strategic leadership is what allows an army to overcome adversity and succeed in the face of difficult odds. Those in command of the business unit must not only possess “genius”, according to Von Clausewitz, but must have a “degree of genius” that can support ongoing mental and moral development. Von Clausewitz refers to “genius” in his literature to literally mean intelligence, fortitude, and common sense. Von Clausewitz (1943) explains how “a leader cannot be merely a genius, but must also have the “courage” to take action and make change” (p 32). Plans must be changed quickly when uncertainty exists and this cannot occur without courageous and genius leadership. An illustration of the need for courageous and genius leadership is expressed by Von Clausewitz (1943) in the following statement: “Resolution springs only from an act of the intellect, which makes evident the need for daring, and determines thereby the will” (p 34). Without a leader in business strategy who is able to problem solve using untraditional methods, if necessary, others in the organization will have no desire to be concerned with fixing the problem either. This poses a threat to the entire establishment because if employees lose their enthusiasm, it becomes the responsibility of the leader to spark excitement again. According to Von Clausewitz, if the leader loses motivation, the entire battle will be lost. David (2001) shows that: “Motivation explains why some people work hard and others do not” (p 134). Also, if a CEO or manager is not motivated, it will be impossible to motivate the troops and the battle against competitors will surely be lost. Hitt, et. al. (1997) support this statement and in fact argues that “the ability to manage human capital may be the most critical of the strategic leader’s skills” (p 383). Ultimately, a strong, intellectual, genius mind is necessary in a leader, but it must also be balanced by emotional strengths. Directing, commanding, and guiding employees requires influencing their emotions to get them to act and react in ways that will contribute to the mission of the firm. “Effective strategic leaders meaningfully influence the behaviors, thoughts, and feelings of those with whom they work” (Hitt, et. al., 1997, p 383). The ability of a leader to effectively engage their troops or employees as obstacles arise is critical. Von Clausewitz (1976) talks about courage and the difficulties of war when facing adversity. “There is hardly a worthwhile enterprise in war whose execution does not call for infinite effort, trouble, and privation; and as man under pressure tends to give in to physical and intellectual weakness, only great strength of will can lead to the objective.” He further states that strategic leadership represents a step towards building perseverance in the face of adversity. “Perseverance in the chosen course is the essential counterweight to pressures of war” (p 227). Strategic leadership is what allows the counterweight to weight heavily. Clearly, a critical aspect of strategic leadership is the outcomes associated with it. In fact, as reported by Thompson & Strickland (2001) “one make or break determinant of successful strategy implementation and execution is how well management leads the process” (p 218). Von Clausewitz (1976) describes these outcomes when he talks about the moral imperatives and military virtues that result from strategic leadership. The moral elements are “the skill of the
  14. 14. commander, the experience and courage of the troops, and their patriotic spirit” (p 218) These moral imperatives are the result of strategic leadership and its ability to empower individuals and teams to willingly create strategic change. Von Clausewitz gives another example of the importance of strategic leadership when he talks about the military virtues. Von Clausewitz (1976) describes the “individual who is steeped in the spirit and the essence of this activity; who trains the capacities it demands, rouses them, and makes them his own; who applies his intelligence to every detail; who gains ease and confidence through practice, an who completely immerses his personality in the appointed task” (p 219) This type of influence and power over an individual is not a result of luck. These results are the result of strategic leadership that can be seen both in business and the military. Many CEO’s have been able to create a vision and mission that is based in sound logic and rationale. However, when a vision and mission is combined with strategic leadership their firms can reach unparalleled heights. Without strategic leadership many engagements are lost and many businesses have floundered. However, many businesses have succeeded and thrived in the absence of strategic leadership. Von Clausewitz (1976) reinforces the idea of success in describing strategic leadership and the many components that help to define it. The importance of strategic leadership can be seen quite clearly in examples throughout On War. Strategic leadership is guiding the firm towards it mission and getting individuals to strive to achieve grander results. “An army that maintains its cohesion under the most murderous fire; that cannot be shaken by imaginary fears and resists well founded ones with all of its might; that proud of its victories, will not lose the strength to obey orders and its respect and trust for its officers even in defeat; whose physician power, like the muscles of an athlete, has been steeled by training in privation and effort; a force that regards such efforts as a means to victory rather than a curse on its cause; that is mindful of all these duties and qualities by virtue of the single powerful idea of the honor of its arms – such an army is imbued with the true military spirit” (p 220). This type of spirit is not created without strategic leadership. It is a concept that is clearly important both in business and the military. A final point regarding leadership involves elements of an external nature that must not be slighted. In war, the commander must not allow himself to become immune to the losses of surrounding enemy troops. In business, leaders must pay careful attention to losses that their competitors sustain. By allowing oneself to become immune to factors affecting competitors, leaders may be unprepared for a tragedy aimed at their own establishment. Leaders must prevent themselves from becoming immune to factors surrounding them as a key to their own survival in war, as well as in business. Innovation. Another important component of the implementation portion of strategy is innovation. Thompson & Strickland (2001) maintain that it is the ability of the organization to consider new alternatives and new approaches to overcome maneuvers or attacks by rivals. In business, there are always new products and challenges facing any company. A Company that fosters a spirit of innovation taps into a greater level of skill in its employees. Von Clausewitz (1976) agrees with the importance of innovation when he talks about different battlefields. War “has evolved methods that are common to most armies, and that no longer even allow the commander scope to employ special artifices” (p 218). He is talking about open country warfare and its lack of innovation and the resulting relatively level playing field. However, like business, wars are also fought in more difficult terrain. When the engagement is moved to mountainous terrain,
  15. 15. innovation is critical to success. “The commander’s talents are given greatest scope in rough hilly county” (p 218). Without innovative approaches, engagements would be implemented poorly as open country strategies and tactics are employed in the wrong military backdrop. Innovation allows an organization to reward and foster new approaches and creative thinking. This focus on innovation and improvement is the hallmark of many new management concepts and ideas like continuous improvement and TQM. Thompson& Strickland (2001) show that. “Surveys indicate that over 95 percent of manufacturing companies and 70 percent of service companies have used some form of quality improvement program” (p 386). Von Clausewitz (1976) describes innovation when he talks about boldness within an army. Boldness or innovation in business can have profound affects on the success or failure of an engagement. “More can be achieved with an army drawn from people known for their boldness, an army in which a daring spirit has always been nurtured, than with an army that lacks this quality” (p 225). Boldness must be nurtured but in addition, it must be tempered as well. “Only when boldness rebels against obedience, when it defiantly ignores an expressed command, must it be treated as a dangerous offense” (p 224). Boldness can be described to some degree as innovation, but innovation must be managed as well. Innovation is a critical component of implementation. It allows an army to reassess and take chances. It allows an army to change tactics to its advantage. Implementation requires some measure of control, as well as strategic leadership and innovation. Within the parameters of an establishment’s mission, goals, philosophy, and objectives, standards must be established and performance must be measured and compared with others performing similar activities. These control standards must be qualitative and quantitative in nature and senior leadership must encourage and enforce these standards through adequate administrative processes. Harrison & St John (2002) present evidence that: “Some of the most successful companies of our time are operating in low-growth, moderately profitable industries and are pursuing strategies that are not unique. The reason for their extraordinary success is their attention to the details associated with strategy implementation” (p 96). Clearly, implementation plays a critical role in successful strategy. Strategic Competitiveness. There are many different characteristics of war that can be used to gain competitive advantage and enhance strategic competitiveness. Von Clausewitz illustrates many of these characteristics in various descriptions of war. What is interesting to look at is how they also directly relate to tactics and strategies that a company may employ to gain competitive advantage. Superiority of Numbers. Von Clausewitz talks about superiority of numbers as a common element of victory. Every day there are businesses moving forward with tactical plans to put more sales representatives in the field than their competition. In effect, blunting the ability of rival firms to get its message out and to effectively control the market. This is also seen with large monopolistic firms overwhelming smaller firms in business. However, as we see in business, small upstarts have been successful in the face of overwhelming odds. Von Clausewitz (1976) echoes this sentiment when he describes the forces of Frederick the Great. “At Leuthen Frederick
  16. 16. the Great, with about 30,000 men, defeated 80,000 Austrians (p 229). Similar to Frederick the Great, some modern day companies have been able to skillfully use their talents to capture markets and business segments. Von Clausewitz (1976) recognizes this very point and talks about sheer size or numbers is not in of itself a recipe for success. “Superior numbers, far from contributing everything, or even a substantial part, to victory, may actually be contributing very little, depending on the circumstances”(p 229). However, at a certain point sheer size does have the tendency to overcome even talented smaller upstarts. “Superiority varies in degree. It can be two to one, or three or four to one, and so on; it can obviously reach the point where it is overwhelming” (p 229). As with business, distinguishing factors between firms can make a difference in an engagement, but superiority of numbers carries a significant weight. Von Clausewitz drives the point home for the importance of superiority of numbers when he sums up the chapter by saying; “we believe we have shown how significant superiority of numbers really is. It must be regarded as fundamental – to be achieved in every case and to the fullest possible extent” (p 232). Concentration of forces in space. Similar to superiority in numbers, the concentration of forces is critical in war. This concept is similar to the business concepts of a concentration on core competencies and the leveraging of strengths. A company should concentrate its time, effort, and resources in segments of the business in which it has relative strengths versus the competition. On the battlefield, Von Clausewitz (1976) makes the same argument when he describes the need “to be very strong, first in general, and then at the decisive point” (p 240). Almost exactly Von Clausewitz in his strategy of “there is no higher and simpler law of strategy than that of keeping one’s forces concentrated” (p 240) describes leveraging strengths. In other words, there is no higher law than leveraging your strengths against the opportunities on the battlefield. In fact Von Clausewitz warns about the danger of allowing one’s focus to move away from strength. Clearly, Von Clausewitz believes as many business strategy models show; leveraging strength will build a competitive advantage in war. Unification of forces in time. Von Clausewitz also talks about the unification of forces in time as a way to garner competitive advantage in the arena of war. For example, in business it has been said many times that the first six months of a product launch will determine its fate. As a result, it would be smart to have as large a product launch in the initial phase as possible. The resulting infusion of business would be a result of this significant investment of resources. Von Clausewitz (1976) makes the same argument when he talks about the unification of forces in time. “All forces intended and available for a strategic purpose should be applied simultaneously; their employment will be the more effective the more everything can be concentrated in a single action at a single moment” (p 246). As in business, war strategy should gather all forces for the engagement at hand to drive competitive advantage. Conclusion In this paper we have shown the parallels between the basic theories of strategic management and the philosophies of war as expressed by Carl Von Clausewitz in his 18th century
  17. 17. masterpiece “On War”. In the business world there are numerous types of strategic models used to define how a company should create competitive advantage. These various models use different terminology and phraseology to attempt to give direction in the murky world of big business. Von Clausewitz over two hundred years ago defined a model for how armies and countries should compete as they engage in the murky world of war. What we have shown is that virtually all of the same aspects of Von Clausewitz’s war model apply to the business world of today. The business model we examined uses components like intent, mission statements, and goals and philosophies. The mission explains “what” a firm intends to do, but the goals illustrate “how” the firm will accomplish the “what” of the mission statement. This business model closely mimics Von Clausewitz thoughts when he defines how armies should provide direction and vision for its troops. Like in business, war requires a mission statement that defines what is to be achieved by engagements. Once a company or army determines the mission and goals that will guide it in its military engagements or business tactics the next step is to take a look at the environment that they are operating in. What external and internal factors are facing the business? What are our competitors doing to drive our agenda away from our goals? Von Clausewitz asks the same questions but in the context of war. What external armies and internal resources are facing our engagements? What are our enemies doing to drive the battle to a different theatre of war than what we want? Establish Direction Strategic Enemy Competitiveness Analysis  Mission  Strategic Intent  Competition Inter-Country  Initiatives  Environment Rivalry Strategy Formulation Implementation  Sovereign Country Level Strategies  Political  Theater of Operations Level Strategies Governance  Structure & Control  Military Spirit / Leadership Military Strength  Innovation & Sustained Superior Military Power Figure 2. The Von Clausewitz model translated into modern terms. (edited on 21 Jan 2006 by WOE)
  18. 18. After scanning and analyzing the environment, companies need to build the components of strategy formulation. Strategy formulation in and of itself is not enough. As a result, strategic business models do not stop at this point but move further to put definition around the important aspects of implementation. The implementation piece of strategic business models becomes critical for businesses to consider as they move forward. Over two hundred years ago Von Clausewitz recognized both the importance of strategy formulation and implementation on the battlefields of war. Von Clausewitz spoke of implementation quite extensively in an attempt to define how armies can gain a competitive advantage as they move forward in their strategies. We have made the case that the same implementation tactics and moves that can drive competitive advantage on the battlefield can drive competitive advantage in business. Once again we return to the strategic management process that has been used to demonstrate the parallels between business and war. The modern strategic management process model we presented as Figure 1. has been rewritten in Figure 2. to show that Von Clausewitz looked at the process of war in the same way. Numerous models and consultants have designed strategic planning models that try to capture the essence of these competitive advantages. Our model talks about corporate governance, structure & control, and strategic leadership as key drivers of success in business today. Von Clausewitz also spent significant time delineating these same ideals and concepts but in military terminology. Much of what Von Clausewitz wrote concerning strategy in war boils down to a significant quote from his book. Von Clausewitz (1943) defines strategies or tactics in war as “an act of violence to compel the enemy to do our will” (p 19). This quote from Von Clausewitz can be rewritten to fit into modern business strategy: “A business maneuver should compel our competitors to do our will.” We have made the case that what was defined as effective strategy over two hundred years ago in war is used to define effective business strategy today. REFERENCES Barney, J. B. 1997. Gaining and Sustaining Competitive Advantage. Reading, Massachusetts: Addison-Wesley Publishing Company. Chen, M. 1996. Competitor analysis and interfirm rivalry: Toward a theoretical integration. Academy of Management Review, 21(1): 100-134. David, F. R. 2001. Strategic Management. Upper Saddle River, New Jersey: Prentice-Hall, Inc. Harrison, J. S., & St. John, C. H. 2002. Foundations in Strategic Management. Cincinnati, Ohio: South-Western College Publishing. Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. 1997. Strategic Management: Competitiveness and Globalization. St. Paul, Minnesota: West Publishing Company.
  19. 19. McGrath, R. G., Chen, M. & Macmillan, I. C. 1998. Multimarket maneuvering in uncertain spheres of influence: Resource Diversion strategies. Academy of Management Review, 23(4): 724-740. Porter, M. E. 1998. On Competition. Boston, MA: Harvard Business School Publishing. Thompson, A. A. & Strickland, A. J. 2001. Crafting and Executing Strategy. New York: McGraw-Hill. Von Clausewitz, C. 1943. On war. New York: Random House, Inc. Von Clausewitz, C. 1976. On war. Princeton University Press.

×