Wednesday, August 5, 2009

Strategy vs. Chess

Chess is the only game I have played in my life seriously and I was a national level player in chess. In case if some of you have been deceived by the fact that I often quote lot of things from cricket, I confess at this point that I have not played cricket at the competitive level :)
This article is an attempt to compare some of the concepts in chess to strategy in business..Let’s see whether it works..

Don’t Channelize your resources to your weakest area: In chess every piece is important..Losing a single extra pawn can cause a lot of difference at the competitive level..Hence while playing chess we would start concentrating on every single piece. A lot of times a particular pawn(Soldier) will be under threat and in order to safeguard that pawn three of your major pieces(rook , queen) will be put as guard…It gives the opponent to time to develop his pieces , it gives him time to settle down..Precisely the same thing happens in business..When companies start channelizing their resources towards their weakest area, you tend to lose out on other areas..Your obvious question would be ‘how will a company overlook such a simple thing..’..But the sad reality is that the companies believe they can turnaround a failing business , the top management has a strong ego(they want to be number one in every field) which makes them invest in a activity which would reduce the shareholder value . I was recently reading the book by Mckinsey on Valuation...They gave an example of restructuring activity wherein they divested a business just because of the sudden realization of the fact that this particular business was eating away their productive resources and not earning according to the expectations of the shareholders.

Counter attack: This has become a cliché term amongst the management students!! ..I remember my own game in a state level tournament where I was playing against the most fancied player..I was playing the traditional game of chess developing all my minor pieces, doing a castling and then taking the game forward to the middle game...My opponent suddenly attacked me on my king side and in the process his king was exposed in the middle. Now I had two options: one was to get back and defend my king side..For this all my pieces have to rush to the safety of the king...The other obvious choice was to attack his king , which would take him by surprise. I went for the counter attack and finally won the battle..Relating this to business scenario , when your opponent attacks you , if you get onto a defense then its advantage – opponent ,because he would have clearly anticipated your move and he would be ready with his next move as well….Instead counter attack..In case the competitor starts a price war in your premium product, then take him by surprise by launching a new product which would compete in the middle segment..Since he would not have anticipated a counter attack its advantage – You..

Play to your strength : It’s a known fact that Vishwanthan Anand is one of the greatest player in Sicilian defense opening and Kasparov generally plays a Queens gambit(which is a attacking game)…Now Anand always plays according to his strength rather than falling to opponents strengths..A direct mapping can be done to the business environment..In case you skill is in manufacturing then do only that activity …outsource other activities...Just because your competitor is vertically integrated, you don’t have to do activities where you don’t have strength..We read recently about TCL electronics in a case study where I understood they had a clear vision that they should be the number one TV producer..They were also competing to become the market leader and they were also earning good revenues in the market but they limited their vision to be the number one ‘producer’...This was because they knew clearly they didn’t have any strength in marketing or distribution or even in R and D activity..They were good only in manufacturing..They played to their strength and did well in the market..Expanded to different nations...Had a tie up with firms which gave them the complementary skills…This is strategy for you!!

Look for that loose bricks: When my strategy prof told me this, I immediately remembered my chess masters analogy ‘Whenever you need to break a dam, you’ll start striking on the weak point’..So he always insisted me to look for that weak spot…Our first case on strategy was on Wal-Mart competing against K-Mart and becoming the market leader...In fact Wal-Mart did not play heads on with K-Mart..But they searched for those loose bricks...They set up the stores in small cities ignored by K-Mart..They did not spend too much on advertising unlike other competitors and hence was able to sell at a cheaper price…So they found such loose bricks and capitalized on it and became a giant…

Hope you enjoyed reading the article….

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