5: Force Two-Front Battles
Krippendorff contrasts a traditional approach of developing expertise in specific areas that are related to an industry, versus the approach of developing a more general expertise and deciding which industries to enter into.
From there, he switches to the military tactic of dividing your forces to attack the enemy from multiple directions rather that keeping them consolidated in a single mass. The single mass is stronger, but is also slower and limited in its ability to attack and defend. This tactic has been used in ancient China, by the Mongol hordes, by the American rebels against the British, and so on.
From there, he switches to a sports metaphor. An offensive team that can either pass the ball downfield or run it forward causes the defense confusion: if they keep their players on the line to defend against the running game, they are vulnerable to a forward pass, and vice-versa.
And in the business world, companies that focus all their efforts on doing one thing will miss opportunities to do other things, and will be obsolete when the one thing they do is no longer needed or no longer profitable. This is the reason firms diversify, but it is also the reason firms change direction.
Consider the example of AutoDesk, which created software used by engineers and architects to build three-dimensional models. It was quite surprised to find that film companies were using its software for special effects and video game developers were using it to create virtual worlds. Rather than ignoring this market and continuing to focus on engineering applications, the firm created a division to customize it further for video animation, and this "Maya" was born, which is the leading software package for animation and CGI effects.
Benefits of Two-Front Strategy
The two-front strategy forces competitors in a defensive position, and causes them to divide their resources. The key elements are the same:
- Divide your own resource and launch simultaneous attacks
- Watch for competitors to divide their resources
- Determine which of their defenses leaves them most vulnerable
- Attach where your opponent is weakest
In order to do this, you must be able to divide your resources effectively and competently, so that both attacks are still potent enough to be a threat. Your advantage in so doing is time: you can plan your attach in advance, whereas your enemy must scramble to defend.
Another important prerequisite is expertise. A firm that concentrates on a single product or industry often does not have the ability to competently enter another field - so per the opening statement, having expertise that can be applied to multiple industries is necessary to use this stratagem.
Dangers of the Two-Front Strategy
The advantages of the two-front strategy are counterbalanced against its liabilities: by dividing your own forces, you also weaken your own defenses against counterattacks.
The author takes the example of the New York Times, which like many newspapers suffered losses from the rise of the Internet. To bolster its position, it decided to reach beyond the city to become a national newspaper, thereby gaining a larger subscriber base and a larger advertising base.
In splitting its forces, the Times weakened itself: it became less relevant to the residents of the city, and never gained much relevance to those outside the city. As a result, the Times lost its stronghold, seeing circulation dip by 40% in the city, and advertisers no longer found it appealing: local merchants did not gain any benefit from being advertised internationally,
And that's when the Wall Street Journal made its move. The Journal already had significant readership outside of the city, but remained focused on financial affairs. They added a local section to their paper, specific to New York city, and attracted the readers and advertisers that the Times had shed by broadening its focus.
The author suggests that the Times is in a bad position, having to abandon one of its two attacks - but given that advertisers and subscribers, feeling betrayed, will not automatically come back, the paper has already taken damage that cannot be easily reversed.
(EN: Thus considered, the two-front strategy a good notion when there is only one enemy, but the problem is that companies have many competitors, and new rivals can take the field. Attacking one foe from multiple vectors is wise, attacking multiple foes is often highly unwise.)
Case Study: Blue Nile
Blue Nile, which sells diamonds on the Internet, was started by a Mark Vadon when he faced confusion in purchasing an engagement ring. It's something many people do, and few understand, and given that it's such a significant investment, there are many dissatisfied customers who dread the purchasing process.
Many find the success of the firm inexplicable: it launched online just as the dot-com bubble was bursting, owns no diamond mines, has no scale advantage, has no existing customer base. (EN: It's really not that cryptic: it's a clear example of customer experience as competitive advantage.)
Blue Nile made the shopping experience easier: customers could easily search among thousands of stones, and were supported by a wealth of user-friendly information. It also gained efficiencies by not having the cost and liability of maintaining an inventory of diamonds in a physical location: it would only order the stone from a supplier once a customer selected it.
The emergence of this site caused a dilemma for traditional retailers: if they went online and tried to compete with Blue Nile on price, they would cannibalize their in-store customer base, which provides a much higher margin. If they used the supply model of ordering on demand, they would lose the advantage of having merchandise available for inspection in store and the ability to give immediate possession to a customer.
In this instance, Blue Nile drover its competition into a two-front battle, even though the firm itself was only fighting on one front.
Case Study: Quest Global
Another case study is provided of Quest Global, a provider of outsourced research and development. The founder had been hired by General Electric, which was a huge firm that invests heavily in R&D, but which also had a constant problem hiring and retaining sufficient engineering staff. Because of their specialized needs, there were few qualified candidates.
The company's procedures involve having one consulting engineer that visits with the client's firm and gathers information, backed by a team of engineers in India, where there is a surplus of educated labor.
It's suggested that this approach stymied competitors, who had either gone the route of having domestic operations to provide quality support for clients, or to offshore operations that provided cheaper and more plentiful staff but could not collaborate effectively across distance and time.
The author suggests that the model "seems to be working" and notes that Quest's business comes from a few deep, strategic relationships with Fortune 500 electronics firms. Because of the local connection, foreign firms cannot compete on the ability to integrate strategically with clients; and because of the foreign support, domestic firms cannot compete for price or obtain the necessary employees.
The author asserts that "competitors cannot easily copy them." (EN: But I disagree because it's actually quite easy for a foreign firm to set up a local office - it can be done in a week. It's also something I've seen done, quite often, in practice.)
Conclusion
(EN: The conclusion offers no new information or insight.)