ISMT 200g (Feb 6, 2007 Lecture): “The Art of War” in Business Dr. Theodore H. K. Clark Associate Professor and Academic Director of MSc in IS Management The Hong Kong University of Science & Technology and Adjunct Associate Professor of Operations & Information Management (Information Economics and Strategy Group) 1998 – 2001 The Wharton School of the University of Pennsylvania and Baker Scholar with Highest Honors, MBA program and Doctorate in Business Harvard Graduate School of Business

HKUST Business School 2 Strategy in War and Business Strategy has its grounding or foundation in War War as a means of achieving “success” is older than business as a international competitive battleground Land and “ownership” of people = old form of wealth Modern economy has different measures of success, with land and property no long primary wealth drivers Goal of Strategy is to WIN (Gain Advantage) Some of the Rules of Ancient Warfare STILL APPLY Foundation of Strategy: Sun Tzu, The Art of War Oldest CLASSIC work on Military Strategy

HKUST Business School 3 The Art of War: Five Basic Principles Moral Cause (Vision / Loyalty / Shared Values) Climatic Conditions (Weather / Seasons) Terrestrial Conditions (Distance / Terrain) Generalship of Commanders (Leadership) Organization and Discipline (Structure / Order) How do each of these apply to business today?

HKUST Business School 4 Quotes from Sun Tzu “One should follow that which is the most profitable” (why does profit matter in war?) “He should also be prepared to deal with all emergencies and to modify plans to suit the requirements of changing circumstances with the objective of obtaining the best results” (how is this similar or different from business?) “War is primarily a game of deception” (why?) “When one is capable, he must feign imcapable.” “… avoid strength and attack weakness.” “Careful planning will lead to victory.”

HKUST Business School 5 Sun Tsu on Planning War involves large movements of troops and resources over long distances Supply chain management and logistics are critical When victory is delayed, fighting strength and morale are dampened, the state treasury is impoverished, and this creates opportunities for other states to attack. “There has never been a case where a prolonged warfare proved beneficial to any State.” “When battles are nearby, prices of goods soar.”

HKUST Business School 6 Sun Tzu on Strategy “… it is preferable to subdue a State whole and intact than to destroy it” (business analogy?) “To conquer … without … war is most desirable” “The highest form of Generalship is to conquer the enemy by strategy. The next highest is to conquer … by alliance. … The worst … by besieging walled cities.” “Besieging requires no less than three months to complete preparations in collecting the necessary weapons, and another three months in building up mounds before the walls can be scaled. During this time, the commander may become impatient of waiting and reckless launch attacks.”

HKUST Business School 7 Five Ways to Win Victories Know when and when NOT to Fight Know HOW to match larger with smaller force. Have whole-hearted support of rank and file. Well prepared to seize favorable opportunities Possess Generalship and be free from Interference from Sovereign Know Self, Know Conditions and Know Enemy

HKUST Business School 8 Sun Tzu on Military Tactics “The Science of War may be summarized under these headings: Measurement of Distances Estimation of Costs Calculation of Forces Balancing of Possibilities Planning for Victory”

HKUST Business School 9 Sun Tzu on Organization / Structure “Management of a large force is the same as management of a small force. It is only a matter of organization.” “a matter of using arrays and signals” (information) “ascertain strengths and weaknesses of the enemy” “The adept in war attacks with terrific speed and perfect timing … like releasing a trigger.” “movements have appearance of disorder, but done according to rule and order; to simulate disorder, one must possess discipline; to simulate weakness …”

HKUST Business School 10 Sun Tzu on Opportunity and Luck The adept in warfare always seeks victory from an opportune situation, and relies little on efforts of individuals. Choose men to fit the situation … “Victory depends on correct anticipation” Bait the enemy to go where you want them to go Force the enemy to traverse distances and dangers to fight you, while waiting at ease to meet them. Attack where the enemy do not expect attacks. Warfare is like water … no fixed form or rules.

HKUST Business School 11 Sun Tzu: Some Final Thoughts Leave escape for enemy; none for self! (commit) Get hold of what enemy prizes most, and they will become amenable (beating stronger force) Prevent enemy from coming together (disorder) Move fast, attack unexpectedly when unprepared Deep invasions -> strongly united; stop them fast General MUST keep army ignorant of his plans Force flock to run without knowing final destination