Stratagem 1:To Catch Something First Let it Go.
“Press the enemy force too hard and they will strike back fiercely. Let them go and their morale will sink. Follow them closely, but do not push them too hard. Tire them, and sap their moral. Then you will be able to capture them without shedding blood. In short, a careful delay in attack will help bring victory.”
—From The Thirty-Six Stratagems
It is often better to let an opponent escape. Trying to beat a surrounded opponent is costly in time, money, energy, or lives, because the opponent, having less to lose, will fight more fiercely. A victory so won also is less permanent. A defeated opponent will look for revenge, but one who submits voluntarily can become useful.
You capture your enemy.
Though you are able, you do not kill your enemy.
- Dominating your opponent often requires more energy than it is worth.
- Force can win hands but rarely hearts.
“A prince ought to inspire fear in such a way that, if he does not win love, he avoids hatred; because he can endure very well being feared whilst he is not hated . . .”
—Niccolò Machiavelli, The Prince4
The Demise of “God’s Machine
In the mid-1990s, two Silicon Graphics engineers, Mike Ramsay and Jim Barton, believed the television industry was on a path to transformation. Digital storage technological advances had been driving down hard-drive prices for years, and Ramsay and Barton believed large hard drives, with the capacity to store hours of video, would soon become affordable. This would spread the ability to store and manage digital video beyond the domain of television and movie professionals, into the hands of common TV viewers.
In the summer of 1997, Ramsay and Barton founded TiVo Inc. with the aim of challenging the incumbent television industry with user-friendly digital video recorders.
The company seemed to have done everything right. It identified an emerging market before anyone else, designed a superior product consumers loved, launched first, established a brand, and secured critical patents. But history proves that a careful follower often outwits a visionary innovator. Cable providers eventually took TiVo’s innovation for themselves with the stratagem To catch something, first let it go.
TiVo’s machine was revolutionary. It empowered television viewers as no competing product could. With the press of one button, a viewer could record every episode of her favorite program. She could later watch the show on her own schedule, no longer at the discretion of TV network programmers. She could pause to answer the phone and fast-forward through the slow parts. She could watch an entire baseball game in forty minutes by fast-forwarding between pitches and, by skipping commercials,get through a half-hour program in just twenty-two minutes. She could even create her own television line-up, watching recorded programs in any order she desired.
“When the position is such that neither side will gain by making the first move, it is called temporizing ground.
“In a position of this sort, even though the enemy should offer us an attractive bait, it will be advisable not to stir forth, but rather to retreat, thus enticing the enemy in his turn; then, when part of his army has come out, we may deliver our attack with advantage.”
—Sun Tzu, The Art of War
TiVo consumers became the “raving fans” of marketers’ dreams. Many claimed TiVo had changed their lives and tired their friends with endless sermons on the topic.
The industry granted equally fervent praise. BusinessWeek profiled TiVo’s product in 1999 with an article titled “Here’s TV ’s Next ‘Next Big Thing.’”6 Michael Powell, then chair of the Federal Communications Commission, called TiVo “God’s machine.”7
Industry leaders appeared equally impressed. TiVo’s early investors included Cox Communications, AOL Time Warner, the Walt Disney Company, and Sony. When the company first issued stock to the public in September 1999, asking $16 per share, investors immediately drove the stock price up 87 percent. TiVo seemed
uniquely positioned to revolutionize television.
But cable companies watched from the wings with an alternative plot in mind. They were letting TiVo walk into a trap.
Cable companies saw that while viewers who tried TiVo’s digital video recorder (DVR ) loved it (97 percent said they were “very satisfied” and would recommend TiVo to a friend), TiVo had a hard time convincing new users to try a DVR . The general public could not quickly grasp what a DVR was or why they should want one. The success of DVR s would come only through an extensive and costly consumer education campaign.
Who should pay for such a campaign? Consumers adopting DVR s would generate new revenue that would benefit many,including TiVo, electronics manufacturers (who produce the boxes), cable providers (from higher monthly fees), networks (from viewers spending more time watching television), and television producers
(for the same reason). But while TiVo—a publicly traded company with thousands of investors and just one product—needed to launch the campaign immediately, other media players could be patient. Cable companies faced little urgency because they calculated they could easily leverage their relationships with millions of television viewers to later erase any lead TiVo might gain.
Between 2000 and 2003, TiVo invested $270 million to build awareness and adoption. Cable companies watched.
The cable firms decided to be passive. They avoided participating in the DVR revolution, repeatedly turning down opportunities that would have allowed them to launch DVR s at little to no cost. TiVo could push DVR s into millions of households by integrating its technology into a cable company’s cable box. It signed a deal with DirecTV to do this and enjoyed spectacular results (the DirecTV deal eventually created 70 percent of TiVo’s users). Then TiVo approached most major cable companies with the identical offer, but each cable company—even TiVo’s early investors, Cox Communications and AOL TimeWarner—refused.
Through TiVo’s efforts, DVR s eventually broke into public consciousness. Viewers began asking for them. They often called cable providers to learn more. When calls came in earnest, cable companies were ready to seize the opportunity TiVo had ushered in. They offered DVR s integrated into cable boxes manufactured
by Motorola, Scientific-Atlanta, and other third-party consumer electronics companies.
While TiVo charged $200 for its box, a DVR from a cable provider costs a fraction of that amount. Cable providers are happy to lose money on the hardware because they make up these losses in the increased monthly fees they earn from DVR customers who must upgrade to digital cable service.
Cable companies let TiVo go and then easily eroded TiVo’s early lead. TiVo’s stock price, once $30 per share, has stagnated at about $6 per share for the past several years. It commands less than a third of the DVR market and is expected to continue losing share.
Cable companies allowed an innovative competitor to enter their domain, watched patiently as TiVo launched a revolution, and, at the moment of ripeness, used their superior position to take over.
The 100-Year Game of Cat and Mouse
Coca-Cola versus Pepsi, the U.S.’s classic corporate rivalry, exemplifies the stratagem To catch something, first let it go. The companies first locked antlers at the turn of the twentieth century, and their drama continues to be studied by MBA students in business schools today. But this rivalry is strange because it is one neither company wants to win completely.
In 1886 a pharmacist in Georgia created Coca-Cola’s formula, and a few years later Coca-Cola was introduced as a branded beverage to the public. Seven years later, in 1893, a pharmacist from North Carolina invented the Pepsi formula. Soon after, in a move that would define the hundred-year dance between these rivals, Pepsi implemented Coca-Cola’s franchise-based business model. By 1910 Coca-Cola had 370 franchises to Pepsi’s 270.
The pattern of competition has remained consistent for a century: Coca-Cola innovates, Pepsi copies;Pepsi innovates, Coca-Cola copies. While each company strives to differentiate itself with a new business model, new channel, or new product, it tries as well to be the same, tracking its adversary’s efforts so that it can
- In 1980 Coca-Cola switched from using sugar in its cola to lower-priced high-fructose corn syrup. Pepsi followed suit three years later.
- In 1984 Pepsi switched from saccharine to aspartame to sweeten its diet product. Coca-Cola switched to aspartame six months later.
- In 1984 Pepsi introduced a two-liter bottle. Coca-Cola introduced its own two-liter bottle four months later.
- In 1985 Seven-Up ran a successful advertising campaign extolling the virtues of being caffeine-free. That same year Coca-Cola and Pepsi launched caffeine-free versions of their own products.
Pepsi and Coca-Cola are enemies that spur each other to be better. As Roger Enrico said in 1988 when he was CEO of Pepsi, “The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola Company didn’t exist, we’d pray for someone to invent them.”8
Coca-Cola and Pepsi play cat and mouse with each other, following closely but never falling too far behind. When one lurches forward, the other pounces; but the pounces are never fatal. It is possible to debate their intentions, but the outcome is clear: These two companies have spurred each other toward greatness for over a century without either one “winning.”
“Do not pursue an enemy who simulates flight; do not attack soldiers whose temper is keen. Do not swallow bait offered by the enemy. Do not interfere with an army that is returning home. When you surround an army, leave an outlet free. Do not press a desperate foe too hard. Such is the art of warfare.”
—Sun Tzu, The Art of War9
To Capture a Heart, Let It Go Seven Times
In AD 225, three kingdoms ruled China. One of these, Shu, had been trying unsuccessfully for years to force a group of tribes in its southern region into submission. The Shu ruler instructed an advisor, Zhuge Liang, to resolve the problem.
With his superior military power, he could have forced a decisive victory over the renegade tribes. But he worried that such a victory would be costly and short-lived. The resentment it would generate would complicate efforts to rule the region. He decided instead to win the tribe members’ hearts and set out to do so by implementing the stratagem To catch something, first let it go. He set his sights on the king of the southern tribes, Meng Huo. In the first battle between Meng Huo’s tribal army and the Shu army, it became clear that the tribal army was no match for the well-trained and equipped Shu. The Shu captured all three of Meng Huo’s generals. But rather than close in on victory, Zhuge Liang fed Meng Huo’s generals well and released them. The generals, who expected to be executed, were naturally grateful.
In response, Meng Huo launched an attack himself, and through some deft maneuvering and trickery by the Shu army, was taken prisoner. But Zhuge Liang again acted strangely. Rather than imprisoning or executing Meng Huo, he simply asked his captive to pledge allegiance to the Shu kingdom. Meng Huo refused but promised that if he were captured a second time he would admit inferiority and submit to Shu rule. Zhuge Liang had Meng Huo untied, treated him to wine and good food, and released him. When Shu officers asked Zhuge Liang why he did not execute the enemy king to end the siege definitively, Zhuge Liang explained that he was trying to win the hearts of the southern tribes, not merely defeat their armies.
Meng Huo planned a second attack. His general, who earlier had been captured and released by Zhuge Liang, failed and almost lost his life as punishment. These two events—being released by the enemy and then nearly being killed by his own ruler—shifted the general’s allegiance. He captured Meng Huo and presented him to Zhuge Liang. For a second time, Meng Huo was a prisoner of the Shu. For a second time, Zhuge Liang asked Meng Huo to submit. For a second time, he declined. And for a second time, Zhuge Liang had Meng Huo untied, fed, and released. Meng Huo
returned home, hunted down his general, and had him executed.
Meng Huo then planned a third assault. This time, he had his brother and a large entourage dressed as civilians bring gifts to Zhuge Liang. Once inside Zhuge Liang’s camp, this band prepared to take the Shu forces by surprise and capture Zhuge Liang. But Zhuge Liang saw the trap coming. When the attack came, his men were prepared. They captured Meng Huo,but again he refused to submit, and again Zhuge Liang released him. This continued four more times.
In one instance, Meng Huo and his men fell into a trap laid by the Shu army. In another instance, a king loyal to Meng Huo turned on him, capturing and delivering him to Zhuge Liang. In yet another, Meng Huo and an entourage pretended to surrender but when searched were revealed to be carrying daggers and swords with which they planned to kill Zhuge Liang. Each time Meng Huo was asked to submit, he refused and was released.
After the sixth capture, few supporters remained. Meng Huo mounted a seventh attack on a Shu outfit. The outfit played a game of cat and mouse for two weeks, setting up camp, pretending to retreat, and setting up camp again. In the last move of this pursuit, Meng Huo’s army found itself trapped in a valley. Most of the army died. Meng Huo found himself captured for the seventh time. By now he had little support and the morale of his troops was flagging, so Meng Huo submitted to Zhuge Liang and to Shu rule of his tribes.
Zhuge Liang rewarded him with a kingdom, land, and dominion over the southern tribes. When asked why he returned Meng Huo to power rather than put a Shu ruler in his place, Zhuge Liang explained that the people of the southern tribes would be more loyal to Meng Huo than to a Chinese ruler and that by playing cat and mouse he had won Meng Huo’s heart. The victory, therefore, was more stable.
“Nothing in the world is more soft and yielding than water. Yet for dissolving the hard and inflexible, nothing can surpass it. The soft overcomes the hard, the gentle overcomes the rigid. Everyone knows this is true, but few can put it into practice.”
—Lao Tzu, Tao Te Ching10