Stratagem 14:Beat the Grass to Startle the Snake.
“Any suspicion about the enemy’s circumstances must be investigated. Before any military action, be sure to ascertain the enemy’s situation; repeated reconnaissance is an effective way to discover the hidden enemy.”
—From The Thirty-Six Stratagems
Most Westerners perceive the success of high-growth companies to be built on exhaustive analysis followed by the execution of bold strategies. Yet this is rarely the case. Only 7 of the 100 most
competitive companies of the decade have explicitly adopted this approach. In accordance with Wu Wei, successful companies more often take a series of small incremental steps that preserve energy,
minimize risk, and allow them to “feel out” the market.
Microsoft regularly turns to this same pattern of trial and error when it builds a new business. It is not that Microsoft identifies opportunities before its competition; indeed, Microsoft is often
a follower. The image of Microsoft using its unprecedented cash reserves to thrust into new businesses is, for the most part, inaccurate. Microsoft follows a patient, deliberate approach that allows it to feel out the competition as it works its way into a leading position over the course of several years.
Consider Microsoft’s entry into the Internet and later the server market. When the company introduced its Web portal in the mid- 1990s, industry experts believed it had missed its opportunity to be an Internet player because Yahoo! and AOL had already built insurmountable leads. Commentators often mentioned the fact that Bill Gates did not refer to the Internet in the first version of his 1995 book The Road Ahead. The publisher rapidly produced a revised version that did, but Microsoft persisted in its Internet strategy, buoyed by strong cash reserves and minimal debt.
In comparison to Yahoo!’s and AOL’s breakneck rise to power, MSN’s decades-long effort seems like a slow plod. Its execution was plagued with mistakes—and with each mistake, onlookers cheered for the smaller, independent companies. This taught the software giant lessons about the Internet and the new economy. Therein is a key to Microsoft’s success. Most observers interpreted Microsoft’s failures as faults. But these missteps also offered lessons. With each loss, Microsoft learned about its market and its competitors. Its next attack was informed by this new knowledge. Through a sequence of minor battles, Microsoft learned. With each loss, it grew more
familiar with competitive and consumer dynamics to cut further into its competitors’ leads. After fifteen years MSN has persisted as one of the Internet’s most popular Web sites. It attracts nearly
500 million unique visitors worldwide each month29 and is the third most-popular search engine after Google and Yahoo!
Its server software business followed a similar pattern. When Microsoft first entered the segment in 1998, industry experts discounted, even poked fun at, the company’s prospects. Microsoft’s product, SQL Server, was far weaker than Oracle’s and IBM’s offerings. But Microsoft persisted. Every few years, it launched an improved version that responded to competitive and customer reactions. It slowly built a legitimate position. Today it captures the third highest share of server revenue.
H&M Plods . . . Quickly
Over the past decade, H&M has emerged as one of the fastest growing and most profitable retailers in the world. It owes its recent success to a great extent to its application of Beat the grass to startle the snake.
The company was founded in Sweden in 1947. It grew from a local success story into a European one, expanding into the UK and continental Europe. Then it set its sites on the United States. As of 2007, H&M operated more than 1,300 stores in twenty-four countries.
Its philosophy is inconsistent with that of other global retailers such as the The Gap because H&M takes small steps instead of big ones and adapts to local tastes instead of standardizing for scale.
When H&M enters a new market it tests out a merchandise mix, keeping inventory levels and costs low. The new store carefully tracks local customer buying habits, whether they buy more children’s clothes or men’s or women’s or a family mix. The company replenishes stores faster than its peers so it can adjust each store’s merchandise mix almost immediately. When a store finally gets its mix right, it maximizes growth.
This trial-and-error strategy has fueled growth and profit margins at nearly twice the industry average over the past decade. In 1995, H&M sold $1.7 billion. In 2005, it sold $11 billion.
“Float a trial balloon to see how well something is accepted and received, especially when you doubt its popularity or success.”
—Baltasar Gracian, The Art of Worldly Wisdom30
Beat an Assistant to Startle a Magistrate
Although this stratagem is much older, its modern name originates from a story during the Tang dynasty (618–907 ce). The story centers on a provincial magistrate who regularly accepted bribes.
His citizens, who were fed up with the corruption, issued a formal complaint. But rather than directly implicate the magistrate, they issued charges against one of his assistant magistrates. Perhaps the citizens feared the response that a direct attack on the magistrate might evoke. Perhaps they were not sure whether the magistrate was actually involved. Either way, their tactic had the desired effect: They startled and exposed the snake. The magistrate felt the threat and ended his corrupt practices. In a moment of anxiety, the magistrate wrote: “You merely beat the grass but by doing so startle the snake within.”
