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Stratagem 15:Loot a Burning House.



“When the enemy falls into severe crisis, exploit his adversity and attack by direct confrontation. This is the strong defeating the weak.”

—From The Thirty-Six Stratagems

Wade F. B. Thompson and Peter B. Orthwein knew next to nothing about the recreational vehicle (RV ) business when they bought HI-LO Trailer, a small RV manufacturer, in 1977. But their willingness to buy when others wanted to sell, combined with their complementary financial and marketing skills, proved sufficient to compete. Today their company, Thor Industries, (named for the first two letters of each partner’s name, Th and Or) is the United States’ leading producer of RV s. It commands a nearly 30 percent market share, having grown revenues by 450 percent over the past ten years to $2.6 billion.32 The courage to move in when others are rushing for the exits can generate attractive returns.

Thompson and Orthwein first got a taste of the ancient stratagem Loot a burning house in 1980 when, with just three years of industry experience, the two bid for an American RV icon, Airstream.

Throughout the 1940s and 1950s, Airstream became a symbol of American culture. Its distinctive bullet-shaped silver trailers could be seen hitched to autos throughout the United States. Known for
its design and durability, the Airstream trailer served as a way for American families to explore their country at a time when family journeys across the States became symbolic of post–World War II mores. Even today, when you imagine the classic RV , you are probably unconsciously visualizing the Airstream.

By 1980, however, Airstream was on the verge of failure. The company had been sold in 1967 to Beatrice Foods, which wanted to diversify beyond its core food businesses. While Airstream had
become an important contributor to Beatrice Foods’ profits, the 1970s oil crisis kept would-be RV travelers at home and pushed Airstream’s profits into negative territory. In 1979, Airstream reported a loss of $12 million on sales of $22 million.

In 1980, Beatrice CEO James Dutt determined that Beatrice should sell all non-core companies, as well as any company that couldn’t produce at least a 20 percent return on net assets for Beatrice.
Airstream, Dutt determined, had to go.

The market for buses and RV s at the time was poor. Few wanted to bet on Airstream’s future. But two entrepreneurs who had entered the RV business just three years prior decided to ignore consensus and bid for Airstream. The two formed a new company, Thor Industries, in August 29, 1980, to buy the Airstream business from Beatrice. They paid $22 million for a company that, at the time, was losing $12 million per year.

The investment paid off. The two implemented a set of operating and marketing initiatives that simultaneously built up Airstream’s top line while it restrained its costs. Within their first year of ownership, the entrepreneurial team increased revenue to $26 million and profit to $1 million (a $13 million turnaround in profit).

They improved Airstream’s quality, sought ways to reduce costs, and improved dealer relationships. Their efforts were rewarded with unexpected results. Within one year of purchase, the Airstream brand, which had been losing money under Beatrice Foods, delivered a profit (income before taxes) of about $1 million. Airstream has continued to grow, consistently challenging the industry’s beliefs.

Thompson and Orthwein continued their strategy of Looting a burning house throughout their careers:

  • In September 1988, Thor acquired El Dorado, a troubled Kansas-based company that produced buses. Under Thor, El Dorado more than quadrupled revenue to become the largest small bus manufacturer in the United States.
  • In 1982, Thompson and Orthwein purchased Commodore Corporation’s RV business. Again, under Thor, Commodore’s business soared.
  • In 1991, Thor purchased Dutchman, which became Thor’s largest “towable” RV company (i.e., an RV to be towed behind users’ main vehicles).

Moving in when others are exiting, and buying when common wisdom drives the competition to sell can lead you to attractive competitive advantages. Thor went public in 1984, and that same year
Forbes magazine ranked Thor sixth out of 200 best small companies in the United States. In 1987, Money magazine named Airstream travel trailers one of the ninety-nine “best-made products” in America. Over the past ten years, Thor’s revenues have grown over 450 percent, while its profit margin has nearly doubled to 10 percent.33

Yue Crouches for Fifteen Years

In the fifth century BC, the states of Yue and Wu were at war. In a decisive battle in 498, the Wu army took the king of Yue prisoner and forced him into slavery. For the next three years, he groomed horses for the king of Wu. He worked without protest. Indeed, he behaved so respectfully and obediently that he won the Wu king’s trust. Eventually the Yue king gained his freedom and returned to his home.

Although the king of Yue yearned for revenge, he waited. In the years that followed his release, he continued to act respectfully toward Wu and purposely stayed close to Wu’s king. He regularly
sent gifts of gold and money to strengthen the foundation of trust between the two nations.

During this time, the Yue king rebuilt his army. This task took several years. Once it was complete, more than five years later, he had the strength to attack Wu and exact his revenge.

But he did not. He sent gifts, maintained his friendly countenance, and waited.

Ten years after the Yue king’s release, a drought hit Wu, and the Yue king sensed his moment approaching. When the king of Wu foolishly executed his most capable advisor, the Yue king prepared to strike. And in 482, when the king of Wu led his most capable troops out of the capital to meet with rulers from surrounding states, the Yue king finally seized the moment and unleashed his revenge. He attacked and took the Wu capital.

The king of Yue sat poised for thirteen years, waiting patiently for a sign of fire. When Wu’s house started to burn, he advanced. His timing gave him a clean victory and a satisfying revenge.

So in war, the way is to avoid what is strong and to strike what is weak.

“Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing.
“Therefore, just as water retains no constant shape, so in warfare there are no constant conditions.”

—Sun Tzu, The Art of War34

“8Ps” of StrategyOpportunity
for Disruption
Recommended Leverage Points
Position- The farmers, individual and corporate, that you are targeting.

- The need of the agricultural industry that you seek to fill.
3- What technologies do you control that can help you tap into market
segments that you previously thought unreachable?

- What are the potential business alliances you could think about with key players in the segment to serve your customers with integrated solutions? (Serving customers with more integrated solutions example: serving farmers with fertilizers, crop protection and other).
Product- The products you offer, and the characteristics that affect their value to customers.

- The technology you develop for producing those products.
8- What moves are your organization taking to implement Big Data and analytics to your operations? What IoT and blockchain applications can you use?

- What tools and technology could you utilize or develop to improve food quality, traceability, and

- How can you develop a more sustainable production model to accommodate constraints on arable

- What is the future business model needed to serve new differentiated products to your customers?
Promotion- How you connect with farmers and consumers across a variety of locations and industries.
- How to make consumers, producers, and other stakeholders aware of your products and services.
8- How are you connecting your product with individual and corporate farms who could utilize it?
- How could you anticipate market and customer needs to make customers interested in accessing your differentiated products?
PriceHow consumers and other members of the agricultural supply chain pay for access to agricultural products.7- What elements of value comprise your pricing? How do each of those elements satisfy the varying needs of your customers?
Placement- How food products reach consumers. How the technologies, data, and services reach stakeholders in the supply chain.9- What new paths might exist for helping consumers access the food they desire?
- How are you adapting your operations and supply chain to accommodate consumers’ desire for proximity to the food they eat?
- How could you anticipate customer expectation to make products more
accessible to customers/agile supply chain?
- Have you considered urbanization as a part of your growth strategy?
- How your food satisfies the needs and desires of your customer.
- How the services you provide to agribusiness fulfill their needs.
9- Where does your food rate on a taste, appearance, and freshness
- Could the services you provide to companies and farms in the agriculture industry be expanded to meet more needs?
- What senses does your food affect besides hunger? How does your
customer extract value from your food in addition to consumption?
Processes- Guiding your food production operations in a manner cognizant of social pressure.8- How can you manage the supply chain differently to improve traceability and reduce waste?
- How can you innovate systems in production, processing, storing, shipping, retailing, etc.?
- What are new capabilities to increase sustainability (impact on the environment, or ESG) components?
People- The choices you make regarding hiring, organizing, and incentivizing your people and your culture.- How are you leveraging the agricultural experience of your staff bottom-up to achieve your vision?
- How do you anticipate new organizational capabilities needed to perform your future strategy (innovation, exponential technologies needed, agile customer relationship, innovative supply chain)?
- How do you manage your talents to assure suitable development with exposure in the agrifood main challenges/allowing a more sustainable view of the opportunities/cross-sectors?