Stratagem 21:The Stratagem of the Open City Gates
“In spite of the inferiority of your force, deliberately make your defensive line defenseless in order to confuse the enemy. In situations when the enemies are many and you are few, this tactic seems all more intriguing.”
—From The Thirty-Six Stratagems
A company regarded as a tough competitor can scare away opposition simply by making noise during its approach. Microsoft’s worldwide reputation as aggressive, persistent, and usually successful is the weapon the company wields to clear away potential opponents. When Microsoft announces its intention to introduce a new product or enter a new market, would-be competitors recalculate their projections. Investors readjust their risk assessments Customers rethink their purchases and consider waiting for the Microsoft product. In other words, when Microsoft announces it is entering a new segment, the market makes room. If Microsoft hid its intentions, it would have to spend more to win over customers and investors.
Microsoft implements this tactic intentionally and proactively. It does not depend on the market to link past successes to future success. It makes this linkage explicit.
In revealing Microsoft’s “digital home” strategy, which envisions home appliances (e.g., refrigerators, televisions, and systems, such as alarms, and lighting) networked through Microsoft products, Bill Gates said, “The way you get to our vision [of the digital home] is by building individual products that are the best in their own categories. It’s like Microsoft Office. We built that with Word being the best, Excel being the best. They all had to be the best before the whole integration thing came together.”57 In other words: Competitors, beware.
Microsoft is not the only company to rely on this stratagem. International Game Technology (IGT) is the largest designer and producer of slot machines and video-gaming machines in the world. The company sells two out of every three slot or video machines bought in the world.
In the mid-1980s, IGT was not the dominant player. It was one of six leading producers in its market. To separate itself from the competition, IGT made a strategic decision to invest more heavily than its peers in research and development. Over the subsequent twenty years, these R & D investments began paying off in two ways. First, IGT’s technological advances created new betting experiences,which captured new business. For example, the company linked one of its new computerized slot machines to a proprietary network that allowed gamblers in different states to play for the same progressive jackpot. This multistate slot machine was a breakthrough that began separating IGT machines from the pack.
But IGT’s commitment to outspend its peers on R & D had a secondary, possibly more powerful, effect. By revealing, even boasting, about the level of its R & D spending, IGT deflated competitive resistance. The company signaled competitors to give up competing with IGT using R & D spending and, possibly, convinced investors to prefer IGT stock because the company was technologically aggressive.
From the mid-1990s, IGT launched a stream of new gaming technologies and expanded into new geographic markets. Over the past decade it has averaged 13 percent annual revenue growth (twice the industry average) and produced a 30 percent profit margin (also twice the industry average).
IGT’s success offers the lesson that by a committing to a bold strategy and openly sharing it, you may convince the competition to step aside.
Using Weakness to Communicate Strength
During the Three Kingdoms period (220–265 ce), while the kingdoms of Shu and Wei were at war, the prime minister of Shu found himself in an apparently helpless predicament. Taking a break from fighting, he retired to his base city. He sent most of his troops off to battle and ordered half of the remaining troops to leave the city to help move supplies in another town. This left him with just 2,500 troops.
The news of an approaching Wei army, 150,000 soldiers strong, came too late for the prime minister to call back his men. He would have to work with what he had.
His two obvious choices were to flee or to fight, each of which meant death for him and his subjects. The Wei army outnumbered his by sixty to one. If he fought, he would lose. If he fled, the Wei would hunt him down and kill him. The situation’s helplessness made his subjects faint, but the prime minister remained calm. He had a stratagem in mind.
As great clouds of dust signaled the approach of the Wei army, the prime minister ordered his soldiers to occupy their posts as usual, threatening to behead anyone who attempted escape. He then opened the city gates and placed twenty soldiers at each gate.
Dressed as civilians, the soldiers pretended to sweep the streets. Finally, the prime minister ascended an observation post, carrying incense and a zither. He lit the incense and calmly played the zither.
Wei scouts were shocked at the strange signs of calm in Shu’s city. When they reported that the city gates were open, civilians were sweeping the streets, and guards were at their usual posts, the Wei general was incredulous. He mounted a horse to inspect the scene himself. He too found the same signs of calm. Then, when he heard the prime minister playing serene songs on a zither without a hint of fear in his voice despite the presence of 150,000 troops at his doorstep, the general concluded that the prime minister had set a trap. He explained to his advisors that the prime minister was known for being conservative and careful, and he would not take such a bold position without a powerful stratagem in hand. Wei turned his troops around and left.
Thus Shu’s prime minister saved his life and his city. He forced 150,000 enemy troops to retreat with only 2,500 soldiers, open city gates, and a zither.
“Things pass for what they seem, not for what they are. Only rarely do people look into them, and many are satisfied with appearances.”
—Baltasar Gracian, The Art of Worldly Wisdom58
