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Stratagem 26:The Stratagem of Injuring Yourself

 

“People rarely inflict injuries on themselves, so when they get injured, it is usually genuine. Exploit this naivety to make the enemy believe your words; then sowing discord within the enemy will work. In this case, one takes advantage of the enemy’s weakness, and makes the enemy look as if he were a naive child easily taken.”

—From The Thirty-Six Stratagems

Injuring yourself can soften competitive resistance in at least two ways. A common approach is to injure yourself so that your competition, perceiving you as weak, discounts you as a threat and lets you advance. A more sophisticated approach entails wounding yourself in a way that entangles your competition in a dilemma, because defending themselves requires that they similarly injure themselves. Preferring your attack to a self-imposed one, your competition is likely to ignore you.

This stratagem has enabled Whole Foods to deliver unprecedented performance while facing minimal competitive resistance. In an industry growing at just 6 percent per year, Whole Foods is growing at 25 percent. While competitors squeeze out 4.5 percent profit margins, Whole Foods, operating on a far smaller scale, manages 8 percent.72

Since going public in 1992, Whole Foods has transformed from a lightweight, generating just a few hundred million dollars in revenue, into a serious contender. With $5 billion in annual sales, it now approaches the league defined by Supervalue, Safeway, and Kroger (which annually earn $60 billion, $40 billion, and $20 billion, respectively). Why did these incumbents allow a small natural-food store to take such a large share of their market? Whole Foods’ rise shows the Stratagem of injuring yourself at work in two phases: first, in the founding of the chain, and second, in its organization on an ongoing basis.

In 1978 John Mackay, a University of Texas dropout, convinced a group of friends and relatives to lend him $78,000 to purchase a natural-food store called Safer Way Natural Foods. Two years later he partnered with a pair of entrepreneurs to open a new store in Austin called Whole Foods Market.

The Whole Foods concept was unique. Until that time naturalfood stores had been small and had offered limited selections. At 12,500 square feet, the first Whole Foods Market approached traditional supermarkets in size and offered a broad selection of foods including meats, breads, wines, and cheeses.

The Whole Foods concept seemed to be working. By 1985 Mackay and his partners had opened two more stores. They then began acquiring existing natural-food stores, first in Texas, then in Louisiana, California, and Wisconsin. By January 1992, when the company issued its initial public offering (IPO) of stock, the company had grown to ten stores and $92.5 million in revenue.

While it’s a great success story, Whole Foods’ strategy of focusing on the natural-foods niche pre-empted competitive responses from the large incumbents. The natural-food segment was too small to be attractive to them. Whole Foods therefore appeared too specialized to be a threat. Larger supermarket chains, feeling no urgency to defend themselves against Whole Foods, allowed this small upstart to grow.

This competitive dynamic, in which an attacker commits itself to a niche deemed unattractive to incumbents, thereby pre-empting competitive resistance, has been termed the Judo Strategy. Numerous small companies have used this approach to carve out small businesses among giants.

But Whole Foods’ strategy seems to be something more; for the company has achieved the scale few Judo Strategy companies enjoy, because Whole Foods “injures” itself in ways the competition chooses not to copy.

For example, Whole Foods gives each store broad control, allowing each to operate as a separate business unit. Its stores are run by teams of managers who make decisions that larger supermarket chains typically reserve for corporate headquarters. By granting such autonomy, Whole Foods spurs healthy interstore competition. Employees know how well their store is doing relative to other stores. They want to be the best so they strive to get better.

Unleashing such competitive energy would benefit any company, even traditional supermarkets, so why don’t incumbents copy Whole Foods’ approach? Because doing so would require inflicting a self-injury few large supermarkets can bring themselves to endure. For staff to play this interstore competition game, they must know their store’s revenue, inventory turns, and profit-margin figures, and they must know how these compare with other stores. Indeed, to operate as it does, Whole Foods shares such detailed financial performance data with employees that the SEC considers each of Whole Foods’ 6,500 employees an “insider,” an outcome far-reaching consequence for a traditional supermarket chain.

Whole Foods has adopted a rule that its CEO cannot earn more than eight times the company’s average wage. Hierarchical supermarket companies, which depend on large numbers of low-wage store clerks to support regional and headquarter managers, would strongly resist such a rule.

Matching Whole Foods’ strategy would require an incumbent to self-injure in at least three ways: It would need to decentralize into autonomous stores, share detailed performance data with employees, and impose an executive salary cap. A copycat strategy is simply too painful to accept. As the incumbents ponder their alternatives, they pacify themselves with the view that Whole Foods, having injured itself, poses a minor threat. Meanwhile Whole Foods advances uncontested.

“There’s this notion that you can’t be touchy-feely and serious, we don’t fit the stereotypes. There’s plenty of managerial edge in this company—the culture creates it.”73

—John Mackey, Founder and CEO, Whole Foods Market

Injuring an Assassin


During the Spring and Autumn period (770–476 BC), the emperor of Wu was preoccupied with the prince of Wei. The emperor had taken power by killing the prince’s father and assuming the throne. The prince, seeking revenge, was assembling capable men to mount an attack. So the emperor decided to hire an assassin, Yao Li, to get rid of the prince’s threat quickly and permanently.

To kill the prince, Yao Li would need to get close. But this would be difficult, because the prince was a careful and suspicious man. He would be wary of anyone who came from within the emperor’s domain. So Yao Li proposed a plan to injure himself.

He publicly offended the emperor. In response, the emperor, playing along with the secret plan, ordered Yao Li arrested and his right hand severed in punishment. The one-handed Yao Li fled the emperor. He sought refuge with the prince and swore to hate the emperor and yearn for revenge.

He publicly offended the emperor. In response, the emperor, playing along with the secret plan, ordered Yao Li arrested and his right hand severed in punishment. The one-handed Yao Li fled the emperor. He sought refuge with the prince and swore to hate the emperor and yearn for revenge.

Yao Li eventually became one of the prince’s advisors. When the prince was finally ready to take action, he launched a waterborne attack on the emperor. Yao Li was on the prince’s boat. When their boat reached the middle of the sea, Yao Li turned to the prince and thrust a spear into him. While the prince bled to death, his men subdued Yao Li. But before they reached the shore, Yao Li committed suicide.

By injuring himself, Yao Li earned the prince’s trust and made the prince pay dearly for this mistake.

Leverage
Point
“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
production?

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

- 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?
Physical
Experience
- 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
scale?
- 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?
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