Stratagem 3:Invite Your Enemy onto the Roof, Then Remove the Ladder.
“Expose your weak points deliberately to entice the enemy to penetrate into your line, then surround him by cutting off his exit.”
—From The Thirty-Six Stratagems
The “ladder” in this stratagem symbolizes a path of entry and escape. A ladder allows one to ascend the battleground and escape if necessary. Without an escape ladder, your opponent is forced to
fight uncomfortably on a roof he does not understand.
You entice your adversary to enter your area of control.
You cut off your adversary’s escape routes.
This disadvantages your adversary and motivates your people.
Microsoft Lures Britannica onto Its Roof
In 1988, Encyclopedia Britannica was the world’s leading English language encyclopedia. Originally published in Scotland in 1768, it was also one of the oldest encyclopedias. Through 130 years of publishing, updating, and republishing, it built two seemingly insurmountable assets: credibility and deep content. These assets were key success factors in the encyclopedia business. Consumers, who had to invest more than $1,000 for a complete set of volumes, demanded that the content be authoritative and exhaustive. These assets were also defend-able. Any new competitor would have to invest in years of losses as it built and rebuilt content, slowly establishing its credibility,to catch up. Britannica’s foundation seemed secure.
Searchability. Users could search for information in multiple ways. In addition to the traditional alphabetical method, users could search by keyword and by category.
Multimedia. Microsoft’s research showed that children learned more when presented with colorful pictures and moving images, so Microsoft included 800 full-color maps (with voice pronunciations, a “zoom” feature, and 100 historical maps), 100 animations, and seven hours of sound (including historic speeches, famous pieces of music, nature sounds, and foreign languages).
More graphics. Microsoft offered 7,000 illustrations and photographs. A twenty-foot historical timeline—from 15 million BC to the present, which allowed users to click on and explore historic events.
Cross-links. Thousands of cross-links enabled users to jump easily from one topic to a related one.
More timely. Electronic content is easier to update than print (e.g., adding a paragraph does not require reformatting all subsequent pages, as is the case with actual books), so Microsoft could promise the content would be fresher.
By the time Microsoft completed development of its encyclopedia,which it named Encarta, in 1993, Britannica’s advantages no longer seemed so secure. To round out its list of advantages, Microsoft leveraged something Britannica could not: cost. It only cost about $1 to produce a CD. So Microsoft could, and did, price Encarta far below a Britannica set—at about $300, Encarta was less than a third Britannica’s cost. A reviewer wrote in the Guardian, “For less than the cost of a Britannica [book set], you can now buy a multimedia personal computer with CD-ROM drive and the leading electronic encyclopedias.”11 Encarta quickly became the top-selling educational CD.
Microsoft’s aggressive pricing removed Britannica’s ladder. Had Microsoft priced Encarta in line with a set of Britannica, its value proposition might have been sufficiently comparable to allow the
two products to coexist. Consumers who wanted in-depth content would buy books, and those who wanted multimedia would buy Encarta. But by pricing Encarta at $300, Microsoft left little choice
for Britannica but to follow suit. Britannica had to cross the river to Microsoft’s shore because its riverbank was eroding. How long would consumers be willing to pay so much more for a product with clear disadvantages?
Britannica responded two years later with its own electronic encyclopedia. But when it did, it stumbled, because it was forced to rush into a business it did not understand, and because it was
playing by rules that gave Microsoft the advantage.
Britannica introduced its CD product in 1995, but because the company did not have the skills or time—it took Microsoft five years to develop Encarta while Britannica had less than two—the
first Britannica CD was little more than Encyclopedia Britannica text in electronic form. The company hoped its superior brand name and content depth would compensate for a multimedia deficit.
Consumers might have accepted this proposition had Britannica not committed a fatal pricing error. Perhaps because it did not understand the CD-ROM market or, more likely, because it
wanted to prevent cannibalization of its core product, Britannica priced its CD product at $1,000—three times the price of Encarta. Sales were, naturally, unimpressive.
Finally, in 1997, after two years in the market, Britannica accepted its new reality and began playing by the new rules. It slashed its price to match competition at $125 and added Web links and multimedia content to its latest release.
Britannica had better but still spotty success online. It was the first to offer an online service, www.eb.com, which allowed users, for a fee, access to Britannica’s thirty-two volumes of content. The site switched fee structures a few times, and in 1999 Britannica decided to try an advertising-based model. It created Britannica.com to offer users full access to Britannica’s volumes at no cost. The site was so popular that it crashed and was down for three weeks.
Before 1993, Britannica was the leading encyclopedia, with impressive sources of strategic advantage and 250 years of experience. Yet in just a few years, a new brand nearly toppled this institution. It did so not by force, nor by direct competition. Rather, it invited Britannica onto its roof, where multimedia skills rather than heritage determined success, and then removed the ladder. Britannica could no longer return to its old world where credibility and deep content alone guaranteed success. Britannica now finds itself battling in a starkly modern setting, fighting with CD-ROM based competitors, fee online encyclopedias (e.g., Wikipedia), and search engines (e.g., Google) that are capturing a growing share of the consumer’s search for knowledge.
As you can see in this example, by removing your enemy’s ladder, you can force him to compete where you hold the advantage. This is risky. Your adversary can become desperate and difficult.
But if applied in the right situation, as the following story shows, it can provide a steady foundation for victory.
Removing Your Enemy’s Ladder
In 206 BC the Han kingdom unified China. During the subsequent Han dynasty, which lasted more than 400 years, China experienced a renaissance that included the revival of Confucianism,
the invention of paper (a thousand years before paper appeared in the West), and the writing of the first dictionaries and general histories of China. This renaissance owes much to the Han’s martial capabilities and adept use of stratagems. The Han ruled by force, regularly attacking rebel kingdoms to keep them within the fold.
In one such instance, a famous general, Han Xin, traveled to quell two revolts. While he was on his way, a third kingdom attempted to stop him. When Han Xin reached the Wei River, he found an army of 200,000 soldiers ready to battle him on the other side. Han Xin appeared to have three choices, none attractive: He could attack; but his solders, wading through water toward an enemy on solid ground, would be at a severe disadvantage and likely lose their lives. He could return home; but in failing his emperor, he might lose his own life. He could wait; but his opponent had no reason to attack or to leave. Han Xin would not reach the revolts in time and still would fail his
Han Xin applied the stratagem Invite your enemy onto the roof, then remove the ladder. He ordered his solders to dam the river upstream with sandbags. As night fell, so did the water level. In
the morning, Han Xin attacked. His solders easily crossed the shallow river. Their opponent was prepared but no longer held a clear advantage.
Soon after the two armies engaged, Han Xin ordered his soldiers to retreat. The opposing general sensed that Han Xin was about to fall and ordered his troops to follow. When half the opposing army had crossed the dry river, Han Xin ordered his soldiers, who had been hiding near the dam, to quickly dismantle the barrier. Pent-up waters crashed down, drowning the half of the
opposing army still in the river’s path.
In one move, Han Xin had done the following:
- Cut his opponent’s size in half (from 200,000 to 100,000 soldiers)
- Obtained the advantage of terrain (he was now on high ground with freedom of movement, while his opponent was on low ground and restricted by a river)
- Shifted from attacker to defender
Han Xin used Invite your enemy onto the roof, then remove the ladder to manipulate his attackers into a precarious position and defeat them with minimal loss of his own soldiers’ lives.
Strategically creative corporations use a maneuver similar to Han Xin’s to win markets. By luring a competitor out of her market and into yours in such a way that the competitor cannot return, you can quickly change the rules of competition in your favor to topple even a more powerful incumbent. Microsoft’s entry into the encyclopedia business illustrates this clearly.