IN WAR AND BUSINESS, IT’S THE TERRAIN THAT MATTERS

Add the dictum, “Know the terrain” to “Know your customer” and you’ve got the two most important principles that a manager needs to follow to compete successfully. At first, and perhaps even later on, the playing field may not be level, but managers who consider the observations of this Ivey Business Journal regular contributor will surely be able to compete with any player, under any conditions.

Sun Tzu’s The Art of War (300 BC.–500 BC), Niccolò Machiavelli’s The Prince (1532) and Carl von Clausewitz’s On War (1832) have become popular with executives seeking leadership and management insights that might improve the performance and competitiveness of their enterprises and, along the way, advance their own careers. I use Tzu and Machiavelli in a capstone course for MBA students called “The CEO,” and have found them very useful in bringing out key executive principles. I am going to add von Clausewitz in the future.
The CEO course involves 10 separate, two-hour, question-and-answer sessions with 10 different CEOs, as well as considerable additional classroom time to discuss what the CEOs had to say. Tzu, Machiavelli and von Clausewitz make a point that the CEOs continually reference and reinforce. In competitive activities like war, sport and business, knowing the terrain can make all the difference between winning and losing, success and failure.

For executives, substitute the expression “business conditions” for the word “terrain” and you have the concept. If you are the one calling the shots, it is critical you know and understand the world around you that everyone must take as the same given. The terrain is the playing field on which you and everyone else competes, over which no one has control, but on which outcomes often totally depend. Decision makers who do not know and understand the terrain better be lucky.

Listen to Machiavelli on terrain. “He [the prince] should, therefore, never take his mind from this exercise of war, and in peacetime he must train himself more than in time of war.…He must also learn the nature of the terrain, and know how mountains slope, how valleys open, how plains lie, and understand the nature of rivers and swamps; and he should devote much attention to such activities. Such knowledge is useful in two ways: first, one learns to know one’s own country and can better understand how to defend it; second, with the knowledge and experience of the terrain, one can easily comprehend the characteristics of any other terrain that it is necessary to explore for the first time.…A prince who lacks this ability lacks the most important quality in a leader; because this skill teaches you to find the enemy, choose a campsite, lead troops, organize them for battle, and besiege towns to your advantage.” Terrific advice for executives: never take your mind off defending market you have and taking market from others; know the terrain you defend and the terrain over which you will advance.

Sun Tzu devotes a chapter to terrain and the appropriate, associated tactics and strategies. “We may distinguish six kinds of terrain: accessible ground, entangling ground, temporizing ground, narrow passes, precipitous heights, positions at a great distance from the enemy.” Von Clausewitz offers: “There are certain constant factors in any engagement that will affect it to some extent…[one of] these factors [is] the locality or terrain…which can be resolved into a combination of the geographical surroundings and nature of the ground.” Notice the use of the expression “constant factors.” That is the notion of those things that cannot be controlled in a competitive environment; hence, they must be taken as a given by all competitors. Von Clausewitz also devotes a chapter to terrain, which he argues “bears a close and ever-present relation to warfare.”

Tzu, Machiavelli and von Clausewitz were in the war business when war was mainly hand-to-hand-style infantry fighting. Not surprisingly, terrain to them was things like the geography of the land, mountains, lakes and rivers, the weather, the fullness of the moon and the length of the day. Each must clearly be taken as is by the warring parties and exploited through tactics and strategies. For warring executives fighting over the same market, the terrain that must be grasped and then exploited includes demographics, politics, the economy and technology. That is the playing field on which enterprises succeed or fail but over which they have very little say.

First, demographics. Auguste Comte, the French positivist philosopher and coiner of the term “sociology,” famously said, “demographics is destiny.” Every dollar of business revenue involves either directly or indirectly selling something to someone. That makes it important to know who the someones are, how old they are, what sex they are, where they are and so on; the stuff of demographics. It is not possible to run a good business and at the same time ignore its demographics.

Second, politics. Politics is the machinery through which societies determine what the laws and penalties will be. Von Clausewitz’s most famous line links politics and war: “War is not merely a political act, but also a political instrument, a continuation of political relations, a carrying out of the same by other means.”
If you want go run a good business, you better be on top of the terrain that is determined by the political process: taxes; rules, regulations and standards; corporate, trade and securities law; subsidies and grants. And, as well, do not overlook that government plays a huge rule in economic growth, employment, inflation, exports, imports, exchange rates and interest rates.

Third, the economy. The economy is that vast space where goods and services are produced, sold and consumed, jobs are created and destroyed, prices are set and funds flow from savers to investors in stock, bond and money markets. For executives, the key components of the economic terrain are aggregate demand, growth, employment, labour availability, inflation, exchange rates, interest rates, credit, savings and investment. Decision-makers who constantly misjudge the economy will not keep their businesses out of trouble. Time spent on the economic terrain is time well spent.

Fourth, technology. Technology is simply the way we get things done that need to be done. Knowing and properly reacting to where the technology relevant to a business is headed is essential to survival and prosperity.

If you were in the watch business and you did not make the shift from mechanical movement to quartz crystal in a timely fashion (no pun intended), you probably did not make it. The same if you were in the music business and you did not make the transition from pressed vinyl records to tape to disc, or the computation business and you did not make the transition from the slide rule to electronics.

Executives should spend a lot of time thinking about how they make and do the things customers pay them for and how those ways will change in the future. This is one train no business can afford to miss.

One of the great business books of all time is My Years with General Motors by Alfred P. Sloan Jr. Bill Gates said, “My Years with General Motors is probably the best book to read if you want to read only one book about business.” High praise!

Sloan nails the importance of business conditions. “[Executives make business judgements.] The big work behind business judgement is in finding and acknowledging the facts and circumstances concerning technology, the market, and the like in their continuously changing forms.… The field was open to all; technical knowledge flows from a common storehouse of scientific progress; the techniques of production are an open book, and the related instruments of production are available to all. The market is world-wide and there are no favorites except those chosen by the customer.” And he knew why General Motors was in business: “General Motors is an engineering organization. Our operation is to cut metal and in so doing to add value to it.” A goal everyone could get their mind around. No wonder GM came to dominate the business world. How they lost their way is another story.

Add the dictum, “Know the terrain” to “Know your customer” and you’ve got the two most important principles that a manager needs to follow to compete successfully. At first, and perhaps even later on, the playing field may not be level, but managers who consider the observations of this Ivey Business Journal regular contributor will surely be able to compete with any player, under any conditions.

Sun Tzu’s The Art of War (300 BC.–500 BC), Niccolò Machiavelli’s The Prince (1532) and Carl von Clausewitz’s On War (1832) have become popular with executives seeking leadership and management insights that might improve the performance and competitiveness of their enterprises and, along the way, advance their own careers. I use Tzu and Machiavelli in a capstone course for MBA students called “The CEO,” and have found them very useful in bringing out key executive principles. I am going to add von Clausewitz in the future.
The CEO course involves 10 separate, two-hour, question-and-answer sessions with 10 different CEOs, as well as considerable additional classroom time to discuss what the CEOs had to say. Tzu, Machiavelli and von Clausewitz make a point that the CEOs continually reference and reinforce. In competitive activities like war, sport and business, knowing the terrain can make all the difference between winning and losing, success and failure.

For executives, substitute the expression “business conditions” for the word “terrain” and you have the concept. If you are the one calling the shots, it is critical you know and understand the world around you that everyone must take as the same given. The terrain is the playing field on which you and everyone else competes, over which no one has control, but on which outcomes often totally depend. Decision makers who do not know and understand the terrain better be lucky.

Listen to Machiavelli on terrain. “He [the prince] should, therefore, never take his mind from this exercise of war, and in peacetime he must train himself more than in time of war.…He must also learn the nature of the terrain, and know how mountains slope, how valleys open, how plains lie, and understand the nature of rivers and swamps; and he should devote much attention to such activities. Such knowledge is useful in two ways: first, one learns to know one’s own country and can better understand how to defend it; second, with the knowledge and experience of the terrain, one can easily comprehend the characteristics of any other terrain that it is necessary to explore for the first time.…A prince who lacks this ability lacks the most important quality in a leader; because this skill teaches you to find the enemy, choose a campsite, lead troops, organize them for battle, and besiege towns to your advantage.” Terrific advice for executives: never take your mind off defending market you have and taking market from others; know the terrain you defend and the terrain over which you will advance.

Sun Tzu devotes a chapter to terrain and the appropriate, associated tactics and strategies. “We may distinguish six kinds of terrain: accessible ground, entangling ground, temporizing ground, narrow passes, precipitous heights, positions at a great distance from the enemy.” Von Clausewitz offers: “There are certain constant factors in any engagement that will affect it to some extent…[one of] these factors [is] the locality or terrain…which can be resolved into a combination of the geographical surroundings and nature of the ground.” Notice the use of the expression “constant factors.” That is the notion of those things that cannot be controlled in a competitive environment; hence, they must be taken as a given by all competitors. Von Clausewitz also devotes a chapter to terrain, which he argues “bears a close and ever-present relation to warfare.”

Tzu, Machiavelli and von Clausewitz were in the war business when war was mainly hand-to-hand-style infantry fighting. Not surprisingly, terrain to them was things like the geography of the land, mountains, lakes and rivers, the weather, the fullness of the moon and the length of the day. Each must clearly be taken as is by the warring parties and exploited through tactics and strategies. For warring executives fighting over the same market, the terrain that must be grasped and then exploited includes demographics, politics, the economy and technology. That is the playing field on which enterprises succeed or fail but over which they have very little say.

First, demographics. Auguste Comte, the French positivist philosopher and coiner of the term “sociology,” famously said, “demographics is destiny.” Every dollar of business revenue involves either directly or indirectly selling something to someone. That makes it important to know who the someones are, how old they are, what sex they are, where they are and so on; the stuff of demographics. It is not possible to run a good business and at the same time ignore its demographics.

Second, politics. Politics is the machinery through which societies determine what the laws and penalties will be. Von Clausewitz’s most famous line links politics and war: “War is not merely a political act, but also a political instrument, a continuation of political relations, a carrying out of the same by other means.”
If you want go run a good business, you better be on top of the terrain that is determined by the political process: taxes; rules, regulations and standards; corporate, trade and securities law; subsidies and grants. And, as well, do not overlook that government plays a huge rule in economic growth, employment, inflation, exports, imports, exchange rates and interest rates.

Third, the economy. The economy is that vast space where goods and services are produced, sold and consumed, jobs are created and destroyed, prices are set and funds flow from savers to investors in stock, bond and money markets. For executives, the key components of the economic terrain are aggregate demand, growth, employment, labour availability, inflation, exchange rates, interest rates, credit, savings and investment. Decision-makers who constantly misjudge the economy will not keep their businesses out of trouble. Time spent on the economic terrain is time well spent.

Fourth, technology. Technology is simply the way we get things done that need to be done. Knowing and properly reacting to where the technology relevant to a business is headed is essential to survival and prosperity.

If you were in the watch business and you did not make the shift from mechanical movement to quartz crystal in a timely fashion (no pun intended), you probably did not make it. The same if you were in the music business and you did not make the transition from pressed vinyl records to tape to disc, or the computation business and you did not make the transition from the slide rule to electronics.

Executives should spend a lot of time thinking about how they make and do the things customers pay them for and how those ways will change in the future. This is one train no business can afford to miss.

One of the great business books of all time is My Years with General Motors by Alfred P. Sloan Jr. Bill Gates said, “My Years with General Motors is probably the best book to read if you want to read only one book about business.” High praise!

Sloan nails the importance of business conditions. “[Executives make business judgements.] The big work behind business judgement is in finding and acknowledging the facts and circumstances concerning technology, the market, and the like in their continuously changing forms.… The field was open to all; technical knowledge flows from a common storehouse of scientific progress; the techniques of production are an open book, and the related instruments of production are available to all. The market is world-wide and there are no favorites except those chosen by the customer.” And he knew why General Motors was in business: “General Motors is an engineering organization. Our operation is to cut metal and in so doing to add value to it.” A goal everyone could get their mind around. No wonder GM came to dominate the business world. How they lost their way is another story.