Stratagems

A stratagem is an artifice or trick for deceiving and outwitting a competitor or opponent. A stratagem can only be considered a strategy if the ruse or trick is used to attain a goal; otherwise the two are different concepts.

A collection of some of the most cunning stratagems ever devised is contained in an old Chinese manuscript, entitled: The Thirty-Six Stratagems (Sānshíliù Jì). The Swiss scholar Harro von Senger first published this manuscript in the Western world. The stratagems were used primarily in politics and war to achieve goals often through unorthodox or deceptive means.

One particularly devious stratagem is:

Shàng wū chōu tī
Invite Your Enemy Onto The Roof - Then Remove The Ladder

The classical description of this warfare stratagem is: “With baits and deceptions, lure your enemy into treacherous terrain. Then cut off his lines of communication and avenue of escape. To save himself, he must fight both your own forces and the elements of nature.”

The roof in this stratagem symbolizes an area you control or hold an advantage. The ladder in this stratagem symbolizes an escape from a dangerous situation. When the ladder is removed, the opponent has no options but to fight for survival.

This stratagem can easily be adapted to business and there are numerous well-known examples. In 1988, Microsoft decided to enter the encyclopedia business. This business was dominated by Encyclopedia Britannica that had over 200 years of encyclopedia publishing experience. Britannica offered authoritative and exhaustive content. The only weak point was the price – consumers had to pony up over $1,000 for a complete set.

Microsoft spent five years doing what it does best – creating software, specifically software to provide unmatched searchability, cross-linking and multimedia to content mostly licensed from Funk & Wagnall’s Encyclopedia. The product Microsoft created was named Encarta. A few years later, Microsoft bought Collier's Encyclopedia and New Merit Scholar's Encyclopedia from Macmillan and incorporated them into Encarta. Since it costs only about $1 to produce a CD, Microsoft priced Encarta very aggressively at $300 for the entire encyclopedia. If Microsoft had priced its product along the lines of Encyclopedia Britannica, the two could likely have coexisted peacefully. By pricing Encarta at $300, Microsoft essentially declared war on Britannica.

The goal was to capture market share from Britannica through aggressive pricing. If Britannica didn’t respond, it would gradually have its market share eroded as the quality of Encarta got better. In order to compete on price, Britannica had to go electronic. This is Microsoft’s area of expertise – this is the roof in this stratagem. Britannica initially kept its price at $1,000 when it introduced its CD product since Britannica believed that its superior brand and content depth would compensate for inferior software. That would have been true if they were priced comparably. Microsoft’s aggressive pricing, however, eventually forced Britannica to lower its price, which removed the ladder on Britannica. There was now no escape; Britannica had to compete head on with Microsoft in an area where it held the clear advantage. Britannica's revenue would suffer along with sales of the print version. This was a brilliant application of the stratagem on the part of Microsoft.