The Art of War: Extraordinary Speed | Sun Tzu Applied to Business

The Art of War: Extraordinary Speed | Sun Tzu Applied to Business

Besides business modeling one of the
things I like to do is actually study business strategy and I don’t even wanna tell you how many
books I’ve read on business strategy but the irony is that the greatest book
ever written for business strategy was actually written 2000 years ago. Sun Tzu: The Art of War. And yes, I know
you’ve probably seen it quoted many times. In fact, in Wall Street the movie it was quoted by Gecko way too
many times and I think that people really don’t
understand the whole principle behind Sun Tzu: The Art of War.
And so what I decided to do is do some episodes of how the
strategy behind Sun Tzu: The Art of War is applied to business and I see it
all the time. And one of the big battles that are you see duked out every day is the battle
between Apple and Samsung. It’s actually quite interesting for us to study. But as I go through
all the different chapters on Sun Tzu: The Art of War, and it’s
actually only thirteen chapters so the first chapter is the chapter on Estimates. And one of my
favorite quotes, it’s probably one of my favorite quotes in the entire book — it
applies to startup entrepreneurship to the core — is that “What is of the greatest importance in war is
extraordinary speed. One cannot afford to neglect opportunity.” I actually quote that to myself at least once a week to remind myself
how speed is important and this was actually a quote – it was a I mean if you study Sun Tzu: The Art of War
they actually have quotes and commentary by different
people throughout the history and so this was a commentary by Ho Yen-hsi and it’s based on verse 26 and so when you look at whether it’s
business or war, speed is very important. One of the things I want to do is
I’ll show you how that can be applied in business. Whether it’s a startup, or even a
large corporation, or whether it’s a startup fighting a large fortune 500 company, you can still
apply the principles. So the battle between Apple and Samsung
is very interesting. So if you have Apple here,
Samsung here, if you look at the iPhone market, Apple came out first. So in this whole battlefront of trying to get you to buy the product okay — make happy
customers right here — is that Apple came out with a very
disruptive revolutionary product — the iPhone. And so they dominated for quite some time.
But what’s so remarkable is that Samsung came from behind to literally catch up to Apple and they
did it through the indirect method. But one of the things that they were really did was they used extraordinary speed.
So they came into the marketplace. They copied Apple, the smartphone. One of the things they did — they
used the Android operating system to get to the market. So it was really one of those things that — they outsource the operating system —
and Android was obviously put out by Google and they included it inside the smartphone in order to get out there. Now one
of the things they did was, because Apple had an exclusive with
AT&T for awhile, they were limited somewhat from a
distribution perspective. And because the margins are really high they were able to generate a substantial
amount of profit in the early stages of the market evolution.
So if you look at, and you’ve seen me do this many times when it comes to how to build a billion
dollar start-up almost overnight, I draw a graph. And so what happened was, in the smartphone sector, Apple was able to extract a
tremendous amount of profit in the early phases of their revolutionary smartphone design.
And so what happened was as the market accelerated Samsung came in and they started to compete on
quite a few different fronts and they used speed as one of their
advantages. They used speed in terms of getting to the consumer on a global
basis. And they also use the principles of speed when it came to distribution
channels. So Samsung used cost as one of their speed advantages. So they
came out with different products at a lower cost. So if you get across the world, and I was in
in Hong Long, literally it was completely dominated by
Samsung even though I went into the Apple store and spent some time there. So what you had was they used
cost as an advantage to penetrate the market. They also
used distribution. So when you look at Samsung’s strategy
of going into the marketplace, into this smartphone sector, they used
the distribution component and then, last but not least, they used a
tremendous amount of advertising to get to the consumer. In fact when you look at the
just pure force of advertising, dollar for dollar
Samsung was outspending Apple 4 to 1 easy, just to get the consumer
awareness. So when you look at the principles of speed and
using extraordinary speed, Samsung was using these different
factor points to get there. Now at the end of the day you have two principles involved when it comes to speed —
speed to launch and then you also have what I call
speed to diffusion. So Apple was able to segment a market at a higher price point,
and they were able to diffuse their technology into those markets. But they left the middle and
the low-end market wide open. And this is where Samsung
came in. Now one of the things that you learn
when you study Sun Tzu: The Art of War is the concept of the indirect approach. And
so one of the other things that Samsung did is not only did they use the advertising firepower to get to the consumers minds, not only do they use different, wider
distribution mechanisms and channels to get to as many global points
as possible, but they also used the principle of form. As the smartphone — if you look at the innovation of the smartphone, this size, first of all, it really
came down to the size, if you look at the plus sign up here and this is the negative sign, so for instance
Apple came out with the phone of a certain size X, okay, and then as
the evolution of the phone started going up with more features, and the irony is that a certain point
it started becoming commoditized where the smartphone features really, to
some extent, are becoming a commodity what happened was, Samsung
came out with a bigger form of a phone. And I can tell you when I
was in Hong Kong literally everybody had these larger
phone sets. And so what they did was they not only
changed the game from a distribution, advertising, and pricing standpoint, but they
also came out with a larger size of a phone, which is now forcing Apple to do two things.
So Apple, if you look at it, what they did was, in order to use speed
to get to the market, what Apple was doing was — let’s say you
segment the market to three different markets: high end, middle end, low-end. So Apple was basically
feeding into this market. Now what Samsung did was big game is and they started appealing to the middle
and the low-end markets on price and distribution and all that. So that’s where they’ve been successful.
Now what’s interesting is that Apple has to react. So if you look at strategy in order to —
once again, you’ve got to remember they’re still fighting to get their product diffused into the
consumers’ minds on a global basis. So now what Apple has to do is come out
with a middle-end, which they’ve been doing and especially the low-end.
Because when you go to Africa, I can tell you, when I was in Africa people wanted to get my iPhone. They were
willing to pay $1000 for it. But overall, most to the people in
Africa, as an example, prefer to get mid-point
or low-end phones. So now here’s what’s happening —
I go back to the analysis of extraordinary speed. You have Apple and you have Samsung
duking it out on the smartphone sector side. Now what’s coming up is the smart watch sector. And here’s the irony, Samsung beat Apple to the punch. So Samsung came in with their own set of smart watches.
Obviously you see them. You can see them anywhere
on the internet And they beat Apple in terms of speed to launch. Now I’ve seen the smart watches
by Samsung and to put it bluntly really not that impressed
but I know a lot of people are but I’m not. So they were able to
penetrate the market so far, when it comes to speed to launch, and beat Apple to the punch. Now from a
business strategy perspective there is some obviously positioning and and branding and is business appeal to being first to market. But if you look at the history of Apple,
they’ve never really been first to market in any sector. You look at the smartphones, you look
at the tablets — they’ve never been the first. What they’ve done is come out
with revolutionary designs within the existing market. So yes, Samsung has beat Apple to the launch
sequence. But even more important is
speed to – speed to diffusion. So who is going to end up owning a huge chunk of the consumer mind and the consumer pocket
when he comes to SmartWatches? I can tell you this is just one of the
first battles in this huge SmartWatch war that’s going to be
played out not only by Apple and Samsung but I’m pretty
much probably every major
player’s gonna be in it. I could see of course
Microsoft, Google Amazon coming into
play as well And then players like
Fossil that have been
around for awhile and they build a huge business as a fashion brand, now
they’re going to have to figure
out what to do in that sector. And how are they going
to play with it? It’s going
to be interesting so What you’re seeing right
now is that Samsung,
in summary, had used extraordinary
speed to get it
to the market first in terms of launch
but at the end
of the day you could win the first
battle in any war, and
that’s happened, obviously, but lose the war
in the long run. This is what’s going to play
out. I love watching
Apple and Samsung and it’s a great business
strategy lesson. If you can get anything
out of this, it is that
extraordinary speed is incredibly important when
you’re going into markets.
But by the same token you have to be able to not
only launch it but then
penetrate those markets. Until next time.

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About the Author: Oren Garnes


  1. As for the smart watch, I think Apple is winning.  This is probably another strategy from the Art of War.  They are pretending they are developing the iWatch, and Samsung put its effort into developing the smart watch.  As you can see, the market is not there for the smart watch…

  2. "What is of the greatest importance in war is extraordinary speed: one cannot afford to neglect opportunity" on Chapter one? Are you sure? :/

  3. It is not the iphone market, it is the smartphone market.  Also the iPhone was not the first.  Windows mobile long before it was branded Windows Phone trying to copy the iPhone and failed miserably was on the market for years before the dumbed down iPhone.  Lastly Samsung didn't copy the iphone.  What did they copy?  rounded corners?

  4. However, when the desire for speed in business becomes about profit and does not have the support of the people (consumers), it all become irrelevant.

  5. Hello! would you like to give an explanation why nokia recently launched their phone in china first.Chinese already has thousand of local manufactures also they have successfully penetrated their market and reach 1.4 million within a week in Sales.

  6. Speed of Samsung's development: My friend was the director of Galaxy Design team…SPEED on development was the result of his team working 18 hours a day, 7 days a week for 3+ years.  Yup…sheer effort.  Samsung also was "coached" by Toyota's guru's and applied TPS to shorten Time to Market.

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