WHEN I S A WEAKNESS A STRENGTH —OR VICE VERSA ? Adam Brandenburger

1. WHEN IS A WEAKNESS A STRENGTH—OR VICE VERSA? Adam Brandenburger filename: when-is-a-weakness-05-09-10

2. “In the Arab case the algebraic factor would take first account of the area we wished to conquer, and I began idly to calculate how many square miles … perhaps a hundred and forty thousand … and how would the Turks defend all that … no doubt by a trench line across the bottom, if we were an army attacking with banners displayed … but suppose we were an influence (as we might be), an idea, a thing invulnerable, intangible, without front or back, drifting about like gas? Armies were like plants, immobile as a whole, firm rooted, nourished through long stems to the head. We might be a vapor, blowing where we listed. Our kingdoms lay in each man’s mind, and as we wanted nothing material to live on, so perhaps we offered nothing material to the killing” (T.E. Lawrence aka “Lawrence of Arabia”) --Lawrence of Arabia, by B.H. Liddell Hart, Da Capo, 1989, p.134 (republication of the 1935 Colonel Lawrence: The Man Behind the Legend) Turning One’s Weakness into a Strength

3. … Or Turning Another’s Strength into a Weakness • 1934: • Pepsi priced its 12-ounce bottle the same as Coke charged for its 6.5-ounce bottle (called the “kitchen cola”) • 1940: • Pepsi created first nationally broadcast advertising jingle (“Pepsi-Cola hits the spot/Twelve full ounces that’s a lot/Twice as much for a nickel, too/Pepsi-Cola is the drink for you”) • 1950s: • Pepsi tracked the growth of supermarkets (introduced 26-ounce bottles) and suburbia—Coke was slower, and faced channel conflict(?) • 1958: • Pepsi targeted young, fashionable consumers with the “Be sociable, have a Pepsi” theme (and replaced its straight-sided bottle with the “swirl” bottle)—Coke couldn’t copy without risking its ‘heartland’ image • 1962: • Pepsi launched its “Pepsi Generation” ad campaign to post-war baby boomers http://www.youtube.com/watch?v=QWQkf0w5JR4 References: “Cola Wars Continue: Coke and Pepsi in the Twenty-First Century,” HBS Case 702-442; www2.coca-cola.com heritage timeline; www.pepsi.com/ads_and_history/legacy; this slide draws heavily on a conversation with David Collis

4. Example: Neutralizing a Brand – c, m Product succeeds E is the entrant I is the incumbent Fails Copy I – c, – d m – c, 0 Don’t Product succeeds Introduce E Fails – c, 0 Don’t 0, 0 • When should E enter (under the expected payoff criterion)? Based on “Judo Strategy: Fear of Failure,” by Adam Brandenburger and Ken Corts, teaching material, 12/24/07; “Innovation and Imitation,” by Vijay Krishna, Harvard Business School Case, 187-160; and “Innovation and Imitation in a Duopoly,” by J.P. Benoit, Review of Economic Studies, 52, 1985, 99-106; this analysis draws on work by Stern MBAs Laura Brown, Nancy Li, Corina Scott, and Sean Wilson

5. Softsoap 1964: Entrepreneur Robert Taylor founds personal-care products company Minnetonka Corporation 1977: Develops the Incredible Soap Machine—liquid soap in a pump dispenser 1980: Launches the product into the mass market as Softsoap • How will the major players in the bar soap industry—Armour-Dial, P&G, Lever Bros., Colgate-Palmolive—react? If they copy Softsoap, can it survive? • Other Minnetonka innovations: • Check-Up pump-dispensed toothpaste • http://www.nytimes.com/1984/10/11/business/toothpaste-pump-battle-near.html?&pagewanted=all • Calvin Klein Obsession and Eternity fragrance campaigns • http://www.vanityfair.com/culture/features/2008/04/calvin_slideshow200804?slide=4#slide=4 Reference: “Minnetonka Corporation: From Softsoap to Eternity,” HBS Case 795-163 and Teaching Note

6. Softsoap cont’d • The major players adopted a wait-and-see approach—why?

7. Softsoap cont’d Eventually, the major players entered with different (inferior) brand names—to delink the liquid-soap game from the bar-soap game As a result, Softsoap enjoyed a sufficient window of opportunity without competition, to survive once the competition arrived Softsoap trademark is owned by Minnetonka Co.

8. The UK Petrol Price War * In the early 1990s, UK supermarkets—Tesco, Sainsbury, Safeway, Asda—entered the UK petrol market, obtaining a 20 percent share by 1995 The strategy was simple—lower prices than those offered by the major oil companies Shell, Esso, BP Since competition among gas stations is local, the supermarkets are targeting only a part of the market A price cut is expensive because the majors have large customer bases Cede share Incumbents’ decision tree Cut price The supermarkets won’t keep to a small share * From: “Judo in Action,” by Ken Corts and Debbie Freier, teaching material, 05/29/02; which is based on “Esso Price-Watch,” by AmeeChande and Eleanor Hardwick, course paper, Harvard Business School, Fall 2001

9. The UK Petrol Price War cont’d • Is there a third option for the oil companies? Picture: Wikimedia Commons “Petrol retailers posed to ignite price war,” by Nigel Cope, The Independent, 09/18/95

10. In 1937, future U.S. president Lyndon Johnson, then an aspiring young politician, was looking for the chance to gain elective office. Here is how he got his break: * Lyndon Johnson was in Houston on February 23 [1937] … when he suddenly saw, on a park bench, a copy of the Houston Post with the banner headline: CONGRESSMAN JAMES P. BUCHANAN OF BRENHAM DIES. He knew at once, he was to recall, that “this was my chance….”  A strategy, money, an organization—these would give this unknown candidate [Johnson] a slim chance of victory against every opponent but one. Against that one opponent, nothing could give him a chance. Nothing could offset the sentimental appeal of a vote for Old Buck’s [Buchanan’s] widow.... And it began to look as if she was going to run…. So Lyndon Johnson went to see … the man who was the smartest politician he had ever known…. [He] pulled up in front of the little white house with the “gingerbread” scrollwork and wisteria, and went into the shabby front parlor, and asked his father’s advice. Sam Johnson [Lyndon’s father] didn’t even have to think before giving it. Recalls Lyndon’s brother: “Lyndon started saying he was thinking of waiting to see what she [Mrs. Buchanan] does, and Daddy says, “Goddammit, Lyndon, you never learn anything about politics.” Lyndon says, “What do you mean?” Lyndon Johnson’s Path to Power * As told in The Years of Lyndon Johnson: The Path to Power, by Robert Caro, Vintage, 1990, pp.389-399

11. Path to Power cont’d J Run Don’t Run B Don’t Run J Don’t B Run Don’t Run J Picture: Wikimedia Commons Don’t Run B Don’t

12. Lyndon Johnson was very dejected as he sat, on the day the [San Antonio] Express poll appeared, in his parents’ home in Johnson City after hours of campaigning…. The leaders were almost all against him, he said; he had several large rallies scheduled, and he had not been able to persuade a single prominent individual to introduce him. So, [his cousin] Ava recalls … “his Daddy said, ‘If you can’t use that route, why don’t you go the other route?’ ” “What other route?” Lyndon asked—and his Daddy mapped it out for him. Path to Power cont’d Picture: Wikimedia Commons Reference: Caro, op.cit., pp.428-429

13. There was a tactic, Sam Johnson said, that could make the leaders’ opposition work for him, instead of against him. The same tactic, Sam said, could make the adverse newspaper polls work for him, instead of against him. It could even make the youth issue work for him. If the leaders were against him, he told his son, stop trying to conceal that fact; emphasize it—in a dramatic fashion. If he was behind in the race, emphasize that—in a dramatic fashion. If he was younger than the other candidates, emphasize that. Lyndon asked his father what he meant, and his father told him. If no leader would introduce Lyndon, Sam said, he should stop searching for mediocre adults as substitutes, but instead should be introduced by a young child, an outstanding young child. And the child should introduce him not as an adult would introduce him, but with a poem, a very special poem…. That [next] night, at a rally in Henly, in Hays County, Lyndon Johnson told the audience, “They say I’m a young candidate. Well, I’ve got a young campaign manager, too,” and he called [his cousin’s son] Corky to the podium, and Corky, smacking down his hand, recited a stanza of Edgar A. Guest’s “It Couldn’t Be Done.” … The audience applauded the eager young boy, and before the applause had died down, Lyndon Johnson took off his coat, and … started in to attack the “thousands” … who said that just because he was behind, he couldn’t win. Path to Power cont’d Reference: Caro, op.cit.

14. During the final days of the Yuan dynasty, rebellion had broken out throughout the empire. Initially, there were several contenders vying to be the first to found a new dynasty on the imminent fall of the house of Yuan, but the field was narrowed to two: Chu Yuanchang and Chen Yifu. The two armies met at Poyang Lake where a naval engagement was to take place. General Chen had the advantage of both troops and ships. His ships were large and sturdy and he had them lined up side by side across the entire expanse of the lake. He furthermore had the ships joined together with iron chains so as to create an impenetrable barrier. General Chu sent his ships to attack but they were defeated, having failed to break through the cordon. Fortunately for Chu, the next day a violent northwest gale began to blow. Since Chen’s flotilla was situated downwind, Chu took advantage of the situation to launch fireboats against the barrier. Soon Chen’s troops were in a frenzy to save their ships from both the rising storm and the fire that was fanned into a blazing fierceness by the wind. Taking advantage of the panic and confusion that ensued, Chu launched his own fleet into the attack and they completely defeated Chen’s forces. Yuan Dynasty China (1279-1368 A.D.) From: The Thirty-Six Strategies of Ancient China, Stefan H. Verstappen, China Books, 1999, p.57