The Art of the Advantage Workbook

1. The Art of the Advantage Workbook CONFIDENTIAL Outthink the Competition ® Workbook and tools October 2006 This workbook is solely for the use of The Strategy Learning Center LLC and its clients. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from The Strategy Learning Center LLC.

2. Conceive | Consider Orient | Aspire Choose | Commit Observe PROCESS www.strategylearningcenter.com

3. PROCESS STEPS AND TOOLS Stage Activities Tools • Project major environment trends • Brainstorm “players”/ leverage points • Synthesize your current situation, trajectory, long-term vision, and near-term aspiration into one or two sentences each • Define a metric for each (situation, trajectory, vision, and aspiration) • Agree on and list your strengths, weaknesses, opportunities, and threats • Agree on and state any solutions that are out of scope • Choose 4 to 6 stratagems by picking them intuitively or using the “Stratagem Selector” available on our web site • Look at your challenge through each stratagem in sequence to generate out-of-the-box options. Use the stratagems as metaphors, seeking analogies for each “key element” • Decide on your prioritization criteria (defining “attractiveness” and “achievability”) • Rate each option’s attractiveness and achievability, map them a matrix • Choose the 4 to 7 options you choose to investigate further ensuring these include at least 2 low-achievable/ high-impact ideas • Predict competitive response and resulting “end game” • Build a hypothesis tree for each of your 4 to 7 high-priority options • Design analyses to support each node of each hypothesis tree • Design an analysis work plan then conduct the analysis to prove or disprove your hypothesis/ option • Craft a strategy composed of 3 to 7 “strategic themes” derived from your proven and chosen options • Communicate the strategy to key stakeholders (e.g., staff, investors, partners) • Align your organization to the strategy by establishing a system to track 5 to 15 key metrics • Measure, analyze, feedback, and adjust your strategy • Corporate Game Map • Political Game Map • Issue tree • Challenge Definition form • List of 36 Stratagems • Stratagem Selector (see our web site) • Option Generation forms • Option prioritization form • Option Voting forms • Competitive response analysis • Hypothesis Tree form • Work Plan form Orient | Aspire Conceive | Consider Choose | Commit Observe www.strategylearningcenter.com

4. CHALLENGE DEFINITION FORM Your long-term vision: Your near-term aspiration: • Strengths • Weaknesses • Opportunities • Threats • Out of scope . . Measure: . . GAP Your project near-term future: Your current reality: . . Measure: Measure: . . www.strategylearningcenter.com

5. Sub-sub questions ISSUE TREE “MECE” sub-questions Core question www.strategylearningcenter.com

6. Technology influencers Competitors Govt & Regulators Suppliers’ suppliers Suppliers Distributors Distributors’ distributors Customers YOU Societal influencers Other influencers Substitutes & Complements © The Strategy Learning Center CORPORATE GAME MAP www.strategylearningcenter.com

7. Strong influence POLITICAL GAME MAP Medium influence Weak influence • Instructions • Identify groups in which support must be built and opposition neutralized • Map key subgroups • Organizational units • Identity groups • Power groups • Analyze influence networks • Who defers to who/ identify opinion leaders • Level of influence • Identify supporters, opponents, persuadables • Assess their interests • Goals • Fears • Beliefs • Mental models • Benefits/ costs Decision- maker You www.strategylearningcenter.com

8. THE 36 STRATAGEMS 1: To Catch Something, First Let It Go Do not attack your adversary, rather let him go and follow close behind 2: Exchange a Brick for a Jade give your adversary something on which you place relatively little value in exchange for something you value much more 3: Invite Your Enemy Onto the Roof, Then Remove the Ladder entice your adversary to enter your area of control and then cut off all escape routes. This motivates your soldiers and disadvantages your adversary 4: Lure the Tiger Down From the Mountain lure your adversary out of his stronghold then either (1) attack on open ground or (2) attack the stronghold 5: Befriend the Distant Enemy To Attack the One Nearby ally yourself with a distant, or less direct, enemy to attack a nearby, or more direct, enemy 6: Kill with a Borrowed Knife Use a third-party to attack your adversary 7: Besiege Wei to Rescue Zhao have you an ally attack your adversary. This will force your adversary to disengage from its conflict with you to defend itself. It must then fight on two fronts 8: The Stratagem of Sowing Discord You induce your adversary’s agent to work in your favor and use this agent to topple a critical relationship on which your adversary depends 9: Trouble the Water to Match the Fish create confusion around your adversary to blind him and hinder his ability to understand your intentions or see your approach 10: Remove the Firewood From Under the Pot rather than engage your adversary head-on, attack his source of power or sustenance 11: Shut the Door to Capture the Thief when your opponent is weak, divided, or dispersed, surround him, prevent his escape, but avoid direct attack 12: Replace the Beams with Rotten Timbres attack the key support structures on which your adversary’s advantage is built to weaken him 13: The Stratagem of the Beautiful Woman identify your adversary’s key weakness or need and use this to encourage your adversary to act in a way counter to his benefit 14: Beat the Grass to Startle the Snake When you are unsure of your enemy’s strength or strategy, launch a small-scale or indirect attack on your adversary to encourage him to reveal his strength or strategy through his response to your “false” attack. Plan your “real” attack with this new knowledge 15: Loot a Burning House when trouble strikes, look for your adversary to freeze or retreat. Capitalize on your adversary’s inaction or retreat to take action and build power 16: Sometimes Running Away Is the Best Strategy rather than fight a more powerful adversary, retreat to preserve your power and apply it somewhere else or at some other time 17: Seize the Opportunity to Lead the Sheep Away take advantage of “deer in the headlights” moments when your when your adversary fails to act (e.g., because he is distracted), by advancing 18: Feign Madness But Keep Your Balance when your adversary is powerful and/or you are weak, appear mad or incapable in order to avoid being perceived as a threat. When your adversary puts down his guard, take him 19: Watch the Fire on the Other Shore when your adversary is engaged in internal conflict or in conflict with his allies, refrain from acting. An attack might unify your adversary (and his allies). Allowed to continue, the internal conflict will damage him 20: Let the Plum Tree Wither in Place of the Peach allow your adversary a victory on one front to preserve, even strengthen, your competitiveness on another front 21: The Stratagem of the Open City Gates openly reveal your strength, weakness, or strategy to encourage your adversary to call off his attack (e.g., because he fears your strength or no longer considers you a threat) 22: Await the Exhausted Enemy At Your Ease identify the next battleground, set up a defendable position there, and wait for your adversary. When your adversary arrives, use your superior position to defeat him 23: Exchange the Role of Guest for That of Host encourage your adversary to accept you as unthreatening guest. Incrementally build power over your adversary and eventually take control 24: Borrow the Road to Conquer Gao form an alliance with a player you share a common objective or enemy with then take your ally 25: Shed Your Skin Like the Golden Cicada create a façade and focus your adversary on it, then move the real action somewhere else 26: The Stratagem of Injuring Yourself when your adversary’s suspicion hinders your success, injure yourself to either (1) win your adversary’s trust or (2) avoid appearing to be a threat. When your adversary accepts you or lets down his guard you advance 27: Borrow a Corpse for the Soul's Return you adopt a forgotten or abandoned model, idea, or technology to differentiate yourself and build power. 28: Point at the Mulberry But Curse the Locust rather than attack your adversary directly, use a different target or message to send a covert message to your adversary that that will alter his behavior. 29: Clamor in the East; Attack to the West feign an attack the defense of which exposes your enemy to a different attack. Launch your true attack and defeat your adversary 30: Openly Repair the Walkway, Secretly March to Chen Cang focus your adversary, or let your adversary focus, on a direct, orthodox attack while you launch an indirect, unorthodox attack to take your adversary by surprise 31: Fool the Emperor and Cross the Sea take actions that appear normal (i.e., that appear to be everyday actions) to lull your adversary into complacency. By the time your adversary realize your actions compose a threat it is too late. 32: Create Something Out of Nothing when your direct attack (i.e., one using existing players) is ineffective, create a new player or entity to catch your adversary off guard 33: Hide a Dagger Behind a Smile because a direct attack would generate resistance in your adversary, choose an approach that is, or appears to be, friendly. When your adversary lets down his defenses and welcomes this approach, take your adversary with a secondary or hidden attack 34: Deck the Tree with Bogus Blossoms combine and coordinate independent elements within your environment to become a much stronger whole then overpower your adversary 35: To Catch the Bandits, First Capture Their Leader focus your attack on your adversary’s leader or leaders. When this leadership falls, it brings down your adversary’s organization with it 36: The Stratagem of Linking Stratagems rather than execute one strategy, you execute multiple (simultaneously or in succession). If one strategy is not effective, the next one is. If the next one is not effective, the following one is. This eventually overwhelms your adversary or catches him in an impossible situation www.strategylearningcenter.com

9. OPTION GENERATION FORM “A” options from stratagem: “B” options from stratagem: “C” options from stratagem: ______________________ ______________________ ______________________ www.strategylearningcenter.com

10. OPTION GENERATION FORM (Continued) “D” options from stratagem: “E” options from stratagem: “F” options from stratagem: ______________________ ______________________ ______________________ www.strategylearningcenter.com

11. Hi Med Low Low Med Hi OPTION PRIORITIZATION FORM Attractiveness Criteria: 1. _____________________ 2. _____________________ 3. _____________________ • Instructions: • Decide on the criteria you will use to define Attractiveness and Achievability • Rate each idea as high, medium, or low Attractiveness and high, medium, or low achievability • Map the number of each option you generated (e.g., a1, a2, b1, b2) onto the matrix to the left • Circle your top 3-5 options Achievability Criteria: 1. __________________________ 2. __________________________ 3. __________________________ www.strategylearningcenter.com

12. OPTION VOTING FORM Initiative Pros Cons Assessment H M Attractiveness L L M H Achievability www.strategylearningcenter.com

13. OPTION VOTING FORM Initiative Pros Cons Assessment H M Attractiveness L L M H Achievability www.strategylearningcenter.com

14. OPTION VOTING FORM Initiative Pros Cons Assessment H M Attractiveness L L M H Achievability www.strategylearningcenter.com

15. OPTION VOTING FORM Initiative Pros Cons Assessment H M Attractiveness L L M H Achievability www.strategylearningcenter.com

16. COMPETITIVE RESPONSE ANALYSIS What would be the outcome? Competitor name: How might your competitor(s) respond? How would you respond? A ______________________________ 1. ______________________________ B______________________________ What is your move/ set of moves? A ______________________________ 2. ______________________________ B______________________________ A ______________________________ 3. ______________________________ B______________________________ www.strategylearningcenter.com

17. Why? What would I have to believe? D.2 D.1 A.2 D.3 B.1 A.1 B.3 C.1 C.2 C.3 A.3 B.2 Why? What would I have to believe? D C B A Option/ hypothesis: HYPOTHESIS TREE www.strategylearningcenter.com

18. WORKPLAN Supporting hypothesis Analysis Info sources Responsible By when www.strategylearningcenter.com