Several years after the Civil War, Union General William Tecumseh Sherman was delivering a speech to a graduating class of cadets. When he finished his speech and was about to leave the podium, he turned toward the cadets and said, “I tell you, war is hell.” In no way can one compare the death and destruction of war with their counterparts in business, yet war and business have much in common. The book Market Warfare, by advertising and marketing gurus Al Ries and Jack Trout, outlines different strategies that companies take to win market share. The authors borrow liberally from On War, a book written by Prussian military strategist Carl von Clausewitz in the 1830s.
Warren Buffett, too, sees that the business world engages in warfare. He has compared the competitive landscape of business with the weapons technology of the Middle Ages, saying, “I don’t want an easy business for competitors. I want a business with a moat around it. I want a very valuable castle in the middle, and then I want a duke who is in charge of that castle to be very honest, hardworking, and able. Then I want a moat around that castle.” [1]
For a business to succeed, it must have both a strategy and an enduring competitive advantage over its competitors. Most businesses fail in their first year, and only a small percentage are still around in five years, because they offer nothing to the marketplace that a competitor does not offer already. If a business does not have a competitive advantage or some type of “moat” around it, there is a very low chance that it will still be around in the years to come.
A Look Back
Do any of these companies–Midvale Steel & Ordnance, International Mercantile Marine, or Cambria Steel–ring a bell? I didn’t think so. Back in 1917, these three companies w ...