Strategy And Conflict: In re Gahlord

So Gahlord Dewald, seriously one of the big brains in the real estate industry, puts up a thought-provoking post on strategy. It’s worth reading in full. But I got obsessed with his definition of strategy, especially since I just wrote a post on strategy. Funny how things seem to come in bunches. Anyhow, Gahlord on Strategy:

Strategy

The art and science of maintaining and deploying resources in order to have the freedom and flexibility to continue operations.

There are a few things to unpack in this definition of strategy and since I’ve come this far I may as well unpack them.

• Strategy is an art because it involves personal choices.
• Strategy is a science because there are often visible and repeatable results.
• Maintaining resources is about conservation and growing.
• Deploying resources is about spending and taking action.
• Freedom is your ability to execute your plans at will.
• Flexibility is your ability to respond, react and pivot when required.
• Winning means to continue operations.

So that’s the root theory of strategy that I follow, as much as a bullet list will allow anyway. For the purpose of our “Large Business vs Small Business and the use of Social” conversation, the most important part is what I see as “winning.” It’s merely the ability to continue to operate.

It’s a really nice formulation. I posted a response on his blog in which I reveal that my definition of winning involves not just continuing operations, but getting the other guy to cease operations. It’s a far more martial, more violent, less peaceful view of the term, I guess.

So how might the above be modified if you believe, as I do, that strategy cannot be divorced from conflict. In business, we call that conflict “competition”.

The Justification & Critique of Dewald Theory

If there is no competition, then there is hardly a need for any strategy. That applies whether you are the king of a small island, and no one else has a gun and therefore cannot challenge your rule, or you are the sole provider of (let’s say) fruit to a particular market. The only issue is operational: keep policing, shoot rebels, grow fruit, get it to market, charge whatever you’d like.

In real estate terms, if you are the one and only brokerage in your county, and everybody has to come to you for real estate services, strategy is hardly necessary. Whether you provide good service or bad, be social or antisocial, you’re the only game in town, so… that’s the end of the strategic thinking.

Only in situations of conflict/competition, where someone else is challenging your rule, or trying to take your market share, or making you completely obsolete through technological advances, do you need to even think about strategy.

As a result, my critique of Gahlord’s definition of strategy is simply that it does not take conflict into account. Once you do, the definitions do not work as they are. Winning does not mean continuing operations — you could continue operations until you go bankrupt, and the seeds of the loss were sown five years ago when you lost price competitiveness.

Hence, I define winning as not only continuing operations, but getting all the other guys to cease operations. If competition/conflict is the natural state of strategy, then winning requires that someone else loses.

Dewald Theory, Modified

So I would rewrite Gahlord’s most excellent set of definitions thus:

• Maintaining resources is about conservation and growing, in the face of opposition who seek to deplete them.
• Deploying resources is about spending and taking action, in order to deplete the opposition’s resources.
• Freedom is your ability to execute your plans at will, in spite of the opposition.
• Flexibility is your ability to respond, react and pivot when required by the opposition.
• Winning means to continue operations, and to force the opposition to cease operations.

In all cases, then, strategy requires knowing what the opponents seek to do. At a minimum, it requires trying to keep track of their activities and guessing as to what their plans are.

Since they will likely seek to do the same to you, you have some decisions to make at this point.

Going back to my post about Unexpected vs. Execution, if you are looking to do the Unexpected, then it is imperative that you catch your competitors by surprise; in the alternative, it requires that they think you’re nuts even when they find out what you are doing.  If, on the other hand, your strategy is based on Execution, then it doesn’t matter that much whether they know what you plan on doing. What matters is that it doesn’t matter whether they know or not; they still can’t match your operational excellence.

This is not to say that doing the Unexpected means you can skimp on operational execution. Without executing on the plan, nothing matters. You will fail and lose, period. But it does mean that you focus on different parts of the execution/value-chain because you’re going to do something others either won’t do, or won’t think of to do.

An Addendum

One addendum here to consider is the idea — which I happen to believe — that a strategy that depends on competitors not knowing is a weak one. What is better is a strategy that creates s whole system which competitors cannot replicate without extraordinary cost, even when they know precisely what you’re doing.

Let’s go back to football for a minute. At this point, it isn’t as if the zone blitz schemes of Dick Lebeau and the Pittsburgh Steelers, based on the 3-4 defense, are unknown. Every head coach, every offensive and defensive coordinator in the NFL and college ranks knows about both. But to replicate the success of the Steeler’s defense requires finding the right personnel (a gigantic nose tackle who forces the defense to double him, extremely fast linemen and linebackers who can not only rush the quarterback or stuff the run, but can also drop into pass coverage, defensive backs who can play both the run and the pass and also rush from unexpected angles); a huge set of plays; training and practice routines to burn the knowledge into muscle memory; conditioning regiments; and so on and so forth. Even in a copycat league like the NFL, it isn’t that other teams haven’t figured out what the Steelers do; it’s that they can’t match it or defend against it perfectly.

Dick Lebeau could probably give a seminar on what he plans to do to the opponent’s offensive coordinator an hour before the game… and it may not matter, as the entire system of the Pittsburgh defense is already created.

The same thing holds true in business, even in real estate. I wrote about Keller Williams on Inman a while back illustrating how all of its operations, all of its activities, are governed by a single dominating strategy of cost leadership. Even when you know what it is that KW does, and how it does it, it’s really difficult to replicate all of the parts to compete. And while you’re doing those things, it isn’t as if KW is standing still letting you overtake its cost leadership strategy.

Hence, the maxim, you don’t out-Walmart Walmart. Once a competitor is entrenched in a position of competitive advantage, you have to find some other way to attack them and defend against them. Conversely, your goal in formulating and implementing your strategy is to create a whole operating system around that strategy such that your competitors will avoid tangling with you on your chosen field of battle.

Looking at “Social” From a Conflict Perspective

So we go to what Gahlord and others began the discussion around: whether “social” helps small businesses compete with big ones. Gahlord’s insight is that “social” is not a strategy, but a resource that would influence strategy — as in, do you maintain it or deploy it? If so, how effectively? And so on.

I don’t know precisely why, but this line of reasoning stuck in my craw a bit. I think it’s because it stems from the whole “social capital” concept, which I consider to be more or less bunk, at least as applied to organizations and companies. I could buy the idea that individuals have social capital; I don’t buy that companies have social capital.

Apple, for example, as a company behaves more or less like a sociopath. Yet, its customers become rabid cult-like fans. Dell has entire departments devoted to creating social capital, but every hardcore computer geek thinks of Dell as a cheap-ass piece of junk that you buy when you can’t be bothered to build your own, or afford the good stuff… like Apple’s Mac computers.

The U.S. military tried its damnedest to create “social capital” in the whole “hearts and minds” campaigns in Iraq and Afghanistan; but until it started to kick some ass with extremely antisocial guns, bullets, and bombs, it got zero traction with the people of those countries. Individual soldiers and commanders may have built up enormous social capital with individual tribal chieftains and the like, but as an organization, the American military gained nothing from “social capital”.

But once you incorporate the dimension of conflict, I think it’s easier to see “social” as just another method of competing where the opponent does not have an overwhelming advantage.

The example Gahlord uses of the small independent bookstore vs. the big boxes like Borders is a good one that appears to argue for how small businesses might utilize the “social resource”. But even he points out that is an example of using social as as survival mechanism. It isn’t as if Borders filed for bankruptcy because a whole bunch of independents were using social media more effectively; Borders filed for bankruptcy because its true competitors, Barnes & Noble and Amazon.com, beat them in the marketplace.

The counterexample is ESPN’s embracing Twitter and Facebook — resulting in total domination of the social space for sports coverage and news. The individual sports blogger, the small independent media company trying to do something in sports through social media… those guys have now gotten rolled up by the machine that is ESPN. Any small entity that wanted to challenge ESPN’s dominance in sports media with social has learned a painful lesson indeed.

So I end up agreeing with Gahlord, that social is not a strategy, but differing from him in that I don’t believe social is a resource either. I believe resources are more easily defined — financial, human, and technological — which can be deployed against opponents to blunt their offense, or to overcome their defense. Social is merely one method of competing when you are at a clear disadvantage in other methods.

Because, after all, strategy is about winning — and therefore, about losing. Without conflict, there can be no real strategy. As Heraclitus said, “War is the father of us all, King of all. Some it makes gods, some it makes men, some it makes slaves, some free.”