Thursday, November 28, 2013

Cao Cao's Strategy in a Modern Day Context

In light of the knowledge that many business strategies are derived from military strategies, I thought that I might take this opportunity to talk briefly about Cao Cao, who is one of my role models, a brilliant military leader and renowned for his ability to formulate and flexibly tweak innovative strategies based on careful, constant analysis about his opponents.

Cao Cao was born during the Han Dynasty as an adopted son of a eunuch. He began as a leader of a small garrison, one of many dispatched by the imperial court to fight off the Yellow Turban Rebellion. Cao Cao’s obvious strategic brilliance and leadership that led to victories inevitably shone through, and in a relatively short period of time, he had become a very prominent general in the Han imperial court. His influence in the court continued to grow to the point that the Emperor began to confide in Cao Cao about all matters concerning the state. Gradually, Cao Cao usurped the imperial court, and when he had accumulated sufficient power, he declared the end of the Han and founded his own kingdom, Wei. 

Before Cao Cao usurped the imperial court, however, he had to fight off many rival warlords. One of the most powerful of such rivals was Yuan Shao, who was Cao Cao’s childhood friend and at the time of their conflict, commanded a significantly larger territory and troops. The fates of the two friends were decided at the Battle of Guandu where Yuan Shao’s troops of 100,000 attacked Cao Cao’s 20,000.

Oftentimes, smaller businesses must think of innovative strategies in order to compete with large companies that dominate higher market share. Simply charging headfirst towards an opponent who is much stronger represents a sure-loss. Whether it be in the form of new products, new product designs, cost-cutting measures or better customer service, smaller businesses must find that niche where they can penetrate safely and build on from there. As such, smaller businesses must be extra proactive in their analysis of competitors and their surrounding environments.

Similarly, if Cao Cao had chosen to meet Yuan Shao’s much larger force heads-on, he would have risked total destruction. Instead, he and his advisors observed that much of the opponent’s morale relied on the might of two generals, Yan and Wen. Therefore, if these two generals could be defeated in front all the troops, then their morale would be shattered. In addition, Cao Cao discovered the location of Yuan Shao’s food store and came to the conclusion that the news of no more food, after witnessing the defeat of their two most trustworthy generals would tear Yuan Shao’s forces apart. The next day, Cao Cao sent out his strongest generals and challenged Yan and Wen to duels. With all the soldiers watching, Cao Cao’s generals killed both men. Simultaneously, Cao Cao launched a stealth attack on the food store. Horrified that their two generals had lost, Yuan Shao’s forces began to abandon their ranks and scatter when news began to spread that their food store was torched to the ground by Cao Cao.

When the battle was over, Yuan Shao barely escaped with 200 men, and died shortly after his retreat.

In a modern context, the victory outlines the importance of competition analysis. By understanding the driving forces of their industries, the strengths and weaknesses of their rivals, companies, whether large or small, can begin to formulate effective strategies to ensure survival, profitability and growth.

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