Lessons From Peter Drucker

Business Strategy: Are you spread too thin?

William Cohen, Ph.D.
Posted: 09/30/2013

Time to concentrate limited resources

Once I watched a friend play a board game called Risk. To his utter frustration, my friend just could not win at this game of strategy. The object of the game is to occupy every territory on a board on which a map of the world is represented, and in so doing to eliminate all other players.

You do this by contesting with other players whose pieces, each representing one army, are placed on this map, six continents are subdivided into territories. The smaller continents have fewer territories, the larger ones have more. At the start of the game, the territories are divided up among the players by chance so that one army occupies every territory. This determines the initial placement of armies.

The game is well-named. When it’s your turn, you accumulate additional armies depending on the number of territories you occupy at that time. A number of territories make up a continent. If you own an entire continent, you are awarded additional armies: more for the larger continents, less for the smaller ones. You can place these additional armies wherever you want in one or more of your territories.

To challenge an opponent, your territory must be adjacent to his and you must have at least two armies in the territory from which you are launching your attack. Attacking is done by rolling dice, so there is an element of chance involved. If you win the throw, your opponent must remove one army. The more armies you have, and the less your opponent has, the better for the attacker. Even though you’re rolling dice, your superior force will usually whittle down a weaker force. You can more easily afford to lose some of your armies along the way. If you defeat all the armies he has in a territory, the territory is yours and you must move in at least one of your armies.

Board game strategies have their place in the boardroom too

My friend complained bitterly about "his luck." Each time there was a new game, he would eventually lose all of his armies and the game. In fact, out of six people playing, he was frequently the first player eliminated.

After observing his playing style and watching how the others played, I took him aside and pointed out to him that luck had very little to do with his inability to win. He just didn't concentrate his armies anywhere. He fought all over the board with no apparent goal other than to contest with his adversaries to capture territories. He was relying on luck, not strategy, and so he always lost.

I reminded my friend that every continent he controlled meant additional armies he would get to use when it was his turn to roll the dice. To win he first had to decide which continent he wanted and take actions to determine where he would concentrate to do this. After winning one continent, rather than spreading his armies around the board at random, he would concentrate as many armies as he could to go after another continent and so on.

After I explained this basic strategic principle to him, he applied the lesson the next time he played Risk. Not surprisingly, he won. Because he concentrated his armies he was able to attack with superior numbers against weaker numbers of armies held by his opponents. He would gain control of one continent and then move on to the next in the same fashion. With just average luck, he won repeatedly.

Concentration, not a specific solution leads to success

Drucker contrasted two famous retail department stores: Marks and Spencer in England and Sears Roebuck in the U.S. Both became very successful due to the application of the concept of concentration, but they chose to concentrate in totally different product lines due to the differing marketing situations each faced during different periods of time. Prior to World War II, Marks and Spencer concentrated on wearing apparel and textiles and was successful and prospered. Sears Roebuck was faced with a different market in a different period. It grew rapidly by concentrating on household appliances and didn’t really get into wearing apparel as a major line until much later.

Massing and Concentration is Critical in Business

Drucker found: "Whenever we find a business that is outstandingly successful, we will find that it has thought through the concentration alternatives and has made a concentration decision." Good business strategists follow the same strategic model that succeeds in a game like Risk. They mass their resources where it counts. Only then do they move on to mass their resources at the next important point. They know that they can’t concentrate and be strong everywhere.

Al Ries, author of a number of business books with his partner and co-author Jack Trout, wrote an entire book on the concept of massing, aptly entitled Focus (Harper Business, 1996). Michael Porter in his classic book, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980) called focus a "generic strategy."

Microsoft founder Bill Gates is certainly no slouch. He built the most successful technology company in the world virtually from scratch and along the way became the richest man in America. In an interview with Fortune Magazine, Bill Gates said: "You know, the notion that a kid who thought software was cool can end up creating a company with all these smart people whose software gets out to hundreds of millions of people, well, that's an amazing thing. I've had one of the luckiest situations ever. But I've also learned that only through focus can you do world-class things, no matter how capable you are."

The Secrets of the World’s Greatest Lover

Not surprisingly, the principle of concentrating your resources applies not only to every aspect of work, but also to everything you do in life. Many recordCasanova as history’s greatest lover. He himself attributed his success with women to his ability to concentrate so completely on the woman he desired at any one time that he rarely failed to win her over. It is important to emphasize that Casanova concentrated his resources and did not pursue more than one woman at a time. While he pursued one he thought of nothing and no one else until his conquest was complete whether this took days or months.

Casanova carried the strategy concept of concentration into everything he did in life. Imprisoned in a dungeon in Venice from which no one had previously escaped, he concentrated on the single goal of escape to an incredible degree. He massed every limited resource he had at his disposal toward that single objective. Finally, although Casanova had no prior experience either with prisons or the means of escaping from them, he succeeded in breaking out of his escape-proof cell. Wrote the successful lover and prison escapee: "I have always believed that when a man gets into his head to do something, and when he exclusively occupies himself in that design, he must succeed whatever the difficulties."

We Can Only Compete Successfully by Concentrating Resources

These are three important points emanating from Drucker’s thoughts:

  • You usually cannot be successful unless you concentrate your resources, no matter what these resources are, be they time, money, or anything else of significance.
  • Concentration usually means economizing resources elsewhere. That is, you take resources from where they are less important to use them where it is more important.
  • Economizing and concentrating requires risk. This risk is unavoidable.

In any competitive situation, success requires us to have more or better resources than a competitor or competitors we face whose success requires a reduction of our success. We bring these resources -- money, people, time, skill, know-how, influence, or whatever -- together, by focusing or concentrating them at the right place and at the right time.

William Cohen, Ph.D.
Posted: 09/30/2013

EVENTS OF INTEREST

Crowne Plaza Berlin Potsdamer Platz, Berlin, Germany
February 26 - 27, 2018
Millennium and Copthorne Hotels, London, United Kingdom
February 25 - 27, 2018
Horseshoe Bay Resort, Austin, TX, United States
March 25 - 27, 2018