As more large public companies such as Borders and Blockbuster file for bankruptcy, it’s apparent that Chinese general and philosopher Sun Tzu’s words nearly 3,000 years ago still haven’t sunk in:

If you know your enemies and know yourself, you will not be imperiled in a hundred battles.

According to research by Paul Carroll and Chunka Mui, the number one cause of bankruptcy is bad strategy. Inherent in bad strategy is ignorance of your competitor’s strategy. Knowing the competitor’s product specs simply doesn’t cut it any more. In order to survive and thrive today, you must understand the competitor’s strategic approach. There are four areas to consider when evaluating your competitor’s approach:

1. Messages: what they say

2. Activities: what they do

3. Results: how they do

4. Approach: their strategy

Running your business without understanding your competitor’s strategic approach is like swimming in shark-infested waters wearing a sashimi Speedo. It’s not going to be pretty.

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