TOCICO 2012 Conference Achiles’ Heel: Identifying and Leveraging a Competitor’s Weakest Point Presented By: Dr. Eldad Kollenscher and Prof. Boaz Ronen Tel Aviv University Faculty of Management Leon Recanati Graduate School of Business Administration Date: June 2012 © 2012TOCICO. All rights reserved. 1 The Tacoma Narrows Bridge, 1940 TOCICO 2012 Conference • Bridge collapsed after 4 months • Resonance effect • http://www.youtube.com/watch?v=jzczJXSxnw 2 © 2012 TOCICO. All rights reserved. Achilles’ Heel TOCICO 2012 Conference • Thetis, anxious to make him immortal, dipped her son Achilles in the River Styx • She held him by his heel which remained dry and became his vulnerable spot • Trojan prince Paris shot an arrow into Achilles‘ heel and killed him Even the most powerful opponent has vulnerabilities 3 © 2012 TOCICO. All rights reserved. TOC: Managing Our Constraints TOCICO 2012 Conference 70 /m 3 TOC : Focus on Bottleneck to increase Throughput 2 1 * 50/m 100/m 4 © 2012 TOCICO. All rights reserved. The Focusing Steps TOCICO 2012 Conference 1. Identify the system’s constraint 2. Decide how to exploit the system’s constraints 3. Subordinate the system to the above decision 4. Elevate the system’s constraint 5. If a constraint was “broken”, go back to step 1. Do not let inertia become the system’s constraint 5 © 2012 TOCICO. All rights reserved. TOC Strengthens the Constraint. But What About the Adversary? TOCICO 2012 Conference 70 /m 3 2 1 * 50/m 100/m 6 © 2012 TOCICO. All rights reserved. The Need for a New Attack Strategy TOCICO 2012 Conference • Military experience is the root of Attack Business Strategy • Current business strategies are still based on Clausewitz’ attrition warfare • Competitive-Business-Strategy focuses on product/market, ignoring the competitor’s internal vulnerabilities • The result: lose-lose attrition battles based on product/market • For example, Porter’s 4 generic strategies 7 © 2012 TOCICO. All rights reserved. Achilles’ Heel for Law Enforcement Agencies TOCICO 2012 Conference The use of Achilles’ Heel methodology for: – Car theft – Money laundering – Drug trafficking 8 © 2012 TOCICO. All rights reserved. The Roots of Achilles’ Heel Methodology TOCICO 2012 Conference 1. Military Operational Theory – Developed in the USSR by Marshal Tukhachevsky and his colleagues in the 1920’s – focuses on attacking the enemy's weak points – a strike at the enemy’s rear will create a shock, disrupting its operational ability and driving the enemy off-balance 2. The Theory of Constraints – The Focusing Steps and their underlying tools 9 © 2012 TOCICO. All rights reserved. Definitions TOCICO 2012 Conference • Achilles’ hill: The organization’s weakest point. Once hurt, will cause severe damage. • Paris’ arrow: a competitive move that attacks the opponent's weak point effectively. * The use of this methodology should follow law and ethics rules 10 © 2012 TOCICO. All rights reserved. Achilles’ Heel Strategy: the Last Resort TOCICO 2012 Conference • A win-win solution • Market segmentation and product differentiation • Viable Vision solution • Blue Ocean strategy • • If everything else fails, consider attacking the adversary using the Achilles’ heel strategy 11 © 2012 TOCICO. All rights reserved. Should We Attack the Adversary? TOCICO 2012 Conference • Risk assessment: think of the “day after” • Cost/benefit analysis • Timing is everything 12 © 2012 TOCICO. All rights reserved. Achilles’ Heel Methodology TOCICO 2012 Conference 1. Identify the adversary's Achilles’ heel, then generate Paris‘ arrow by: 2. Overload and confuse the adversary's Achilles’ heel 3. Isolate and starve the adversary's Achilles’ heel 4. Attack and neutralize the adversary's Achilles’ heel 5. Return to step 1 if the adversary's Achilles’ heel has moved elsewhere – avoid inertia 13 © 2012 TOCICO. All rights reserved. Step 1 TOCICO 2012 Conference Identify the adversary's Achilles’ heel 14 © 2012 TOCICO. All rights reserved. Identify: Classification of Achilles’ Heel TOCICO 2012 Conference • Customers (sole customer) • The supply chain (sole supplier) • Internal resources: – Value chain (critical stages) – Policy constraints (silos, performance measures, pricing) – Physical Resources (bottlenecks, talents, human resources) – Processes/Structure (bureaucracy) – Reputation and culture • The distribution chain (long chain, sole distributor) • Management and board of directors • Business associates 15 • Regulators (regulations, protectionism) © 2012 TOCICO. All rights reserved. Identify: Identification Tools TOCICO 2012 Conference • The Arena model • Focused CRT • KPI analysis • Bottleneck analysis • Flowchart • SWOT analysis • Inter Stakeholder Analysis (ISA) • Financial statement analysis • And, above all, Common 16 Sense… © 2012 TOCICO. All rights reserved. Step 2 TOCICO 2012 Conference Overload-and-confuse the adversary's Achilles’ heel 17 © 2012 TOCICO. All rights reserved. Overload-and-Confuse TOCICO 2012 Conference • TOC: Increase the constraint’s throughput • Achilles’ heel: drive the adversary to ineffectively manage its Achilles’ heel. 18 © 2012 TOCICO. All rights reserved. Overload and Confuse: iPhone Case TOCICO 2012 Conference Overloading the adversaries’ distribution channels • Apple's iPhone was sought after by mobile phone operators • Outside the US Apple did not provide exclusivity to any operator and included a clause committing them to the distribution of large quantities of iPhones over a period of three years • As a result Apple increased its market share on the expense of competitors such as Motorola, Sony-Ericsson and Samsung • Achilles’ heel: limited distribution capacity • Paris’ arrow: choke the distribution channels 19 © 2012 TOCICO. All rights reserved. Step 3 TOCICO 2012 Conference Isolate-and-starve the adversary's Achilles’ heel 20 © 2012 TOCICO. All rights reserved. Isolate-and-Starve TOCICO 2012 Conference TOC: Subordination to the constraint Achilles’ heel: Preventing the adversary from diverting resources to assist its Achilles’ heel 21 © 2012 TOCICO. All rights reserved. Isolate-and-Starve: The End of Life Component TOCICO 2012 Conference • A US government agency published a tender for a complex Hightech system • One player recognized that a component that was required in the contract was declared as "end-of-life“ • The player bought the manufacturer’s whole stock of components thus preventing its larger competitors from bidding • Achilles’ heel: the obsolete component • Paris‘ arrow: buying the whole stock 22 © 2012 TOCICO. All rights reserved. Step 4 TOCICO 2012 Conference Attack-and-neutralize the adversary's Achilles’ heel 23 © 2012 TOCICO. All rights reserved. Attack-and-Neutralize TOCICO 2012 Conference TOC: Elevate the constraint Achilles’ heel: Decrease the capacity of the weakest point 24 © 2012 TOCICO. All rights reserved. Attack-and-Neutralize: Logica/CMG TOCICO 2012 Conference • VAS (SMS, voicemail, etc.) developer Logica merged with CMG • For a small competitor the kneejerk reaction was to treat this merger as a threat • The underdog took advantage of the decision making chaos (due to the merger) in the new company and aggressively provided bid offers to Logica-CMG customers • 50% decline in Logica-CMG's valuation during the two quarters following the merger. The underdog tripled its value • Achilles’ heel: long decision making process • Paris‘ arrow: aggressively provided bid offers 25 © 2012 TOCICO. All rights reserved. Step 5 TOCICO 2012 Conference Return to step 1 if the adversary's Achilles’ heel has moved elsewhere – avoid inertia 26 © 2012 TOCICO. All rights reserved. Avoid Inertia – Huawei Case TOCICO 2012 Conference • Huawei, a Chinese telecom supplier, identified the reluctance of incumbent competitors to pursue legal action against large Chines companies • Huawei was encouraged to ignore IP rights • However, in 2003 Cisco wan a major lawsuit against Huawei for infringing Cisco’s source code • In 2004 during a SuperComm Show a Huawei employee was suspected of industrial espionage at the Fujitsu booth. • Achilles‘ heel: ignoring NDA’s • Paris‘ arrow: lawsuit for illegal use of source codes 27 © 2012 TOCICO. All rights reserved. Achilles’ Heel Implications TOCICO 2012 Conference 1. How to make the adversary’s Achilles’ heel weaker 2. How to protect our Achilles’ heel from the adversary’s attack 3. How to improve our value offer to our customers so they will better protect their Achilles’ heel 28 © 2012 TOCICO. All rights reserved. Summary TOCICO 2012 Conference • Achilles’ heel strategy enables small companies to compete with large adversaries • It has helped law-enforcement agencies in their never-ending war against crime • It helps differentiate your value offering by defending the customers’ Achilles’ heel. 29 © 2012 TOCICO. All rights reserved.