FIVE KILLER STRATEGIES FOR TROUNCING THE COMPETITION
WINNERS IN BUSINESS PLAY ROUGH AND DON'T APOLOGIZE FOR IT Toyota
has steadily attacked the Big Three where their will to defend was
weakest, moving up the line from compact cars to mid- and full-size
vehicles and on to Detroit's last remaining profit centers, light
trucks and SUVs. All the while, Toyota has dared its rivals to
duplicate a production system that gives the company unmatchable
productivity and quality.
Dell is similarly relentless, and ruthless, in dealing with
competitors. Last summer, the day after Hewlett-Packard announced
weak results because of price competition in PCs, Dell announced a
further across-the-board cut--delivering a swift kick to a tough
rival when it was down.
Wal-Mart is well known for its uncompromising stance toward
suppliers. In 1996, Rubbermaid, a $2 billion business that a few
years earlier had been Fortune's most admired company, ventured to
contest Wal-Mart's pressure on suppliers to lower their prices--and
Wal-Mart simply cut Rubbermaid off. (Newell acquired a struggling
Rubbermaid in 1999.) Wal-Mart doesn't pull punches with competitors,
either. In recent years, as Kmart floundered in bankruptcy
proceedings, Mart-Mart rolled out a knockoff of Kmart's Martha
Stewart product line, putting pressure on one of the tottering
retailer's few areas of success.
Hardly anyone would dispute that Toyota, Dell, and Wal-Mart have
epitomized corporate success over the past decade. But the raised
eyebrows they provoke--recent BusinessWeek cover articles have
included "Can Anything Stop Toyota?" "Is Wal-Mart Too Powerful?" and
"What You Don't Know About Dell"--suggest there's something not
quite kosher about the way they achieve that success.
because Toyota, Dell, and Wal-Mart play
hardball. What do we mean by this? Hardball
players pursue with a single-minded
focus competitive advantage and the
benefits it offers--leading market
share, great margins, rapid growth, and
all the intangibles of being in command.
They pick their shots, seek out
competitive encounters, set the pace of
innovation, test the edges of the
possible. They play to win. And they do.
Softball players, by contrast, may look good--they may report
decent earnings and even get favorable ink in the business
press--but they aren't intensely serious about winning. They don't
accept that you sometimes must hurt your rivals, and risk being hurt
yourself, to get what you want. Instead of running smart and hard,
they seem almost to be standing around and watching. They play to
play. And though they may not end up out-and-out losers, they
certainly don't win.
recent emphasis of management science,
which itself has gone soft. Indeed, the
discourse around a constellation of
squishy issues--leadership, corporate
culture, customer care, knowledge
management, talent management, employee
empowerment, and the like--has
encouraged the making of softball
Look at the titles of some recent business books. Who Moved My
Cheese? (Come on, what are you, a man or a mouse?) Or Fish! A
Remarkable Way to Boost Morale and Improve Results. Or Servant
Leader. Or Hug Your Customers. Softball books accounted for probably
four out of five of the titles on the business best-seller list in
the last ten years--and even more in the past five years. This trend
is not good for the people in your organization who read this stuff
or are sent to hear the authors speak.
Now, the word "hardball" may be difficult for some people to
swallow. In business, it smacks of corporate moguls and robber
barons--Andrew Carnegie sending armed Pinkerton's men and gunboats
into mill towns to fight the unions. It sounds like the kind of game
played by former Sunbeam CEO "Chainsaw" Al Dunlap, whose memoirs
were entitled Mean Business and who was eventually barred by the SEC
from ever again being an officer of a public company.
hardball is not about playing beyond the
lines of legality. Enron and WorldCom
may have appeared to be hardball
competitors, but they in fact used a
classic softball tactic: manipulating
(whether legally or illegally) results
to make yourself look better. Hardball
players don't cheat.
But they can cause discomfort. In sports, after all, playing
hardball means brushing back an aggressive batter with a
100-mile-an-hour pitch. It means bare-knuckle boxing, John L.
Sullivan--style. It means giving someone a head fake in a pickup
basketball game on a city court littered with broken glass--and
leaving him sitting on his rear.
is not only intense, it's efficient. It
cleanses the market. It makes companies
strong and vibrant. It results in more
affordable products and services, as
well as more satisfied customers. It
makes competitors sweat. Flabby rivals
will sometimes gasp that hardball
players are playing too hard, that their
advantages are "unfair" or
players may demand trade restrictions or
take their complaints to the press--or
to the courts. They will posture and
pout. Meanwhile, they will let billions
of dollars of shareholder wealth drip,
drip, drip into oblivion.
players are immune to this sort of
thing. In fact, they have a name for it.
They call it whining.
THE HARDBALL MANIFESTO
the time has come to rebalance the hard
and the soft. Softball players that have
survived until now-think of most
airlines, the U.S. auto industry, the
recording industry, to name a few
examples--are in deep trouble. Hardball
players are taking their places at an
unprecedented rate. Companies join and
fly off the Fortune 100 list faster than
ever before. In this quicker, tougher
world of business, playing hardball is
not an option; it is a requirement for
Ready to relearn the fundamentals of winning and losing? Start
with the Hardball Manifesto. It lays out the keys to becoming an
effective hardball player.
relentlessly on competitive advantage. The
history of business is littered with the
remains of companies whose competitive
advantages, once robust, simply withered
away. Hardball players, by contrast,
strive to widen the performance gap
between themselves and competitors. They
are not satisfied with today's
competitive advantage--they want
a lot of companies talk about
competitive advantage, few are able to
put a finger on exactly what theirs is,
and fewer still can quantify it.
Hardball players know--empirically--what
theirs is and exploit it ruthlessly.
Companies that relentlessly pursue competitive advantage are
wonders to behold. Wal-Mart is first and foremost a logistics
company, and it established its competitive advantage in discount
retailing in the 1970s with a network of "cross-docking" warehouses.
Goods from suppliers were accepted only in full truckload
quantities. They were then moved across the dock and loaded onto
other trucks that later departed fully loaded with a variety of
goods going to stores.
But Wal-Mart didn't stop with this drastic reduction in its
transportation costs. It went to "everyday low prices" to stabilize
demand and thereby further reduce costs. Supercomputers were
installed to track and analyze consumer purchases, competitor
prices, and other information. Satellites beamed the data from
stores to suppliers and on to warehouses, helping to keep inbound
and outbound trucks full and shelves stocked. Suppliers were told
exactly when to deliver shipments to warehouses; if they missed the
window, their shipments might be returned until the next window
opened--or rejected altogether. Wal-Mart also used sales and
inventory data to tell companies like Rubbermaid which products it
would carry--no matter what the companies thought was the
appropriate merchandising of their lines.
Wal-Mart continues to tighten the bolts on this system, so far
without any signs of shearing. In Wal-Mart's intense and relentless
effort to further increase efficiency, suppliers' costs and consumer
prices are, apparently, expected to decline forever.
for "extreme" competitive
advantage. To hardball
players, there's something far more
important than competitive advantage. It
is, in effect, extreme competitive
advantage, which is the ultimate
plain old competitive advantage, which
can be fleeting, this is something that
puts you out of the reach of your
competitors. They're likely to
cry that such an advantage is
unfair--not because it's unjust, but
because no matter how hard they try,
they cannot match it. Often, the
hardball competitor has an economic
system that is unassailable. Or a
relationship with a customer or a
supplier that is not available to its
competitors, or capabilities such as
fast product development or superior
customer knowledge that others cannot
Toyota's production system, for example, is so much better than
any other automaker's that the company practically flaunts it. The
system lets Toyota produce, at both high and low volumes, a great
variety of high-quality vehicles at very low cost. Toyota is so
confident that its system cannot be replicated that it has welcomed
competitors into its factories. "Study us all you want," the company
has said. Despite decades of trying, no rival has matched Toyota's
system. Toyota continues to push the boundaries of its advantage
with a new type of flexible assembly line--dubbed the Global Body
Line--that costs 50% less to install and can be changed to
accommodate a new model for 70% less than Toyota's previous
The rewards to Toyota have been spectacular. Its global market
share has steadily risen from 5% in 1980 to more than 10% today,
with each point of market share worth about $10 billion in revenue.
Toyota, which recently overtook Ford as the world's second-largest
automaker (in terms of volume), says its global market share goal is
15% by 2010. Does anyone want to bet against it?
attacking directly. Perhaps
paradoxically, hardball players avoid
direct confrontation. That's because
they're smart. History shows that for a
military force to be reasonably assured
of success in a direct attack, its
strength must be several times greater
than its opponent's. That's not a
prospect hardball players like. Even if
they have the strength, they prefer the
economies of force inherent in the
Southwest Airlines' unusual but highly successful route strategy
is a classic indirect attack. Traditional airlines built huge
competitive strengths in their hubs; for example, United has nearly
1,000 flights in and out of Chicago's O'Hare airport every day.
Southwest chose not to attack the major airlines on their
well-defended turf. Instead, it opened operations in small,
out-of-the-way airports. For instance, bypassing Boston, it offered
service out of Manchester, New Hampshire, and Providence, Rhode
Island. Instead of trying to get slots at O'Hare or New York's
LaGuardia airport, it set up operations at Chicago's Midway airport
and at Islip on Long Island. Not surprisingly, there were no bloody
battles with the major airlines for control of these locations.
Once Southwest was established in the smaller airports, the major
carriers faced a dilemma. How could they respond to Southwest's
small-airport success without stepping out of their well-protected
foxholes at the major airports? Should they compete directly with
Southwest in smaller airports where Southwest had built a
competitive advantage? Or should they create their own non-hub-based
airlines to compete with Southwest? With either response, the major
carriers would be playing into Southwest's game. And, in fact, no
major carrier has yet resolved this dilemma. Numerous attempts to
confront Southwest directly--for example, Continental Lite--have
failed. Meanwhile, Southwest continues to push into small cities.
Its well-documented success as other airline companies teetered
after the September 11, 2001, tragedy only confirms just how savvy
people's will to win. Hardball
requires guts as well as smarts. Victory
often belongs to those who want it the
most. Southwest's founder, Herb
Kelleher, despite his aw-shucks persona,
is a hardball player, and Southwest is a
hardball team. Don't be fooled by its
touchy-feely image in the media--or by
its stock ticker symbol, LUV. Sure, in a
syrupy training video, one animated
character tells employees, "Spirit
is engaging our minds and our hearts and
our souls to do the right thing.
Southwest spirit is you." But in an
advertisement for the whole world to
see--including employees--Southwest once
crowed: "We came. We saw. We kicked
This is a
great mantra for hardball players. To
achieve competitive advantage and drive
toward extreme competitive advantage,
hardball players must be action
oriented, constantly impatient with the
status quo. Fortunately, one can
foster this will to win and turn
softball players into hardball players.
One way to
do this is by adopting hardball
strategies of the kind we describe
below. These by themselves can help
release people's natural desire to win.
But to really turn softball players into
hardball players, you need to create and
maintain in people a hardball attitude.
This becomes more difficult as your
advantage over competitors grows and
people become complacent. As
Kelleher said in a letter to all
employees in the early 1990s, "The
number one threat is us." He added:
"We must not let success breed
complacency; cockiness; greediness;
laziness; indifference; preoccupation
with nonessentials; bureaucracy;
hierarchy; quarrelsomeness; or
obliviousness to threats posed by the
such complacency, you need to foster
a sense of urgency. Once, in
response to United's launch of a
competing service in several California
cities that were served by Southwest,
Kelleher dispatched a letter to
employees with the headline
"Commencement of Hostilities."
Noting that United had more than 100
planes that could be "hurled
against us" on the contested
routes, he warned that "our stock
price, our wages, our benefits, our job
security, our expansion opportunities are
all on the line." In several cities
where the competition was fiercest,
Southwest employees came to work wearing
camouflage outfits and battle helmets.
Know the caution
zone. Hardball involves playing
the edges, probing that narrow strip of territory--so rich in
possibilities--between the places where society clearly says you can
play the game of business and those where society clearly says you
can't. The hardball player ventures closer to the boundary, whether
it be established by law or social conventions, than competitors
would ever dare.
But to play the edges, you have to know where the edges are. This
is perhaps the most complex and daunting aspect of hardball. So
hardball players do their homework. They know their industries cold.
They have the legal and accounting counsel to help them determine
what they can and can't do. But the answers often are far from
A few guidelines can help you navigate your way through the
caution zone when considering an action:
- Does it
break any existing laws? It goes
without saying that hardball isn't
about playing dirty: You brush a
batter back but you don't aim for his
head; you throw hard but you don't
doctor the ball with spit. Keep in
mind, though, that a legal standard is
often less than crystal clear. By
aggressively pushing the limits of
existing regulations, a hardball
player can sometimes win tremendous
- Is the
action good for the customer? If so, a
move otherwise subject to challenge
may be found acceptable by the courts
or legislators. If it isn't, you may
be creating an army of malcontents
eager to assist in your downfall.
competitors be directly hurt by it?
Putting competitors in situations in
which they inflict damages on
themselves is acceptable -- for example,
enticing a rival to invest in an area
where it has no hope of winning.
Overtly hurting a competitor by, say,
buying a key supplier and then cutting
off your rival may win you the wrath
of others you do business with, even
if the move is legal.
- Will the
action touch a nerve in
special-interest groups? Organizations
of people who don't want to be
customers but want to impose their
point of view on those who might be
customers--think, for example, of the
ecoterrorists who have set fire to
Hummers and other sport-utility
vehicles--can create costly public
relations disasters for companies.
Microsoft regularly plays in the caution zone, to its benefit and
detriment. The company's seeming disregard for the damage it can
inflict on competitors by refusing to share ownership of the PC
desktop has mired it in lawsuits. At the same time, its assertion
that customers benefit from its approach--a view shared by many--has
undoubtedly reduced the impact of the numerous legal attacks by
competitors and regulators.
At the risk of repetition, let us stress once again that
is not about breaking, or even bending, the law. It is not about
crooked accounting, breaching contracts, stealing trade secrets, or
predatory pricing. It's not about being mean.
Well, not too mean. The nicest part of playing hardball is
watching your competitors squirm.
5 HARDBALL STRATEGIES
How do you become a hardball player? While there are countless
ways to play hardball, a handful of classic strategies are
timelessly effective in generating competitive advantage. These
methods are best employed in bursts of ruthless intensity. The aim:
a dramatic shift in your competitive position, followed by
consolidation of the gains and preparation for the next attack.
Devastate rivals' profit sanctuaries.
sanctuaries are the parts of a business where a company makes the
most money, where it can quietly accumulate wealth, like a bear
storing up fat for winter. If a rival starts pushing into one of
your territories, you respond by attacking his plump underbelly. He
should get the message, fast.
There are numerous ways to devastate a competitor's profit
sanctuary--for example, flooding the market with advertising or
making across-the-board price cuts--but the most effective strikes
are surgical. Some of these can take you deep into the caution zone,
and the legality of each must be considered. Given the competitive
sensitivity of this strategy, companies that have successfully
employed it are rarely willing to describe it in detail. The
following disguised example is one such case.
A few years ago, vacuum cleaner maker VacuCorp was having a
problem with a rival. SweepCo was cutting into VacuCorp's fattest
profit sanctuary--its product range sold to national retail
accounts--by low-balling its products to the same buyers.
VacuCorp did a competitive deconstruction of SweepCo's business.
The company's managers looked at everything--products, pricing,
design, distribution--and finally found what they were looking for
at a SweepCo plant in Iowa. Here, SweepCo made the canister type of
vacuum cleaner, the kind that rests horizontally on wheels and has a
long hose and a cord that always seems to be tangled. Most
manufacturers had stopped making canisters. As a result, they were a
rich profit sanctuary for SweepCo. VacuCorp estimated that
canisters, which accounted for only 25% of SweepCo's revenue,
produced 80% of the company's profits.
That's all VacuCorp needed to know. VacuCorp designed a canister
with fewer parts and less expensive components than SweepCo's.
VacuCorp then set the new canister's price below SweepCo's--and
waited. Whenever SweepCo attempted to lowball one of VacuCorp's
national accounts, VacuCorp went after one of SweepCo's major
accounts with its own low-priced canister. After several of these
skirmishes, SweepCo figured out what was going on. SweepCo stopped
low-balling VacuCorp's customers. Peace settled over the vacuum
Knowledge is the key to devastating a competitor's profit
sanctuary. You need to know, among other things, your own and your
competitor's costs and profitability-by category, by geography, and
by account. This will allow you to hone your attack strategy,
adjusting prices to inflict the most pain.
You also need to be alert to the legal limits on pricing
strategies. There's a fine but real line between aggressive and
predatory pricing. Above all, recognize that an attack on your
competitor's profit sanctuary is liable to provoke a strong
response. Be hypervigilant, therefore, for the early warning signs
of failure or success. Your competitor may attack your profit
sanctuaries in response. He may have greater financial resources
than you thought or a "sugar daddy" to protect him. When you decide
to gut the bear, don't be reckless.
pride. Softball competitors like
to think that their bright ideas are sacred. But hardball players
know better. They're willing to steal any good idea they see--as
long as it isn't nailed down by a robust patent--and use it for
themselves. Ray Kroc didn't invent McDonald's; he took the idea from
brothers Dick and Maurice McDonald when he bought their small chain
of burger joints. Home Depot founders Arthur Blank and Bernie Marcus
didn't invent the first warehouse-outlet hardware chain; they got
the "big box" concept from their earlier employer, Handy Dan Home
But hardball plagiarism involves much more than appropriating a
good idea. You have to improve on it. As Harry Cunningham, the
founder of Kmart, is reported to have conceded, Sam Walton "not only
copied our concepts, he strengthened them."
It's also important that you make the idea your own, grafting it
onto your organization and getting your people to buy into it.
Simply replicating the details isn't enough. Just ask the airlines
that have tried--and failed--to copy Southwest. All of this means
that plagiarizing is not as easy as it may seem.
In the late 1990s, Ford dealers were losing business at their
service bays. Ford--which enjoyed particularly high margins on the
replacement parts installed by dealers' service
technicians--couldn't figure out why. So it sent a team to look at
the competition. The team discovered that one carmaker, Honda, had
built a particularly strong service business. Honda's secret had two
parts: tying a new vehicle's purchase to its after-sales service and
boiling down the car's hundreds of servicing needs into a simple,
customer-friendly menu. Based on their preferences and mileage,
Honda customers could choose a bundled package of maintenance tasks
as easily as they could order a Happy Meal at McDonald's. Ford
decided to do the same thing.
The problem, however, was that Ford's dealers and engineers were
entrenched groups. Some powerful engineers felt that if a part
needed servicing at 33,603 miles, then that was it. No lumping of
servicing intervals into a menu of Happy Meal programs for them!
Meanwhile, the dealers, an equally independent lot, had a
single-minded focus on selling new cars and thus generally neglected
their service business. In the end, Ford did copy Honda's program
and improved upon it, marketing it aggressively to new-car buyers.
But it wasn't the details of the program that made it successful. It
was Ford's effort to win over its engineers and, most important, its
massive network of 5,000 dealers.
Some people might recoil when competitors or the media call them
copycats. Hardball players couldn't care less. They know that if
Steve Jobs had ignored the graphical user interface he saw at Xerox
PARC, Apple Computer would never have been born. If Kiichiro Toyoda
hadn't learned the forerunner of just-in-time techniques from Ford,
Toyota wouldn't have surpassed rival Nissan in the 1950s and later
become such a formidable challenger to U.S. automakers.
And you needn't imitate just your competitors. You can take ideas
from one geographic market and transplant them in another, as
Ryanair has done with Southwest's model in Europe. You can also
transplant between industries, as casket maker Hillenbrand has done:
It applied the methods of the Toyota Production System to casket
making and transformed its industry.
competition. Do you have a great
strategy but worry that you lack the time to get it in place before
competitors can blunt or otherwise resist it? Hardball players will
mislead rivals to buy time--or to gain any other kind of competitive
Think of the "fake" that is a fundamental--and legal-tactic in
any number of sports: the head fake in basketball, the fake handoff
in football, a pitcher's fake pickoff throw in baseball. The aim of
all these feints is the same: getting your rival to set up or move
in a way that puts him off balance and reduces his ability to meet
Similar moves occur in business, although no one says much about
them. The high-technology industry has employed fakes for years--for
example, to attract potential customers and distract competitors, a
software company will announce "vaporware" that isn't ready for
prime time. In the auto industry, prototypes are sometimes doctored
up to throw off the competition.
Pushing this tactic too far--beyond the caution zone--could spell
trouble, especially if it deceives investors as well as competitors.
But certain types of fakes, particularly those that distort rivals'
understanding of what you're up to, represent a key hardball
Wausau Papers was a poorly performing manufacturer of uncoated
paper, with outdated machines and high production costs. When a new
president of the company learned that Wausau had an unusually large
share of business in Chicago, he began asking questions. It turned
out that Wausau's share was high there because, with a factory
nearby, it could service its distributor daily. This became the
foundation for a new strategy: Wausau would offer next-day service
to its distributors in the major mid-western cities and encourage
them to order small quantities, some with custom specifications.
Wausau's customers responded enthusiastically to this offering of
better service and greater choice. Frustration over long and
unreliable lead times, poor service, and limited choice from
traditional suppliers was so high that distributors eagerly switched
to Wausau, even if they had to pay a premium price. Indeed, some
ordered Wausau's traditional commodity products along with its new
customized ones because of its speedy service.
Wausau had to move fast to lock up its customers before
competitors caught on and copied the strategy. To buy time, the
company decided to try a little sleight of hand. Wausau was helped
by the traditional mind-set of the industry. Its competitors, used
to keeping their prices down by producing standard products in large
quantities on very fast machines, were initially confused by
customers' willingness to pay a premium for significantly better
service and choice.
Wausau needed to prolong this confusion so that rivals would take
no action--or the wrong action--while the company executed its new
strategy. So Wausau executives told the trade press that the company
had been able to speed deliveries by holding large inventories of
finished goods and by working longer hours--both of which were true.
But the company didn't signal that it had also undertaken a major
shift in strategy and operations. As Wausau hoped, competitors for
the most part chose to ignore Wausau's moves.
In addition to this active deception, the company employed
passive deception, allowing competitors to think that they were
continuing to win against their historically weak rival. Although
Wausau rapidly captured the business of service-sensitive
distributors that needed high-margin specialty products, many of
those distributors continued buying competitively priced commodity
products from less service-oriented suppliers. The suppliers saw
this new segmentation as entirely acceptable; why would they want to
undermine their own performance by introducing costly small
Furthermore, to meet the demand of customers who wanted to
continue buying its commodity products, Wausau began buying
commodity papers in rolls from its competitors, cutting and
repackaging them as part of its overall offering--which delighted
the competitors. Wausau thus reduced its production of commodity
papers and boosted its rivals' reliance on those low-margin
Unleash massive and overwhelming
hardball players prefer the indirect attack, sometimes they beat
their competitors with the polar opposite.
Massive and overwhelming force must be the equivalent of a hammer
blow: focused, direct, and swift. Consequently, a company must be
dam sure it is ready to employ it. Substantial competitive advantage
may exist on paper, but is that advantage readily and quickly
available? The sum of the company's divisions may be greater than
the sum of a competitor's, but can those divisions act as one in
Thus, a company choosing massive force must be ready to
completely overhaul its business. Because the company may not face
the immediate competitive pressure that typically forces this kind
of massive revamping, the process can have the feel of a turnaround
of a successful company. This paradoxical situation makes the
strategy uncomfortable for entrenched leaders who don't have the
vision and courage to engage in hardball competition.
In the early 1990s, Anheuser-Busch attacked FritoLay's leadership
in salty snacks--potato, corn, and tortilla chips. The big brewer
had noticed that Frito-Lay, a division of PepsiCo, had been
distracted by its expansion into cookies and crackers. So, in a
classic indirect attack, Anheuser-Busch began to slip its new Eagle
brand salty snacks onto the shelves of its traditional beer
outlets--supermarkets and liquor stores--where Frito-Lay was
Unfortunately for Anheuser-Busch, Roger Enrico, toughened by a
stint battling Coke as the head of Pepsi-Cola North America, had
just taken the helm at Frito-Lay. He realized that Frito-Lay's
strong brands and huge size gave it a clear economic advantage over
Anheuser-Busch in the salty-snack business. But to get the full
benefit of this competitive advantage, Enrico had to get Frito-Lay
into fighting shape by massively redirecting investments within the
He cut the number of offerings in Frito-Lay's product line by
half--no more cookies, no more crackers--and concentrated the
company's energy, not to mention its 10,000 route drivers, on
America's salty-snack aisles. He took Frito-Lay's considerable ad
budget, which had been balkanized into regional fiefdoms, and rolled
it back up into a single blockbuster sum.
He heavily invested in product quality, which had slipped below
Eagle's. In a turning-point meeting, he directed his operations
people to bury in the ground $30 million worth of inferior potatoes
rather than put them into Frito-Lay products. He ordered the first
layoffs in Frito-Lay's history--but hired additional salespeople.
And because he had cut costs, he was able to cut prices.
Armed with this superior offering--better chips, better service,
and lower prices--Enrico began to put pressure on one of Eagle's
profit sanctuaries: potato chips in supermarkets. Frito-Lay sent its
salespeople streaming in; some even stayed at the largest
supermarkets full time, continually restocking the Frito-Lay
When the dust had settled in 1996, Anheuser-Busch had shuttered
its Eagle snack business. In the end, Frito-Lay even bought four of
Eagle's plants--at very attractive prices.
To use this kind of strategy, a company often unleashes forces
that are latent in its organization, as Enrico did at Frito-Lay. But
those forces must represent a real, if unrealized, competitive
advantage. For example, you must have a clear cost advantage before
attacking; otherwise, competitors can counter with price cuts that
blunt the attack.
Of course, seldom do you want to eliminate your competitors. Weak
competitors are better than those that may emerge from bankruptcy
fit and ready to fight. Also, you must be prepared for public
scrutiny; Frito-Lay's sales practices in supermarkets were
investigated and cleared by the FTC. After all, your competitors may
scream loudly on the way down.
costs. If you have a superior
understanding of your costs, you can use pricing to maneuver your
competitors into believing that they are making profitable moves,
when in fact their costs are increasing. Implausible as it sounds,
successfully driving up a competitor's costs without his knowing is
one of the marks of a true hardball competitor.
Some years back, automotive components maker Federal-Mogul began
to see its profits slide. Then-CEO Dennis Gormley decided to look
closely at the company's cost and pricing structures. Until that
point, top management had assumed that Federal-Mogul's low-volume
sales of engine bearings to Caterpillar, Cummins, and John Deere
were much more profitable, because of their high gross margins, than
the company's high-volume sales of bearings to Ford, GM, and other
Gormley was in for a shock. Contrary to the reports of the
company's standard costing system, low-volume parts generated far
more indirect costs per unit than did high-volume parts--that is,
the costs of low-volume parts had been understated and their profits
overstated. This meant that Federal-Mogul's strategy of increasing
profitability through the sales of more low-volume parts was having
an effect exactly the opposite of what was intended. In fact, for
some low-volume parts, Federal-Mogul was "shipping cash."
The company could have addressed the problem by simply ceding the
low-volume business to a competitor, JP Industries, which was weaker
than Federal-Mogul in high-volume bearings and stronger in the
low-volume end--and also apparently unaware of how little profit was
to be made in low-volume sales. But doing so would have handed the
rival company a profit sanctuary from which to launch attacks on
Federal-Mogul's now more attractive position in the high-volume
So Gormley hatched a plan to cede the low-volume segment in such
a way as to keep JPI unwittingly enmeshed in that business. The
strategy: overprice Federal-Mogul's bids for the low-volume
business, setting them just high enough that Federal-Mogul lost most
competitions but low enough to keep JPI's profit margins slim. JPI
repeatedly won these bidding contests, to its detriment. Its
victories both distracted JPI from any thoughts it might have had
about attacking Federal-Mogul's high-volume business and reduced its
financial ability to launch an attack if it had been inclined to do
Of course, Federal-Mogul didn't want JPI to drive itself into a
destructive cycle of higher costs and lower margins. That might have
led it in desperation to try boosting its high-volume sales to
generate cash. So every now and then, to keep JPI from running
itself into the ground or catching on to the deception,
Federal-Mogul would take a win in the low-volume business and give
JPI a win in the high-volume business.
Raising your competitors' costs works well in certain situations,
primarily when the complexities of a business introduce costs that
can be misallocated. For example, large volume differences between a
company's highest- and lowest-selling products or services--as was
the case for Federal-Mogul and JPI--can result in such
This is a risky, bet-the-company strategy. There is lots of room
for error. Your analysis of the actual versus apparent costs
associated with a product, service, or customer -- and the strategy
that grows out of that analysis -- had better be right.
A HARDBALL STATE OF MIND
These five strategies don't constitute a comprehensive hardball
strategy playbook; there are others. Indeed, any strategy that
provides you with an extreme but legal competitive advantage is a
hardball move. But it's important to emphasize that hardball isn't
only about the moves you make. It's also about the attitude you
bring to them. A hardball playbook won't do you any good if you feel
squeamish about using it.
Look first at how tough you are on yourself. Do you demand to
hear the truth from customers, suppliers, business partners,
shareholders, and employees? Do you look without flinching at the
problems most likely to bring your company down? Are you constantly
dissatisfied with the status quo, no matter how fine things may
If you play hardball at home, then you're ready to go after
competitors. Again, we're not talking about cruelty here: Hardball
is tough, not sadistic. Yes, you want rivals to squirm, but not so
visibly that you are viewed as a bully. In fact, you want the people
in your world--the same ones you demand straight answers from--to
cheer you on. And many of them will, as they share the riches your
A few of them may even come to share your intense passion for
winning in ways that can seem unfair to competitors. That kind of
mind-set isn't something most people have these days, when
apologizing for victory is about as common as celebrating it. So,
how do you feel?
Do you have what it takes to play hardball?
Relearn the fundamental behaviors of winning:
- Focus relentlessly on competitive advantage.
- Strive for "extreme" competitive advantage.
- Avoid attacking directly.
- Exploit people's will to win.
- Know the caution zone.
Deploy these in bursts of ruthless intensity:
- Devastate rivals' profit sanctuaries.
- Plagiarize with pride.
- Deceive the competition.
- Unleash massive and overwhelming force. Raise competitors'
By George Stalk, Jr. and Rob Lachenauer
George Stalk, Jr., (email@example.com) is a senior vice
president with the Boston Consulting Group and the author of
numerous books and articles, including the McKinsey Award-winning
article "Time--The Next Source of Competitive Advantage" (HBR,
July-August 1988). Rob Lachenauer (firstname.lastname@example.org) is a vice
president with the Boston Consulting Group. The authors, who are
completing a book on hardball strategies, have had consulting
relationships with a number of the companies mentioned in this