Monday, March 30, 2009

Strategic Planning Analogy #249: Strategic Planning is Like Chess

Jose Raul Capablanca, known as “Capa,” was the world chess champion from 1921 to 1927. He is often considered to be one of the greatest chess players of all time. There is a story he liked to tell, which I found at

"I was playing in a tournament in Germany one year when a man approached me. Thinking he just wanted an autograph, I reached for my pen, when the man made a startling announcement. 'I've solved chess!' I sensibly started to back away, in case the man was dangerous as well as insane, but the man continued: 'I'll bet you 50 marks that if you come back to my hotel room I can prove it to you.' Well, 50 marks was 50 marks, so I humored the fellow and accompanied him to his room."

"Back at the room, we sat down at his chess board. 'I've worked it all out, white mates in 12 no matter what.' I played black with perhaps a bit incautiously, but I found to my horror that white's pieces coordinated very strangely, and that I was going to be mated on the 12th move!"

"I tried again, and I played a completely different opening that couldn't possibly result in such a position, but after a series of very queer-looking moves, once again I found my king surrounded, with mate to fall on the 12th move. I asked the man to wait while I ran downstairs and fetched Emmanuel Lasker, who was world champion before me. He was extremely skeptical, but agreed to at least come and play. Along the way we snagged Alekhine, who was then world champion, and the three of us ran back up to the room."

"Lasker took no chances, but played as cautiously as could be, yet after a bizarre, pointless-looking series of maneuvers, found himself hemmed in a mating net from which there was no escape. Alekhine tried his hand, too, but all to no avail."

"It was awful! Here we were, the finest players in the world, men who had devoted our very lives to the game, and it was all over! The tournaments, the matches, everything - chess had been solved, white wins."

About this time Capa's friends would break in, saying "Wait a minute, I never heard anything about all this! What happened?"

"Why, we killed him, of course."

In general, chess games are not won by murdering your opponent. Instead, chess games are won by the player with the superior chess strategy. Similarly, businesses are not allowed to go around murdering their competitors. Instead, businesses need to outwit their competitors with superior business strategy.

Since both business and chess are won by having superior strategies, it may be useful to see what businesses can learn from the strategic approach used by the grand masters of chess. What we find are four principles.

1) Context
2) Position
3) Movement
4) Time-Aware

1) Context
One of the biggest differences between grand masters of chess and the rest of us is their skill at pattern recognition. They can quickly glance at the board of a game in process and immediately grasp the entirety of what is going on across the entire board. This understanding of the “Big Picture” provides the context for making the next move.

This principle also applies to business strategy. Strategic moves do not occur in isolation. They are influenced by the larger environment—consumer trends, competitive activity, regulatory activity, economic conditions, internal strengths and weaknesses, and so on. If you don’t look at the entire playing field, you can miss something that influences the success or failure of your strategy.

In chess, you have only one opponent at a time. In the business world, you have a multitude of players and stakeholders with pieces on the board. This may make understanding the entire board more complicated, but also more critical.

Two suggestions: First, dedicate time and effort to understanding the greater context in which you are operating. Learn your entire chess board. Not only get the data, but get out of the office and see the world in which you compete.

Second, spend time learning patterns. Study historical strategic activity. Study the strategic environment in other industries. Be like the grand masters of chess who practice for thousands of hours and repeatedly expose themselves hundreds of patterns.

The more time you spend looking at strategic environments, the more you will be able to detect patterns of business outcomes. The more patterns you can recognize, the better you can detect which pattern is closest to the one you are currently experiencing. This will provide even more depth to the context for your decisions.

2) Position
The grand masters of chess understand that the most important factor in a game is your relative position of strength versus the opposition. The stronger your relative position, the more control you have over how the game plays out and the greater the likelihood you will win.

When considering individual moves, the grand masters may see several potential moves that maintain or strengthen one’s position. They may be satisfied with any of them. What they really focus on is trying to avoid the very bad moves, which put them on a path to weakening their position. They understand that once your relative position of strength starts to unravel, it is very difficult to gain it back.

Positioning is critically important in business strategy as well. If you have no relative position of strength in the marketplace, then you have no reason for existing in the marketplace. Two suggestions: First, decide what that position of strength should be. To help in that process, see my blog on “Eight Questions.” Second, every move you make should be designed to protect and extend that strength. Avoid the bonehead moves that cause the long-term strength to unravel, even if it means backing away from some quick near-term gain.

3) Movement
Chess is a game of movement. You don’t just create a position of strength and stop playing. The board is in continual motion. The environment changes, and so must you.

Grand masters of chess understand that since change is inevitable, they may as well get in front of it. It is not uncommon for a grand master to study 10 to 12 moves in advance. The idea is to anticipate what the opposition is capable of doing and try to block it before it happens. Anticipation tends to be more effective than reaction.

The business environment is also in constant movement. There is never a time when you can relax and say “I’m all set” and never have to worry about strategic moves again. Two suggestions: First, do not look at strategic planning as an “event” which takes place one a year or so and then is put aside until the following year. Instead, look at strategy as an ongoing process which needs to be incorporated into everyday decision making.

Second, try to anticipate how things could evolve. Don’t just look at one move at a time in isolation. Understand the longer-term consequences, so that you can avoid unintended consequences.

4) Time-Aware
Grand masters tend to see a game unfold in three phases—the opening game, the middle game and the end game. Their style of play and strategy is different in each phase. The trick is to understand which phase you are in and then act appropriately.

Businesses go through phases as well—start-up, rapid growth, maturity, and decline. Each phase is different enough that it requires a different type of strategic approach. Good leaders recognize when companies are moving between phases and change their strategies appropriately. This is discussed more fully in a prior blog.

One of the more common mistakes I have seen are companies that love the rapid growth phase and try to stay there forever, even when that phase is over. As a result, they over expand. The newly mature environment cannot absorb all of the investment, and the firm collapses under the weight of those excessive investments. Stay aware of the times and get in tune with the times.

The strategic principles of chess are also useful in business strategy. First, realize the full context in which you are acting by understanding the entire playing field. Second, seek out and strengthen positions of relative strength. Third, treat strategy as an ongoing part of everyday activity (not an infrequent event). Fourth, make sure your strategic approach is appropriate to the phase of the business life cycle you are in.

The grand masters of chess can still usually beat the computers. Therefore, don’t just blindly rely on reams of data when creating a strategy. Use your human intuition and think outside the box.

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