Global gamesmanship

GOOD TO GLOBAL

Azim Premji

Girish Paranjpe is shocked by how fierce the battle for business has suddenly become.

The president of Wipro Technologies' Banking, Securities, Financial Services and Insurance (BSFI) group says that the moment the company started bidding for big-ticket customers overseas, rivals like IBM and Accenture bared their fangs.

They slashed prices without caring about margins, dropping their average realisation on projects from 170 per cent to 50 per cent.

Recently, when Wipro made a grab for a project at a prestigious American financial services leader, a global competitor undercut it by 10 per cent. What left Paranjpe shaken, he says, was "not so much the dollar value of the deal as our rival's desire to deny Wipro certain markets."

Welcome to the brutal, dirty and complex world of global competition, where strategy can often be like a game of 3-D chess. As the world economy has become more integrated, global companies have learnt to protect turf by deploying an arsenal of strategies designed to thwart the ambitions of emerging global players. Transnational companies often deploy multi-country, multi-product game-plans to tie emerging rivals in knots.

It's called global gamesmanship, and Rita Gunther McGrath, a Columbia University professor of management, is an authority on the subject. In an article in the Harvard Business Review in May 2003, McGrath and her two co-authors first drew attention to the tactic.

"The moves that an organisation makes in one market are designed to achieve goals in another market in ways that aren't apparent to its rivals. We call this approach competing under strategic interdependence (CSI)," she explains.

McGrath sounds like a latter-day Sun-Tzu: your company is an instigator; competitors are opponents; a marketplace is an arena; market share is territory; resources are live ammunition; and the battleground could be anywhere, anytime around the globe.

It's a way of thinking about competition that emerging globalisers like Wipro would do well to come to grips with. After all, the company counts as its rivals the likes of IBM, Accenture, EDS, Cap Gemini and Bearing Point, and competes with them across categories and longitudes.

By adopting the gamesman's mindset, Wipro may be able to cover two flanks. For one, it can build defences against the multi-pronged attack of global rivals. For another, by using gamesmanship, it can deploy limited resources for offence more efficiently across the globe.

"It's the equivalent of playing chess when your opponent is playing checkers. There are multiple moves that you can make to get your opponents to behave in a way that's convenient for you. If your opponents aren't aware that you're doing that, you can really trip them up," points out McGrath.

Companies like Wipro are no strangers to gamesmanship; after all, even in the domestic market, competitors deploy a confusing mix of attack and counter-attacks. Nor are companies blind to the overt and covert power that large global competitors wield.

Declares Wipro Chairman Azim Premji: "We try to never lose sight of any competitor. You can see what's in front of you and on the sides, but the ability that really helps is the ability to see what's behind you without turning around."

However, few emerging globalisers have an integrated strategy to take on all their global competitors. Premji himself admits that he doesn't buy into McGrath's views.

"I believe that great businesses are built on the foundation of sustainable competitive advantages. The role of gamesmanship in this scheme of things is, at best, transient," he says.

That may have been true when Wipro was moving up the value chain and expanding its footprint without stepping on the toes of the big guns. Now that the company can no longer fly below the radar "" Wipro was ranked 62nd in BusinessWeek's Top Infotech 100 last fortnight "" it is bound to be at the receiving end of gamesmanship.

Wipro might not choose to join the game, but the game has certainly begun. For instance, Wipro-Spectramind Chairman Raman Roy recalls that when Spectramind first competed against IBM three years ago, everyone celebrated.

But, by April 2004, when IBM plunked down $ 170 million to acquire rival Daksh eServices, Roy says he had no doubts that "Wipro's success in the BPO industry had played a big role in IBM's decision." When I pressed Roy to recall if he had sensed a rising heat from global gamesmanship, he admitted having seen some signs.

Recently, the CEO of a global call-centre giant bumped into Roy at a customer meeting, and told him point-blank: "You guys are having my lunch. That's not acceptable."

McGrath argues that gamesmanship is particularly important in industries where there is a flurry of activity and companies are staking out territory. The entry of new competitors or new technologies changes the power structure.

It's a matter of concern that McGrath, who tracked global competition in India's fast-moving consumer goods industry, says: "There's a tendency to underestimate the vigour of competitor responses in most Indian companies."

As I talked to Wipro's top management team, it became clear that it's in the company's DNA to look at the world from the customer's viewpoint. But, going forward, emerging globalisers in India like Wipro might need to deploy systems and develop a degree of commitment to track rivals too. After all:

It sure helps to know who your competitors are.

Two questions that McGrath asks companies who are sitting on the fence are: does the company understand which firms it is competing against? And does the company keep that knowledge up-to-date?

Step one in McGrath's model is for companies to draw a matrix that lists all the product categories and territories that they compete in. For example, Wipro's infotech interests are in two companies.

Wipro Technologies handles the Americas, Europe and Japan, and offers services in application development and maintenance, package implementation, global IT infrastructure management, consulting and BPO.

Wipro Infotech targets customers in India, Asia-Pacific, and west Asia, and offers services like IT hardware and software, infrastructure integration, application development and maintenance, package implementation, IT infrastructure services and consulting.

At one level, it makes sense for Wipro to draw a global CSI table that consolidates the competitive landscapes of both companies. At another level, Wipro also needs to drill down to the level of each company.

For, a more granular picture will emerge if it were to draw up a table for each business across geographies. The goal is to uncover the interdependencies between Wipro and its competitors such that the former can use them to its advantage.

It sure helps to know what your competitor fights for.

Once the CSI table has helped identify each competitive arena, by product or service category as well as geography, a company needs to figure out where it stands. To do that, companies must track three parameters.

One, the competitor's potential reactiveness to increased pressure in each market, which shows the competitor's propensity to defend its territory.

Two, the market's attractiveness, based on criteria like market share, profitability and even emotions, to the company. And three, the relative clout that both firms enjoy "" where clout measures each company's ability to fight back.

The final step is to map the competitive landscape on a bubble chart, where the X-axis shows the competitor's reactiveness; the Y-axis, the attractiveness to the company; and the bubble's size indicates the clout or strength of the rival.

Such gamesmanship exercises can also help companies overcome what McGrath calls "perceptual gaps". The bubble chart, for example, might show that one rival enjoys a lot of clout in the US market, but little in India.

At a deeper level, it might show that the rival's reactiveness is high in the US financial services market, but that it is low when it comes to, say, telecom service providers in Europe.

Points out McGrath: "Such tools give a company a pretty good idea of which arenas the opposition is likely to be motivated to protect versus those where the doors are a little more ajar."

And it sure helps to know that the competition is fallible.

There are six main CSI strategies: the onslaught, the contest, the guerrilla campaign, the feint, the gambit, and harvesting. Once a company has developed its product- and geographic-arena charts, it can plan specific strategies for each arena.

 

Competing under strategic interdependence: Strategies for gamesmanship
Strategy	Goal	Tactics
Onslaught	To mount a direct attack for market share in a target arena and force the competitor to retreat.	Instigator cuts price without regard to profits, increases market spend aggressively and upsets existing distribution patterns.
Contest	To use a narrowly focused and less costly attack strategy to grab market share.	Instigator focuses on highly attractive niche area in which competitor has less clout. Then attacks in a way that the competitor finds hard to match.
Guerrilla campaign	To drive a wedge into the target market and exploit the smaller segments.	Instigator focuses on underserved segments of highly-attractive arenas where competitor has clout but reactiveness is low.
Feint	To gain market share in target arena by diverting the competitor's attention and resources..	Instigator forces competitor to divert resources from target area, by attacking a different focal area.
Gambit	To sacrifice a non-essential focal arena in order to gain market share in a target arena.	Instigator lures the competition to divert resources into non-essential arena by making a show of vacating it. Instigator then increases resources to gain market share in target arena.
Harvesting	To extract profits from an arena that is no longer attractive in the long-term.	Instigator and competitor combine moves "" for example, through cross-licensing arrangements "" to maximise profits for both.

Hypothetically, let's say that Wipro finds the business of European telecom companies attractive.

It also finds that a global arch-rival's propensity to protect that segment is high, but the latter's clout in that market isn't high.

Wipro then has two options. The company can either mount a "contest" by developing a breakthrough product or strategy for telecom companies.

Alternately, it can "feint" by seeming to attack a segment the rival deeply cares about "" European airlines, for example "" while it is actually wooing telecom clients. In gamesmanship, says McGrath, "you have to know where a competitor is strong, and design a strategy that allows you to use those strengths against the opponent."

To a degree, all companies employ gamesmanship intuitively. Wipro has certainly done a competent job of coping with global competition. The company keeps close tabs on major rivals through formal and informal mechanisms.

For instance, it has a Competitive Intelligence Help Desk, where data pours in from all over the world on what has helped Wipro bag clients. Paranjpe has a one-hour conference with his direct reports in Boston, Dallas, the UK, Japan, and Europe every week, during which his people share recent experiences. Roy makes a Quick Market Review call to his front-line staff every fortnight to "join the pieces of the jigsaw, and see the big picture."

However, the focus of all those information flows is to track Wipro's customers "" not rivals. Moreover, while Wipro may be collecting a lot of data on competitors, there seems to be little that is done to collate it and develop strategies that would count as gamesmanship. For example, when it comes to customers, Wipro is clear that feedback needs to be worked on: from data, to information, to knowledge, to wisdom.

When I asked Roy how important it is to have "knowledge" on rivals, he admitted it was critical. But he also said that when it came to the competition, "we are either at the information or knowledge level. It would be wrong to say that we are, across the board, at the knowledge level."

Successful gamesmanship isn't about smart knowledge management, though. Top management needs to plan attack and counter-attack moves, and then communicate them down the line, so that each piece on the board knows its role.

For instance, the company's incentive structure has to be aligned to the strategy. If the Japan country head is told to merely hold the firm's position while the Europe business head is told to be aggressive in a certain business area, both still need to be rewarded equitably for sticking to the game-plan.

According to McGrath, the most important skill in gamesmanship "is the ability to look at the world, not through your own eyes but through the eyes of your opponent. The best companies make time for that." Not every global company need practice gamesmanship, but emerging globalisers certainly need to give it thought.

After all, the games Indian companies play will decide whether they can take on the world.