The connection between F. W. Lanchester, who designed one of the first
British cars, Admiral Lord Nelson, the famous British hero, and a modern
Japanese marketing consultant is not one that immediately springs to mind.
And yet to the Japanese business community this eccentric link is becoming
increasingly familiar as managers learn of the military strategy used by
all three to great effect.
Dr. Nobuo Taoka
The consultant in question is Nobuo Taoka, who, since its foundation in
1976 has turned his firm, Lanchester Systems KK, into one of Japan's leading
marketing consultancies. His company bases its advice entirely on Lanchester
strategy, a strategy of military confrontation developed by the British
engineer and mathematician F. W. Lanchester (1868 - 1946) which adds considerable
weight and precision to the well-known American principles of market segmentation
and "niche strategy." Since its emergence from the shadows of
history in the early 1970s, Lanchester strategy has reinforced the Japanese
tendency to adopt a "laser beam" approach to market penetration
into one precise segment after another, until the onslaught becomes a veritable
"cascade" into the market as a whole.
Discovery of Lanchester's laws
It became quite by chance that Taoka came across a cursory reference to
Lanchester Strategy 30 years ago in a Japanese government document. He was
intrigued to discover that it had been used by the U.S. Navy against the
Japanese during the war in the Pacific. Along with a colleague, Taikohboh
Onoda, he began seriously to research Lanchester's military principles and
to develop ways of applying those principles to business competition.
Over the past 13 years, Taoka's ideas have become well known and widely
accepted in Japan. Tokyo bookshops have shelves full of his works, including
such titles as "Lanchester: An Introduction to the Strategy (published
in 1972), and more recently, "Practical Applications of the Lanchester
Strategy" (1982). Total sales of his books have reached over 1.5 million
copies and on top of that, over 1,000 copies of his video tape have also
been sold.
Taoka's following among the Japanese business community is such that two
lanchester Clubs have been founded, in Tokyo and Osaka, at which practical
applications of Lanchester Strategy are regularly discussed by senior executives
from large organizations such as Matsushita, Sumitomo and Kanebo cosmetics,
as well as from smaller enterprises.
F. W. Lanchester
A latterday Leonardo da Vinci, F. W. Lanchester was responsible for far
more than the construction in 1985 of the first in a line of pioneering
British cars. He filed more than 400 patents and wrote on such diverse subjects
as music, poetry and aerodynamics. It was during the great war that he published
his work on the theory of conflict. [Aircraft in Warfare, the Dawn of the
Fourth Arm - ed]
He developed two laws to govern military combat. The first applies to ancient
warfare where the battle is a series of man-to-man duels. In this case the
fighting strength of an army is proportional to the efficiency of its weapons
times the number of troops. The second law applies to modern warfare. Here,
the fighting strength of an army is proportional to the efficiency of its
weapons times the square number of troops. The square function arises because
in a modern battlefield concentration of fire power is possible and the
larger army is able to wipe out the smaller army at a much greater rate
than might casually be supposed.
Based on Lanchester's work, Taoka has built a quantitative framework for
the analysis and formulation of market share strategy. It gives particular
strategic significance to certain market share targets, to the degree of
market share differences between competitors, and to the overall market
share "patterns" that these create.
Concentration and the Battle of Trafalgar (1805)
The over-riding message from Lanchester's second law is the importance of
concentration. Although Lanchester was the first to show the effects mathematically,
the importance of concentration has been known to military and naval strategists
for some time. For example, Admiral Lord Nelson , had fewer ships at Trafalgar
than the combined French and Spanish fleets. If he did battle in the conventional
manner, he would be defeated. He therefore planned to sail his ships through
the middle of the enemy fleet. Having boldly cut the enemy in half, he then
planned to concentrate his ships on encircling and attacking one half of
the opposing fleet. With the square law in his favour, he would achieve
such a crushing victory over one half of the enemy fleet that he would still
have enough ships to take on the second half with some hope of success.
Concentration strategy in business today
For today's business strategist, intent on entering a new market, the
concept of concentration by splitting the enemy force, and attacking one
part at a time, is one of the most important to be derived from Lanchester
Strategy. Another is the principle of aiming for dominance, which follows
from the extra stability gained from a high market share. The third is the
principle of target separation. Strategy must distinguish between smaller
competitors which can be attacked, and larger competitors against which
the company must protect itself.
Combine the principles of domination and concentration, it becomes eminently
clear that market penetration depends on building a series of strong positions
in different segments of the market. Whenever possible, Taoka recommends
dividing the market geographically, as well as by product and consumer category.
The Canon - Xerox copier battle
This was part of Canon's strategy against Rank Xerox in the UK in the
late 197s and early 1980s. First its resources were concentrated on Scotland.
Having captured about 40 percent of the market, Canon began to attack selected
and tightly defined regions in England, before making a determined push
in London with a numerically larger salesforce.
Having penetrated the market by achieving dominant positions in a series
of geographic markets the newcomer is then ready to invest more heavily
in product development in order to broaden its range of product markets
and consolidate its position in the marketplace. Following these strategies
- they have national coverage and distribution, and concentrate particularly
hard on product development and differentiation.
The Pedigree Petfoods - Unilever battle
Thus Pedigree Petfoods has used its comprehensive product range and regular
launch of new products to hinder attempts by Unilever which possesses low-cost
raw materials and considerable marketing strengths, to penetrate the British
petfoods market.
These strategies can be further refined by considering the most appropriate
course of action for companies, with various rankings within different market
share patterns. Take the strategy for market leaders. At one end of the
scale - a "premium"
market where it has over 42 percent and fulfils other conditions - it can
rely mainly on innovation and product development to defend its various
market segments. But at the other extreme, where no company has over 26
percent of the market, the market leader must take all sorts of action to
achieve a more stable position. This may include trying to acquire competitors
and taking advantage of newly emerging parts of the market to make a pre-emptive
strike.
The strategies for companies ranked number two, three or four are roughly
similar to each other in all of the market share patterns. Like newcomers,
they must look for segments of the market which they can dominate, and which
wherever possible are insulated from attack of stronger companies. This
may involve attacking other "followers" in order to build a stronger
position for the final attack on the market leader.
Of course, business strategy is more than just market share atrategy. But
given the emphasis which the Japanese place on this aspect of corporate
strategy it is unfortunate that lanchester's followers in the West are largely
confined to the narrow worlds of mathematics and operations research.
This article originally appeared in the Financial Times in 1986 and is reproduced
with permission of the Financial Times of London
England
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