You may think you know what your competitors are doing, but what do the implied meanings indicate about their competitive behavior? Here’s how a little mental jujitsu and criminal profiling can help you see the motivations behind their moves.


My first martial-arts instructor was a short, fat accountant who could toss a charging 250-pound person across the room without breaking a sweat or a spreadsheet. Size didn’t matter to him. He knew that throwing a person is all about leverage. The harder you came at my instructor; the harder you’d hit the ground. I love that about martial arts.

If you want to toss a person charging you, you’ve got to look beyond the overt person-charging-you information. Subtle cues or inconsistencies, invisible to the untrained eye, tell you the deeper story of your opponent’s trajectory. The leverage you need to toss the person is in the deeper story.

The same deeper story applies to your opponents in the marketplace. Your competitors provide you with a constant stream of messages and information: advertisements, quarterly statements, analyst reports, and much more. You can learn a great deal about your competitors by looking beyond the overt meanings (charging) to implied meanings (subtle or unintended cues).

Read More →

An important part of the skill of competing is the art of betting on future trends before they are obvious to everyone. Every company attempts to do so. Startups in particular are all about “seeing” things around the corner, and anticipating changing preferences. I call it an art because trying to apply the principles behind exact sciences like physics to predicting social behavior and the diffusion of new trends is shamanism. I have nothing against shamans as a profession, though. Some of my best friends are shamans. Some of the brightest scientists can be shamans. A case in point is Didier Sornette, a physicist who claims to have discovered a method to predict the exact time market bubbles will pop  based on the physical principles behind a spiraling coin. Unfortunately, he failed to predict the 2008 crash. Here is my prediction: he will fail in predicting the next one as well. And I did not even have to apply any fractal or quantum or other theories.

While trends cannot be verified by science before they are obvious, for me they are felt subcutaneously, as in goose bumps when something is not right. That’s what I felt when reading about Walmart going small. Walmart?

Read More → focuses on competing as a skill. Advantage in competing is the ultimate com­petitive advantage.

How do we know when someone is skillful at competing? Reflexively, unconsciously, and seem­ingly inevitably we turn to the person’s track record. A person with a string of competitive suc­cesses is more likely to be competitively skillful, we figure, than someone with a string of com­petitive failures.

The thing is, it’s hard to tell the difference between luck and skill. We all know luck plays a part. (Bad luck, anyway: we fail when we’re unlucky. Success always comes from skill, we assure our­selves.) That’s why we hesitate to call a person a genius after one good move or a dud after one bad move. But with a reasonably long track record it’s easy to fall into the track-record fallacy, the business equivalent of the prosecutor’s fallacy.

Stop! Do not let your brain recoil in fear of probabilities and actual logic! This is your chance to improve your skill at competing relative to the weaker souls who rely on lists of five magic se­crets of success.

Read More →

Businesspeople often cast critical thinking as a due-diligence gauntlet. Where did that number come from. How confident are you. What does [fill in author, authority, or celebrity] say.

Those aren’t bad questions; they’re just not good enough. They’re necessary but not sufficient. Saying you must be right because you survived the gauntlet is like saying you must be movie-star gorgeous because you floss your teeth.

Think of it this way. No strategy or business plan ever gets adopted without passing the gaunt­let, yet strategies and plans fail. We know that because companies go bankrupt (a severe form of failure), and it’s unlikely that bankruptcy was their goal.

Read More →

It’s easy to tell if a business was profitable after the fact. Unfortunately, we have to place our investment bets before the fact.

As my colleague Ben Gilad has described (“Why Venture Capitalists Fail”), even highly motivated professionals have difficulty consistently placing bets that win. John Bogle founded The Vanguard Group (currently managing $2 trillion) in 1974 on the idea that actively managed mutual funds will not beat a well-run index fund over time.

But regardless of difficulty, we still must place bets. We bet not only when we buy a share of stock. We bet also when we decide where to work and what business to start.

Read More →

This is a sad piece. I typically try to keep emotions out of strategy but I feel bad for this company. It arranged a marriage between a new business and an old one, and it ran against what I’d call irreconcilable differences.

Companies in declining industries can get desperate, especially when they’re accustomed to market-leader status. They get beaten down by Wall Street, shareholders, and columnists. Sometimes they bolt way out of their comfort zone instead of trying to tune up the old business, scale down expectations, and ride peacefully into the horizon, making a lot of money in the process for shareholders.

In itself, venturing boldly into a new area when the old one is in decline is entrepreneurial vision at its best. Unless, of course, the new business is so far from the old business’ comfort zone — i.e., expertise, technology, infrastructure, etc. — that it’s like trying to cross a chasm in two steps. This is the case of Barnes & Noble. As USA Today reports, Barnes and Noble’s CEO, William Lynch, the one who led B&N into the e-commerce age with Nook, resigned on July 8, 2013. The reason is that the e-reader market is highly competitive (red, bloody ocean for sure) and Nook has been losing its shirt.

Read More →

Meredith Whitney predicted the 2007 financial crisis. At the time, economists and Wall Street analysts attacked her prediction. In 2010, she predicted a wave of municipal-bond defaults. As USA Today reports, the director of the National League of Cities called her prediction a “stunning lack of understanding.” Three cities in California declared bankruptcy within three weeks in 2013, including Stockton, the largest in US history. Those bankruptcies still did not faze the critics who called them isolated events.

Read More →