judo

Forget karate, kung fu and kick-boxing. In the first four Ultimate Fighting Championships, the top spot went to practitioners of judo—the “gentle way.” Welterweight Royce Gracie (whose Brazilian jiu-jitsu is a judo variant) out-thought, out-grappled and out-leveraged his rivals—some of them 50 pounds heavier than he—to win title after title. In 1994, in a four-round championship bout, it took Gracie less than five minutes total to defeat his final three opponents.

In combat, judokas use motion, balance and leverage to overcome opponents’ superior size and weight. In business, you can do the same. Achieving success despite limited resources is the essence of entrepreneurship. By understanding the principles of judo, you can learn to spot your competitors’ weak points and use their strengths against them.

Focusing on one market lets you dive deep, focus your marketing and talk to your customers in a consistent way.

Ajay Agrawal is a business professor at the University of Toronto’s Rotman School of Management and co-founder of The Next 36, a rigorous training program designed to turn overachieving undergrads into high-impact entrepreneurs. At the 2013 cohort’s final classroom session, Agrawal demonstrated two key tactics of the “judo strategy”: using your opponents’ brand equity against them, and exploiting their market clout to make it too costly for them to declare war.

Take Red Bull. (Please.) The iconic energy drink was a penniless import from Austria when it entered the U.S. in 1997. Coke or Pepsi could have KO-ed the upstart had either foreseen the spectacular growth of the energy-drink category. But Red Bull made it tough for them by promoting itself to the Anti-Pepsi Generation. Instead of depicting clean-cut kids sipping cola on a beach in its ads, Red Bull embraced extreme sports such as cliff-diving and street luge. The company revelled in its outlaw image and gladly let people believe that its ingredients included the most private parts of a bull. Although Coke launched its own energy drink, it was a half-hearted effort; Red Bull’s marketers knew the all-American brand would struggle in this unruly market. Today, Red Bull’s U.S. sales are estimated at US$3.4 billion.

To demonstrate how a smaller business used a giant’s market clout against it, Agrawal looked closer to home: Wind Mobile versus Rogers Communications. An aggressive mobile upstart, Wind faced a tricky question. What prices would be low enough to attract customers but high enough to keep established telcos from killing it in a price war? Wind had one point of leverage: it was targeting only select cities. An incumbent wanting to match Wind’s prices would have to offer the same deal Canada-wide—turning its huge footprint into a liability. “Rogers was reluctant to lower its price because it had too much to lose,” explains Agrawal. According to the judo strategy, Wind simply had to find the price point that would enable the telcos to retain just enough customers to keep profitability higher than if they launched a price war. So long as Wind stayed just shy of that “line of indifference,” says Agrawal, it could keep growing stealthily.

There are many additional examples in Judo Strategy by Harvard profs David B. Yoffie and Mary Kwak. Sadly, the book came out in 2001, amid a tech crash that undermined many of its examples (Palm, Novell). Still, the authors offer many practical tips, such as:

Don’t invite attack: “Judo strategy counsels smaller challengers to appear as inoffensive as possible so that stronger players will either fail to notice them or choose to leave them alone,” they write.

Follow through fast: Once you gain a foothold in a market, pour resources into securing your position. Partnering with organizations drawn to your success could provide the critical mass you need.

Avoid tit-for-tat: Resist “escalatory moves” that could drag you into a war of attrition, the authors advise. When fledgling online auctioneer eBay faced incursions from Yahoo and Amazon, many eBay executives recommended cutting prices and increasing spending. But then-CEO Meg Whitman held her ground, keeping eBay focused on low-cost marketing to hobbyists and collectors. By refusing to get into a firefight, eBay preserved its margins, and the interlopers eventually retreated.

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One Canadian upstart practicing judo is Toronto-based Kira Talent, a company founded last year by The Next 36 students. Kira developed a video-auditioning system that enables companies to evaluate job candidates based on their recorded responses, which in turn helps the clients reduce recruiting costs. CEO Emilie Cushman says Kira started out tackling a range of markets, from retail to professional services, but soon realized “we were going after way too much.” With Utah-based rival HireVue dominating the corporate space, Kira opted to focus on academic institutions that have to interview hundreds of program candidates.

Today, Kira sells to most of Canada’s top business schools, as well as elite universities in the U.S. and Australia. “Focusing on one market lets you dive deep, focus your marketing and talk to your customers in a consistent way,” says Cushman. Kira is leveraging its limited resources and deferring face-to-face competition until it’s ready to meet industry leaders in the ring.

In the martial arts, the best fight is the one you put off.

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