Monday Mornings with Madison

Using Chess Strategy in Business, Part 1

Word Count:  1,804 

Estimated Read Time:  7  min.

Chess is one of the fairest games there is.  In chess, opponents start with an identical force.   The entire playing field of a chess game is out in the open.  A player can see every move an opponent makes as soon as he makes it.  And, in chess, no dice are used so it is never a game of “chance” and there is no luck of the draw.  Moreover, there is no referee involved in chess that might “throw” a game or be partial to one side over the other.

The business world is perhaps not as fair, balanced and chivalrous as a game of chess.  In business, competitors seldom start with identical workforces, and a company can easily hire a better force.   In business, a lot of deal-making is done behind-the-scenes and a company might not learn about a competitor’s initiatives until much later.  And, in business, a company can innovate a product or service – or how it delivers that product or service — in ways that totally change the playing field for competitors.  In fact, a company can innovate to the point of actually changing the game.   Think of how Uber has revolutionized short-distance transportation and how Airbnb is changing the hospitality industry.

So, in many ways, business and chess are different.  That said, chess is all about strategy and tactics. The best chess players are those who have the ability to stay ahead of their opponents and strategize goals that can be achieved as quickly as possible.  In that regard, running a company is a lot like a game of chess.  To stay ahead of the competition, companies must think strategically and be quick to implement.  That’s where chess strategy can give business leaders guidance.   While many games use methods that can be incorporated into how business decisions are made, chess requires strategic decision-making, connections, timing, tactics and evaluation.

The Way of Strategy

There is a concept in Japanese culture dating back many centuries that says “From One Thing, Know Ten Thousand”.  It means that key strategies are transferrable and have a wider application.  Achieving mastery in one discipline can give the person the tools to transfer those skills to all other areas of life.  The strategies used in chess – at deeper levels – can provide a blueprint for strategy, decision and action in business and in life.  According to Danielle Rice, a Senior Managing Consultant at IBM’s Healthcare Practice and a chess player, “Chess can have a strong influence on business strategy and work life.  Chess develops one’s discipline for critical thinking, analyzing ones plans targeted to results, and most importantly it teaches patience and the need to learn how to handle (and come back from) defeats gracefully.”

Business owners who want to take their company to the next level would do well to at least learn the key strategies used by the greatest chess masters and understand how they can be applied to business.

Seven Strategic Principles of Chess

1. Take the Initiative

In chess, white always plays first, and therefore starts with a small advantage.  However, frequently the first player to mount a coordinated strategy often gains the ultimate advantage.  A strong initiative holds the other player back, upsets his timing and rhythm, and puts the one who took the lead in control.  As the saying goes, the best defense is a good offense.

In business, this means that a company must take the initiative to innovate, try new technologies, revolutionize operations, or dare to be different in the approach to sales and marketing.  Taking the initiative can mean making an effort to expand into new markets or an effort to go after clients that might be considered “un-gettable” or simply change how “the game is played.”  And it means that companies must move quickly to implement initiatives.  As the saying goes, the early bird gets the worm.

Case in point.  Amazon initially partnered with Borders Books to assist them with their online book sales.  But Amazon understood the ecommerce world better.  Soon, they were able to go beyond just facilitating Borders’ online sales.  Amazon captured online market share.  Borders was unable to adapt to the ecommerce world and eventually went out of business.   Amazon then went on to transform the book publishing industry, allowing authors to self-publish and sell to readers directly.  This was a game-changer for the book publishing industry.  Amazon started with a small advantage.  They understood online sales and could see how technology could and would change the book selling and book publishing industries.  They pushed their initiatives forward, leading the way in innovation.  Now Amazon is doing the same thing in the retail sector.  As in chess, Amazon was one of the first companies to pursue new business initiatives and gained the ultimate advantage.

2. Follow Through to the Finish

All things come to an end.  Bridges collapse.  Homes deteriorate.  Bodies weaken and fail.  Even the biggest companies can lose initiative and market share if they lose focus.  The same thing happens in chess when a player’s rhythm becomes deranged.  In chess, when a player starts to make bad moves that cost him part of his force, the best chess players continue to pursue without ceasing to the finish.  In a game of chess, the goal is to win the game so a player cannot stop taking the initiative until the game is over.

To apply this chess strategy to business means a business leader must stay focused to ensure that any initiatives pursued and market share captured is not lost later.  The business must not let up.  Per the adage of big game hunters in Africa, “It is the dead lion that gets up and eats you.”  That is meant to be a reminder that, in chess and in business, one must never let the guard down even when things are going well.  A business must always be striving to do better.  Innovate.  Evolve.  Grow.  Expand.

3.  Impenetrable Defense

Floyd Patterson, the youngest man to win the heavyweight championship in boxing in 1956, once said that “the greatest pleasure of boxing is making the other guy miss.”  This strategy is important not just in boxing.  It is also important in martial arts.  The best martial artists are also adept at deflecting the power of lethal blows back upon an opponent.  And, this strategy is equally important in chess.   For the best chess masters, a solid defense provides the underpinning of every successful proactive strategy.  The best chess masters wriggle out of difficult plays while appearing cool and confident even when the game is not going well.  Their technique is to blunt the other player’s efforts and protect until it is safe to take proactive steps again.

In business, few business leaders like the idea of taking a defensive position.  However, every company at some point will be forced to do so.  And while a company must be good at being proactive (taking the initiative and following through), it must also be able to protect itself.  Being behind a competitor in terms of feature development, scrambling to do work for a large client for razor thin margins, or agreeing to big salaries or bonuses just to keep from losing a valuable salesperson or leader– whatever the situation, it may not feel good when a company is boxed in.  When someone else is dictating strategy, tactics, resource allocation or agenda, it can be frustrating even if it is necessary.

Indeed, the road to long-term success is seldom a straight line for companies.  Businesses make big bets on strategies — only to discover that the playing field has shifted once again.  It’s easy to become flustered by setbacks.  But successful leaders know how to gain control of situations that are out of their control, retool themselves, and rebound quickly from the setback.  In playing defense, the key is to ensure that a business protects the company long-term.

Case in point.  Ciena Corp was first to market with what is now a critical technology: dense wave division multiplexing (DWDM). Carriers such as Sprint and WorldCom quickly became converts to the technology, which essentially increases bandwidth-transmission capacity across fiber-optic cables. In 1997, Ciena enjoyed the best-performing IPO of the year, more than doubling its share price.  Ciena’s leadership then snared a merger deal with Tellabs, an old-line telecommunications carrier in the Chicago area. They spent more than four months sorting out details and cultural matches with Tellabs.  But literally minutes before the two companies’ shareholders were scheduled to vote on the merger, AT&T (without testing the products) decided not to close an expected contract to use Ciena’s more-advanced DWDM offerings.  Ciena’s stock price collapsed, from more than $55 to barely more than $31.

The company’s business was fine: It was on track to make its revenue estimates, even without the AT&T contract. Regardless, three weeks later, Tellabs called Ciena to say that the merger was off. The stock price plunged again, down to $8 a share.  Ciena had done nothing wrong and its product was fine, and yet the company was floundering and the management and staff were upset.

Ciena could have retreated — cutting costs, scaling back their ambitions and losing key staff.  Instead, Ciena played defense and waited for the right opportunity to take the initiative again.  First, Ciena paused to regroup and then — harnessing their collective will – decided to build a full-scale optical network themselves.  As a result, not a single engineer left Ciena.  Then Ciena found the right opportunity to take the initiative again. It decided to acquire two companies that had the customers and the technology that Ciena needed in order to grow. By 1999, Ciena had acquired Lightera Networks and Omnia Communications to create a full-service optical network with an optical-switching system.  By falling back and playing defense, Ciena was able to recover and then go forward again.

Today, 20 years later, Ciena Corporation is still a global supplier of telecommunications networking equipment, software and services that support the delivery and transport of voice, video and data service.  When it faced the challenges of the Tech Bubble of 2001-2002, Ciena once again played defense.  To strengthen its position, Ciena diversified its product offerings with internal development as well as a series of acquisitions and strategic partnerships. By 2004 Ciena had purchased a total of 11 firms with an aggregate value of over $3.3 billion.  With a broader range of offerings, Ciena gave customers a wider range of solutions and was able to compete for new customers in additional segments and regions.  Ciena’s continued ability to fall back, regroup and then push forward allowed Ciena to succeed while many of its rivals, such as Nortel, Alcatel Lucent, and others struggled.

Next week, we will examine four additional chess strategies that are invaluable for business:  Timing, Distance, Surprise and Deception, and Yielding.  Don’t miss it.

Quote of the Week

“Strategy requires thought, tactics require observation.”
Max Euwe, PhD, Dutch Chess Grandmaster


© 2017, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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