judo strategy: 10 techniques for beating a stronger opponent

Business Strategy Review

The idea of judo economics, building onanalogies with the sport of judo, has beenaround for at least 20 years. But takingthese ideas further to judo strategy meansthat a framework of strategic principlescan be developed to help companies putstronger opponents on the mat.

Why do some companies succeed in defeating strongerrivals, while others fail? This is a question that allambitious businesses eventually face. Whether you’rea start-up taking on industry giants or a giant movinginto markets dominated by powerful incumbents, thebasic problem remains the same: how do you competewith opponents who have size, strength, and historyon their side?

The answer lies in a simple but powerful lesson:successful challengers use what we call “judo” strategyto prevent opponents from bringing their full strengthinto play. Judo strategists avoid forms of competition,such as head-to-head struggles, that naturally favourthe large and the strong. Instead, they rely on speed,agility, and creative thinking in crafting strategies thatmake it difficult for powerful rivals to compete.

This is not, of course, an entirely new idea. It has longbeen recognised, for example, that by first securing afoothold in an undefended market, a company can

improve its chances of ultimate success. (In fact, PeterDrucker has labelled this process “entrepreneurial judo”.)

We have taken this thinking on unequal competitionfurther.

First, rather than focus on a single insight, such as theimportance of niche picking, we provide anoverarching framework that ties together a wealth ofstrategic ideas.

Second, we offer numerous examples of howcompanies have put these ideas to work, based on ourinterviews with executives at a broad range ofcompanies – both old and new economy, large andsmall. (Unless otherwise noted, all quotations aredrawn from these interviews.)

Moreover, the judo strategy approach seemsparticularly timely today. In the go-go years of theInternet boom, tilting with giants was all the rage.But in the vast majority of cases, it was the upstarts,not the incumbents, who found themselves facingdefeat. Does this mean that competing with giants isa doomed enterprise? No, but it surely means that would-be challengers must find smarter ways to compete.

What is judo strategy?Judo strategy is an approach to competition thatemphasises skill, rather than size or strength. Indeveloping this framework, we were inspired by thework of two economists, Judith Gelman and Steven

Judo Strategy: 10 Techniquesfor Beating a Stronger OpponentDavid B Yoffie and Mary Kwak

Business Strategy Review, 2002, Volume 13 Issue 1, pp 20-30

© London Business School

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Salop, who coined the term “judo economics” todescribe a strategy that allows a company to use alarger opponent’s size to its advantage.

In their model, a challenger must decide howaggressively to enter a market dominated by anincumbent. Based on some simple assumptions (seebox), Gelman and Salop show that if a challenger triesto capture the entire market, the incumbent will fightback – and probably win. However, the challengercan induce the incumbent to accommodate his entryby making a credible commitment to target only asmall subset of the market. This approach worksbecause the incumbent is better off ceding a fractionof the market than cutting prices across its entirecustomer base.

The central idea behind this model – turning anopponent’s strength into a disadvantage – hasenormous appeal. But judo economics also hasimportant limitations. For example, it’s very difficultto implement. It’s one thing to say that you won’tthreaten bigger competitors. It’s quite another toconvince them that you mean what you say. Moreover,judo economics looks rather less promising once theassumptions behind the original model, such as theprohibition on price discrimination, are relaxed.

But perhaps the most important limitation of judoeconomics is that it requires an entrant to remain smallin order to survive. For most managers and companies,this is not enough. Consequently, judo strategy picksup where judo economics leaves off.

Judo strategy provides a set of tools that allow you todo more than just survive in the face of dauntingcompetition; they show you how to thrive and grow.Building on the insights of both judo economics andjudo, its original source, we argue that companies canwin against larger or stronger competitors bymastering three core principles: movement, balanceand leverage.

In judo, these principles work closely together. As oneexpert writes: “Through movement the opponent isled into an unbalanced position. Then he is throwneither by some form of leverage or by stopping orsweeping away some part of his body or limbs”.

Analogously, through movement managers can seizethe lead and make the most of their initial advantage.

By maintaining balance, they can successfully engagewith opponents and respond to rivals’ attacks. And,finally, by exploiting leverage, firms can transformtheir competitors’ strengths into strategic liabilities.By mastering these principles, any company can learnto compete more effectively with stronger opponents.

Below we discuss 10 core techniques that thecompanies we studied have used to put these ideas towork. However, it isimportant to note that this isby no means an exhaustiveaccount. Moreover, judostrategy is not a rigid formulato be followed systematically.Depending on the nature oftheir competition, firms willcombine and implement movement, balance andleverage in different ways.

Mastering movementJudo strategy, like judo, begins with movement. Injudo, movement serves both offensive and defensivegoals. Competitors use their quickness and agility tomove into a position of relative strength while evadingattack. Judo masters also use movement to take anopponent “out of his game”, in the words of Olympicmedallist Jimmy Pedro, by preventing him from

Judo economics — a simple example● Assume that an incumbent faces a single

challenger, who has no cost advantage; thatcustomers in this market choose theirsuppliers solely based on price; and that allcustomers must be charged the same price.

● At the beginning of the game, the incumbentsupplies 10 customers with widgets for $50.

● Scenario A: If the challenger offers to supplythe entire market at $40, the incumbent willbe forced to match the price or lose all of itssales. Eventually, the challenger will bedriven from the market.

● Scenario B: If the challenger only investsin enough capacity to sell to one customer,the incumbent will find it more profitableto accommodate his entry by sticking tothe original price and selling to theremaining nine.

Judo Strategy: 10 Techniques for Beating a Stronger Opponent 21

If a challengertries to capturethe entire market,the incumbentwill fight back –and probably win


employing his strongest techniques. Finally, once he’sgained an edge, a skilled judoka follows through quickly,moving seamlessly from attack to attack. In a sportwhere advantage can shift in a second, faltering whenit comes to the follow-through can be a fatal mistake.

The same tactics can help companies seize and keepthe lead away from powerful opponents. Judostrategists learn to implement the “puppy dog ploy”(a term we have borrowed from economists DrewFudenberg and Jean Tirole), steadily building marketmomentum while cultivating an unthreatening image

in order to avoidprovoking an attack. Theyalso move quickly to definethe competitive space,challenging competitorsto compete by new andunfamiliar rules. Andfinally, they follow

through fast, capitalising on their initial advantagewith a well-executed plan of continuous attack.

Technique no. 1: the “puppy dog ploy”In any kind of competition, your first goal is to stayin the game. So judo strategy counsels challengers tokeep a low profile and avoid head-to-head battles thatthey’re too weak to win. This advice goes against thegrain for many managers. In a crowded marketplace,it’s often said, you have to shout to be heard. Youhave to be aggressive to win customers and build value,and often that means attacking giants head-on.

There’s a kernel of truth in this argument. In order tomake a dent in the market, you do have to attractattention and win credibility among customers,partners and sometimes the media as well. This isparticularly true in business-to-business markets andin sectors where network effects are strong. But inmost cases, this goal can be accomplished withoutinitiating or provoking a full frontal attack.

For evidence, consider the rapid rise of Capital One,which became one of the biggest and most profitablecredit card issuers in the US in less than 10 years,thanks largely to its ability to remain “extremelyconfidential and very, very hush-hush”, as one formerexecutive explained. By forgoing productannouncements and other publicity in favour of directmarketing campaigns, Capital One made it nearlyimpossible for competitors to imitate its highly

targeted products. Consequently, the company facedlittle direct competition in many of the marketsegments it pioneered.

Palm Computing, by contrast, was unable to keep itsproducts under wraps. But by downplaying theirpotential, the company succeeded in temporarilyaverting a full-scale attack. Unlike earlier handheldplayers, such as Apple, Palm described its products ascompanions, not substitutes, for personal computers.In this way, the company hoped to keep competitorslike Microsoft and Compaq from identifying Palm asan urgent threat.

In addition, although the Palm operating system waseventually to serve as the launch pad for thousands ofapplications, Palm tiptoed around Microsoft’s greatestarea of sensitivity – the potential emergence ofcompeting platform players – by defining the Pilot notas a platform, but as a relatively inoffensive device.As a result, handheld computing remained low onMicrosoft’s list of priorities for at least two years afterthe Pilot’s debut, giving Palm the opportunity to builda massive installed base.

For a final, cautionary example, we turn to Netscape,which rejected the puppy dog ploy in favour of“mooning the giant”, in one senior executive’s words.Netscape drew tremendous attention by posing as agiant-killer early in the game – labeling Microsoft “theDeath Star” and predicting that the web would makeWindows obsolete. This aggressive positioning helpedNetscape in the battle for publicity and, for a while,the start-up’s fortunes soared. Over the longer run,however, the danger of mooning the giant becameclear. The company’s bravado helped push the Internetto the top of Bill Gates’ list of priorities and secureNetscape’s position as enemy number-one.

Technique no. 2: define the competitive spaceWhile the puppy dog ploy is largely about defence,with this next technique, offence comes into play.Here’s where you seize the initiative by defining acompetitive space where you can take the lead. Mostchampions rise to the top by learning to excel at a fewkey skills – shoulder throws, for example, or cuttingcosts. Competing with a stronger player at what hedoes best is a losing game. But every champion hasareas where he’s weak, often precisely because he’sinvested so heavily in his core strengths. Take advantageof these weak points to define a game you can win.

22 David B Yoffie and Mary Kwak

Judo strategy counselschallengers to keep alow profile and avoidhead-to-head battlesthat they’re too weakto win

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Intuit chose usability as its battlefield in implementingthis technique. When it entered the personal financesoftware market in the early 1980s, the seven-personstart-up found that the usual road to victory lay inpacking more and more complicated features intoyour products with every release. This was a contestthat only the resource-rich could win. But byredefining customer expectations, Intuit managed torise to the top.

Intuit didn’t try to out-feature the competition; it didn’teven try to match most of the features its rivals alreadyhad. Instead, the company picked a short list offunctions that consumers used, such as writing chequesand keeping a cheque register and focused on makingthose things quick and easy to do. Customers flockedto purchase Quicken while the previous market leadersremained locked in the “more is better” mindset andIntuit vaulted into first place.

In a very different market, Juniper Networks alsofound the key to competing successfully with CiscoSystems in proactively defining the competitive space.Previous challengers had attacked Cisco on its hometurf, selling “the same application to the samecustomers” – multi-protocol routers to enterprisecustomers – as Juniper CEO Scott Kriens explained.

Juniper, by contrast, forced Cisco to compete on farless hospitable terrain. The networking start-uptargeted the top of the market, where Cisco was relativelyweak. Moreover, Juniper broke with Cisco’s traditionalproduct architecture in order to meet the performanceneeds of customers like AT&T. Rather than rely onsoftware to drive its routers, Juniper focused on addingintelligence to the underlying chips. This strategyshifted the battleground from software to silicon,making it even harder for Cisco to match itschallenger’s moves and opening the way for Juniperto capture nearly 40 per cent of the high-end routermarket in less than two-and-a-half years.

Technique no. 3: follow-through fastBy combining the first two movement techniques, youcreate a window of opportunity. Next, you need touse this opening to strengthen your position throughcontinuous attack. One day soon – and these days,that’s sooner than ever – your competitors will seethrough the puppy dog ploy, rise to the challenges ofa new competitive space and seek to bring theadvantages of superior size and strength into play. By

following-through fast, you can postpone this day ofreckoning and make the most of your early lead.

Palm Computing in many ways exemplifies thisapproach. In order to stay ahead of Microsoft and itsallies, Palm turned itself into a moving target, bringingnew product generations to market at least once ayear. Three key practices helped the company maintainthis pace.

First, unlike many high-tech start-ups, Palm avoidedrocket science and lengthy wish lists that could delaya launch by months or evenyears. The company alsoincluded manufacturingmanagers in the designprocess from the verybeginning in order to helpkeep its engineers’ feet onthe ground. And Palm reliedheavily on outsourcing fornon-core tasks, includingelectrical engineering,mechanical engineering andindustrial design, and manufacturing rather than spendscarce time and resources developing these capabilitiesin-house.

While Palm’s engineering teams streamlined thedevelopment process for speed, the company’smarketers focused on reaching critical mass bystarting with low prices ($300 as opposed to $500for a typical Microsoft-based device) and loweringthem every year.

Palm also reached out quietly to developers, who couldfurther the company’s momentum by creatingcomplementary applications. As early as 1996, Palmtook the unusual step of publishing the source codefor its basic applications in order to make it easier fordevelopers to create new software. These decisionshelped push Palm toward a market share of nearly 80per cent in less than three years.

But what is perhaps most impressive about Palm’sfollow-through is the company’s ability to speed aheadwithout losing its balance. Palm constantly facedtemptations to extend its brand. “We had peopleknocking at our door to license this bit or that bit forthis thing or the other thing, whether it was for set-top boxes or big-screen phones,” CEO Donna


One day soon yourcompetitors will seethrough the puppydog ploy, rise to thechallenges of a newcompetitive spaceand seek to bringthe advantages ofsuperior size andstrength into play


Dubinsky later recalled. But in most cases, Palm turnedits suitors down.

The company’s management realised that even as salesexploded, Palm needed to focus its resources on justone goal: building and selling the best handheld devicein the world.

Skilled judo strategists like Dubinsky understand thatspeed is a means, not an end. While moving quickly,they remain wary of becoming overextended andcreating an opening for the competition. Equallyimportant, they realise that speed should never becomean obsession to the point where it excludes othercritical concerns, such as product quality, customersatisfaction and long-run profitability – a lesson thatmany humbled new-economy firms would have donewell to learn.

Mastering balanceMovement can help you avoid head-to-head battleswith bigger, stronger opponents. Eventually, however,you’ll have to meet the competition. In judo strategy,as in judo, you have to learn to engage with opponentsin order to win. This is where balance comes into play.

At the beginning of a judo match, each player battlesto secure a grip on the other’s collar or sleeve with theaim of pushing or pulling his or her opponent into aweakened or unbalanced position. Meanwhile, therecipient of this treatment must follow a simple but

counterintuitive rule.Rather than resist, heshould give way to hisopponent’s momentum,pushing when pulled andpulling when pushed.Rather than opposestrength to strength, judopractitioners learn to

conserve their resources and maintain their balanceby first giving way. Then they use their opponents’momentum to help bring them down.

A similar set of techniques can help companies keepthe upper hand in encounters with more powerfulcompetitors. By gripping their opponents, skilled judostrategists maximise their influence over the futurecourse of competition, with the ultimate aim ofaverting an attack. Should this prove impossible,they can minimise the impact of an opponent’s blows

by avoiding tit-for-tat. Pushing when pulled takes themone step further by re-channelling an opponent’smomentum and turning it against him. And finally, bymastering ukemi, judo strategists can remain in controlof their future, even in the face of temporary defeat.

Technique no. 4: grip your opponentBy gripping an opponent early, you may succeed inpre-empting competition: securing victory, in essence,by making it unnecessary to fight. You can also buildrelationships with current or future rivals that limittheir room for manoeuvre or allow you to benefit attheir expense. Both moves will undercut their futureability to attack.

There are many ways to grip another player. If youwant to avoid future combat, give potentialcompetitors a stake in your success throughpartnerships, joint ventures or equity deals.Alternatively, if you want to limit your rivals’ optionsand reduce their incentives to develop their owncapabilities, offer your services or products instead.Several Japanese consumer electronics companies tookthis route in the 1960s and 1970s, gripping their largerUS competitors by producing low-end products thatwere sold under their rivals’ brands. In many cases,these tactics will involve what modern strategy jargoncalls “co-opetition”: competing and co-operating withother companies at the same time. But keep in mindthat the true goal of gripping isn’t to make all sidesbetter off; it’s to defend and strengthen yourcompetitive position.

RealNetworks, the leader in streaming media software,implemented gripping early in its history throughdistribution partnerships that fed it customers at itspotential competitors’ expense. By convincing Microsoftto bundle RealAudio with Internet Explorer, forexample, RealNetworks built a devoted installed basethat later became one of the obstacles facing Microsoftwhen it launched its own streaming media products.

While gripping strengthened Real’s position vis-à-visMicrosoft, it was unable to eliminate the threat ofattack. At eBay, however, the same technique had morelasting results. Beginning in the fall of 1997, eBayexecutives worked hard to head off the spectre ofcompetition with AOL by negotiating three successivedeals. By the spring of 1999, eBay had established afirm grip on AOL, which was left with little incentiveto enter its partner’s space. In return for payments of


Rather than opposestrength to strength,judo practitionerslearn to conserve theirresources and maintaintheir balance by firstgiving way

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$75m over four years, AOL agreed to make eBay theexclusive auction provider on all AOL propertiesaround the world, to co-brand eBay’s auctions underthe eBay@AOL name, and to sell ads for the co-branded site. In addition, AOL pledged not to enterthe auction market for two years.

EBay CEO Meg Whitman recognised that AOL couldstill decide to enter the auction market on its own.“You never can say never with AOL,” she points out.But by providing AOL with an important revenuestream with margins estimated at nearly 98 per cent,eBay was doing its utmost to ensure that AOL wouldremain on the sidelines of the game.

Technique no. 5: avoid tit-for-tatThrough gripping you can sometimes alter acompetitor’s incentives sufficiently to head off a battle.Often, however, despite your best efforts, a rivalcompany will eventually decide to attack. Once thishappens, keeping your balance is a challenge. Yourgut tells you to match every move. Your instinct is tostop your opponent from getting the upper hand. Butas a judo strategist, the last thing you want is to getlocked into a tit-for-tat struggle or a war of attrition,as tit-for-tat often becomes.

So study your opponent carefully before decidingwhich attacks to counter and how. “Go to school onyour competitors,” as Intuit founder Scott Cook likesto say. Figure out what works and what’s just amarketing flash in the pan. Separate the trulycompelling propositions from the chaff you shouldignore. Figure out the moves you can match withoutgetting dragged out of your depth, and craft counterattacks that play to your strength when you can’tafford to respond in kind.

Matching an opponent’s move makes sense in certainsituations: when you can match without provokingan escalatory response, for example, or in cases whereyou can easily neutralise your opponent’s advantageand recapture the lead (often a sign that the enemyhas strayed onto your home turf). But if matchingmeans getting dragged into a war of attrition or a puretrial of strength, then resist the temptation to fight tit-for-tat and strike back on your own terms instead.

This is a message that Novell would have done wellto heed. As late as 1992, Novell still held onto two-thirds of the market for network operating systems,

despite repeated attacks by Microsoft, a company fourtimes its size. But then CEO Ray Noorda made afateful mistake. Angered by Microsoft’s attacks on hiscore business, Noorda decided to respond in kind,taking the battle to his opponent’s home turf. Novellwent on an acquisition spree, buying AT&T’s UNIX,WordPerfect and Borland’s QuattroPro with the goalof storming the markets for operating systems andoffice productivity suites.

Five years later, the company was in shambles,undone by the unequal struggle and facing its firstloss in 14 years. It took a new CEO and a radical newstrategy toward the end of the decade to bring Novellback to life.

By contrast, eBay avoided Novell’s mistakes. Betweenthe fall of 1998 and the summer of 1999, the companywas forced into competition with three of the Internet’spowerhouses: Yahoo!, Amazon and Microsoft (inalliance with Excite). Nonetheless, the companymaintained its balance by avoiding tit-for-tat andmeeting the competition on its own terms.

After careful study of the market, eBay resisted thetemptation to reflexively match competitors’ moves,such as Yahoo’s decision to make its auctions free.Instead, the companyresponded with moves thatplayed to its strengths –stepping up grassrootsmarketing, for example,rather than tryingpointlessly to matchYahoo!’s marketing onthe web. This strategy helped eBay stay firmly in thelead without burning through mountains of cash. By early2000, eBay was doing more than 25 times as muchbusiness as Yahoo!Auctions, and its other competitorstrailed even further behind.

Technique no. 6: push when pulledGripping your opponent and avoiding tit-for-tat helpyou minimise the prospect or impact of a competitor’sattack. With push when pulled, you go one step furtherby using your opponent’s force or momentum to youradvantage. By incorporating a competitor’s products,services or technology into your attack, you can throwhim off-balance and confront him with a painfulchoice: whether to abandon his initial strategy or towatch it fail.


By incorporating acompetitor’s products,services or technologyinto your attack, youcan throw him off-balance


A classic example of this technique comes from thediaper business, which saw an upstart namedDrypers emerge in the 1980s. Drypers challengedmarket leader Procter & Gamble by offering abranded product at a lower price, giving consumersa choice between no-frills store brands andpremium-priced Pampers.

When Drypers entered the market in Texas, P&Gresponded with unusual vigour, bombarding the state

with coupons for $2 – morethan twice the usual 75 cents.Drypers could not afford toprint and distribute couponsall across the state. But CEODave Pitassi, who had justfinished reading a book onjudo, came up with a creativeresponse. Rather than try to

match P&G’s offensive, Drypers piggybacked on itsrival’s attack. The company launched a state-wideadvertising campaign to tell consumers that P&Gcoupons could be used on Drypers and sales shot up.In a matter of weeks, Drypers had added as much as15 points to its market share in some stores. Withintwo months, the company was running at full capacityand it was cash-positive for the first time. Thanks toPitassi’s inspired use of judo strategy, P&G’s attackhad seriously backfired. By harnessing its competitor’smomentum, Drypers had used P&G to underwrite itsown promotional campaign.

While Drypers fits the classic start-up profile – smalland scrappy – large companies can also push whenpulled to powerful effect. Wal-Mart used thistechnique against Kmart in the 1980s, as it battledto seize the discount-retailing crown. At the time,Wal-Mart’s average prices were slightly lower thanKmart’s but Kmart aggressively advertised weeklyspecials in order to pull customers into its stores.Wal-Mart was reluctant to match Kmart’sadvertising and promotional strategy because itsbusiness model relied on low costs and “EverydayLow Prices”.

So managers in several stores used judo strategy instead.They posted Kmart’s weekly circular at the front of theirstores and promised that Wal-Mart would match or beatany of the advertised deals. This move created a realdilemma for Kmart: just like P&G, the more it advertised,the more it drove customers to the competition.

Technique no. 7: practice ukemiIn judo, ukemi is the technique of falling safely andwith minimal loss of advantage in order to return moreeffectively to the fight. In other words, even intemporary or partial defeat, you should give in to youropponent’s momentum, rather than resist and risklosing control.

Ukemi is the first thing that new students of judolearn, and it is a critical discipline in judo strategyas well. No matter how skilled you are as astrategist, you are unlikely to win every skirmish. Butlosing a battle need not lead to defeat in the war. Bybeating a strategic retreat, you can conserve yourresources and regroup in better position for theconfrontations ahead.

Microsoft absorbed this lesson in the mid-1990s whenit decided to walk away from its efforts to establishthe Microsoft Network (MSN) as a proprietary onlineservice – a project that soaked up nearly $1bn incompany resources – and relaunched its service onthe web. A few years later, Charles Schwab took asimilar step by integrating eSchwab into its corediscount brokerage business, at a short-term cost of$125m in revenues.

Larger companies, of course, have both theorganisational resources and the deep pockets that areoften necessary to absorb a temporary loss. But whileharder to implement, ukemi can be even more criticalfor smaller firms facing determined opponents, as thehistory of Dublin-based Ryanair shows.

Cathal and Declan Ryan started Ryanair with asingle 44-seat turboprop plane in 1986. Thebrothers’ strategy was to build a beachhead byoffering better service and simplified pricing on theLondon-Dublin route. But this plan soon came toan end when British Airways and Aer Linguslaunched a full-scale price war, dropping fares by20 per cent. By 1991, facing mounting losses,Ryanair was on the verge of bankruptcy.

That’s when the company’s founders decided they hadto give up the struggle and find another strategy. Theydropped the effort to match BA and Aer Lingus onservice and made price the focus of their offering. In aHerculean effort, all unnecessary expenses wereeliminated, including in-flight food and pens forheadquarters staff.


Even in temporaryor partial defeat,you should give into your opponent’smomentum, ratherthan resist and risklosing control

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With its new cost and fare structure, Ryanair returnedto profitability in 1992 and remained there throughoutthe 1990s. After losing their balance in an initialbattle, the Ryan brothers had learned the samelesson as Bill Gates and Schwab: rather than fight alosing battle, it is better to fall of your own accordand rebuild momentum

Mastering leverageBy mastering movement, you improve your chancesof building a strong initial position and getting aheadof competitors before they respond. The techniquesof balance, in turn, allow you to engage bigger orstronger rivals without getting knocked down. In somecases, by making the most of these two principles, youcan build and consolidate an insurmountable lead. Inmost cases, however, you will need leverage to score awin. As an old judo master said: that one does not fallin a bout means that one is not beaten; it doesn’t meanthat you’ve won.

By avoiding a fall, you’ve hung on for another roundor another day – or another few seconds in an actualmatch. But in order to win, you need to take youropponent to the mat. And that’s where leverage comesinto play.

In judo, your opponent’s body becomes a lever in yourhands. In judo strategy, a competitor’s assets, partnersand rivals can all play a similar role. By leveragingyour opponent’s assets, you can transform acompetitor’s strengths into sources of weakness.Similarly, by leveraging your opponent’s partners, youcan turn an opponent’s allies into brakes on his abilityto respond. Finally, by leveraging your opponent’scompetitors, you can confront a rival with a doublechallenge: first deciding to co-operate with hiscompetitors and then convincing them to co-operatewith him.

Technique no. 8: leverage your opponent’s assetsIt may sound trite, but a company’s greatest assetscan often become its greatest liabilities. Whetherintangible, like brand names and intellectualproperty, or tangible, like property and plant,“assets collect risks around them in one form oranother”, as Michael Dell, Dell Computer’s chairmanand CEO has said. Anything that represents asignificant investment can become a barrier to change.And by exploiting these barriers, you can find theleverage you need to win.

In implementing this technique, your goal is to findmoves that shift your opponents’ assets to the otherside of the ledger, as Sega did by leveraging Nintendo’sinvestments in technology and marketing in the early1990s. At the beginning of the decade, Nintendodominated the US home video game market withan 80 per cent share to Sega’s seven per cent. Yetthree years later, the two companies were locked ina dead heat.

Sega owed much of its success to two deft judostrategy moves. In hardware, it leveraged Nintendo’snear-monopoly in eight-bit technology by launchingfaster, 16-bit machines. In software, it leveragedNintendo’s brand equity by targeting an older, hipperaudience with game titles containing generous dosesof sex and gore.

Both moves turned Nintendo’s investments intohostages: forcing the company to decide betweendestroying its own assets (bymatching Sega’s moves) andlosing share (by failing torespond). If Nintendo broughtout its own 16-bit machine, itwould accelerate thecannibalisation of its highlyprofitable eight-bit business.Similarly, by following Segainto the teen and adultmarket, Nintendo wouldundercut its image as atrustworthy, family-entertainment brand.

Faced with this dilemma, Nintendo froze. It tooktwo years to update its hardware and even longerto revamp its image by issuing unsanitised versionsof games like Mortal Kombat. In the meantime, Segaforged ahead, capturing 50 per cent of the marketby 1993.

Sega used leverage to give itself a short-term boost.Once Nintendo resigned itself to destroying its ownassets, Sega’s leverage lost its force. But in othercontexts, leverage can do more than impose a one-time hit. It can also make it difficult for an opponentto compete effectively, even after he’s made the decisionto match an attack. Delta and United found this to betrue, for example, when they tried to fight back againstSouthwest Airlines, which also used leverage tounderpin its attack.


Anything thatrepresents asignificantinvestment canbecome a barrierto change. And byexploiting thesebarriers, you canfind the leverageyou need to win


The Texas-based airline rose to prominence thanks toan interlocking set of policies – smaller airports, noconnecting flights, no assigned seating, no meals andan all-737 fleet – that made it possible to slash coststo the bone and keep fares 50 per cent to 60 per centbelow competitors’ rates. The major carriers mighttry to match Southwest’s fares on selected routes, butonly at the cost of cannibalising their own sales.

Moreover, even if theywere willing to make thissacrifice, Southwest’srivals were at a permanentdisadvantage in competinghead-to-head. They couldnever match Southwest’sprofitability if theycharged the same pricesdue to the cost ofmaintaining the assets –the big-city terminals,

complex reservations systems and mixed fleets – thathad originally underwritten their strength.

Technique no. 9: leverage your opponent’s partnersIn addition to investing in valuable assets, manypowerful competitors have built up networks ofsuppliers, distributors and “complementors” who area significant source of strength. But by exploitingdifferences among them, you can turn a rival’s partnersinto false friends. Using the old tactic of divide andconquer, sow dissension within the opposing camp.Set old allies at odds by creating situations where theirinterests are no longer aligned. You may have to lookcarefully but on close inspection even the most solid-looking bloc is likely to yield up a fissure you can exploit.

Back in the 1930s, Pepsi-Cola used this technique topose its first successful challenge to Coke. By offeringconsumers “12 full ounces” (in the words of the once-ubiquitous jingle) for the same price as a six-and-one-half ounce Coke, Pepsi turned Coca-Cola’s army offranchised bottlers – who had millions of dollarsinvested in six-and-one-half ounce bottles – into a forcethat helped significantly delay Coke’s response.

While Pepsi found leverage in its rival’s dependenceon its bottlers, Sony took advantage of itscompetitors’ efforts to dominate their partners, usinga divide-and-conquer strategy to seize the lead in homevideo games in the second half of the 1990s. WhenSony entered the market, Nintendo and Sega were

accustomed to keeping partners on a tight leash,charging steep royalties and allowing only a limitednumber of independent developers to produce gamesfor their machines.

In addition to allowing them to control game quality,this approach ensured that Nintendo and Sega wouldbe able to keep a healthy share of the games marketfor themselves.

However, this strategy also created an opening forSony to hold its competitors hostage to their ownsuccess. Rather than dictate to games developers, Sonygave them free rein, making PlayStation developmenttools widely available and cutting licensing fees. As aresult, by 1999 consumers could choose from nearly3,000 PlayStation titles, more than 10 times thenumber available for Nintendo 64, and Sony had soldmore than 50 million PlayStations, generating over abillion dollars in profit in a single year.

Technique no. 10: leverage your opponent’scompetitorsCompared to the first two leverage techniques, thisone sounds like child’s play. What could be easier andmore natural than allowing your competitor’scompetitors to wear him down? After all, as the oldsaying has it, “the enemy of my enemy is my friend”.But judo strategists don’t just sit back and let someoneelse do the job. By staying on the offensive you cancraft a strategy using an opponent’s competitors thathe’ll be hard-pressed to match.

There are many ways to leverage an opponent’scompetitors. You can add value on top of hiscompetitors’ products, as Netscape did by developingsoftware that ran on UNIX, the chief competitor toMicrosoft’s industrial-strength Windows NT. You canbuild coalitions with his competitors, a tactic that JVCused to beat Sony, a much stronger company, in therace to set standards in the market for VCRs. Or youcan serve as a distributor for his competitors, asCharles Schwab has done to powerful effect.

In the early 1990s, Schwab decided to become a majorplayer in the mutual fund business. Senior executivesat the discount brokerage knew that they lacked theresources to compete head-to-head with entrenchedopponents like Fidelity by launching their own funds.However, by rewriting the rules of fund distribution,Schwab could take a big bite out of Fidelity’s business.


By 1999 consumerscould choose fromnearly 3,000PlayStation titles,more than 10 timesthe number availablefor Nintendo 64, andSony had sold morethan 50 millionPlayStations

Spring 2002

Schwab’s innovation was to make mutual fundtransactions free. Rather than collect commissionsfrom customers, Schwab’s OneSource, whichlaunched in July 1992, charged fund families a feeof 25 basis points on invested assets. Fidelity, in animpressive demonstration of strategic flexibility,soon matched Schwab’s move. In July 1993, themutual fund giant, which had been operating itsown multifamily fund supermarket since mid-1989,eliminated transactions fees on 195 competitor-runfunds. Nonetheless, due to Schwab’s continuingleverage, Fidelity’s third-party fund distributionremained a fraction of Schwab’s.

Many fund companies were slow to join forces withFidelity. As a senior executive at Invesco told TheNew York Times in 1994, “We don’t sell our fundsthrough Fidelity. It goes to a competitive issue. Theirinterest is in selling customers Fidelity funds”.(Invesco later rethought its position and signed on.)In addition, competitors were unhappy aboutFidelity’s ability to monopolise communicationswith customers – a sacrifice that Schwab made morepalatable by declining to offer its own activelymanaged funds.

But the biggest brakes on the growth of Fidelity’ssupermarket came from within Fidelity, whereexecutives were keenly aware that every dollar takenin by another fund family was, to some extent, at theirexpense. As a result, backers of third-party distributionoften found themselves on the losing side of battlesover strategy, and Fidelity’s FundsNetwork was unableto copy some of Schwab’s most successful moves, suchas the Mutual Fund Select List, a quarterly list ofrecommended funds that based its picks on acombination of risk and return.

By the end of the decade, Fidelity had overcome someof its internal resistance. In fact, for a few fundfamilies, Fidelity was outselling OneSource. Yet fromSchwab’s perspective, this was a win-win situation.As long as Fidelity held back, Schwab could count onthe lead. But when Fidelity put its muscle behind third-party distribution, Schwab would still gain.

As one Schwab executive pointed out: “If we forceFidelity to offer third-party mutual funds at 25 basispoints instead of 125 basis points [the fee Fidelitycollected on in-house funds], they have fewer bulletsin their cannon to aim our way”.

Conclusion: judo strategy in actionIn this article, we’ve analysed judo strategy as a seriesof individual techniques. This approach has twoadvantages. Treating each technique in isolation makesit easier to identify both the similarities and thedifferences in how various companies have put it towork. In addition, this approach gives us theopportunity to suggest judo strategy’s range byprofiling 15 companies in nearly as many industries.

However, without two important caveats, thisdiscussion would be incomplete.

First, although we’ve focused on illustrating individualtechniques, the most effective judo strategists rely ona combination of different techniques and principles.The puppy dog ploy, for example, becomes much moreeffective when used in conjunction with defining thecompetitive space and follow-through fast – as a moreextended discussion of Palm Computing would show.

Similarly, when it comes to the core judo strategyprinciples, at any one time, one of the three may playa particularly importantrole. In the early days,before the contours of thecompetitive landscape havebeen fully defined,movement is often theprinciple most critical tosuccess. Balance takes over as competitors start to payattention and prepare to attack. And finding andapplying leverage usually become crucial once you aimto knock a serious competitor down.

Winning over the long run, however, requires you tomaster a much larger portfolio of judo techniques. Atrue master of judo strategy must possess a richrepertoire of skills while at the same time beingconstantly prepared to learn new ways to win.

Our second caveat picks up on this point. Bydelineating 10 core techniques, we’ve tried to makethe concepts of movement, balance and leverage moreconcrete. But it would be a mistake to see this menuof choices as a definitive account of judo strategy. Nolisting can capture the potential richness of thisapproach.

At its heart, judo strategy is about developing a deepunderstanding of your competitors and espying the


The most effectivejudo strategists relyon a combination ofdifferent techniquesand principles


David B. Yoffie is the Max and Doris StarrProfessor of International BusinessAdministration at Harvard Business School,where he chairs the strategy unit and theAdvanced Management Program.

Mary Kwak is a research associate at HarvardBusiness School.

This article is adapted from their book JudoStrategy: Turning Your Competitors’ Strength toYour Advantage (HBS Press, 2001).

potential weaknesses that lurk among theirstrengths. This is no science. There are no easyformulas for victory. Instead, judo strategy demandsdiscipline, creativity and the flexibility to mix andmatch techniques. But the power and promise ofthis approach are equal to the investment itdemands, for by mastering the principles behindjudo strategy, you can use your competitors’strength to bring them down.

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Posner, B. (1993) Targeting the Giant, Inc, 15, 10.Rivkin, J.W. (2000) Dogfight Over Europe: Ryanair(A), Boston, Harvard Business School.Tedlow, R. (1996) New and Improved: The Story ofMass Marketing in America, Boston, Harvard BusinessSchool Press.Tomiki, K. (1959) Judo, Tokyo, Japan Travel Bureau.Wayne, L. (1994) The Next Giant in Mutual Funds?The New York Times, 20 March.Yerkow, C. (1942) Modern Judo: The Complete Ju-Jutsu Library, Harrisburg, The Military ServicePublishing Co.


judo strategy: 10 techniques for beating a stronger opponent

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