Chess and Business Strategy

By Luigi Morsa, Ph.D.

Undoubtedly the chess game is fascinating because it implies deep thinking, strategy, and prediction ability. It is often seen analogous to a business strategy. Each player fervently studies the board, patiently waits their turn, anticipates the opponent’s next move, and runs through potential scenarios in their head. This is not so different from strategic planning in the business world. However, in some markets, the competitors attack simultaneously from all sides, the internal struggles of a company can have a negative effect, and a host of other elements which can all be put into play at the same time. Nevertheless, the parallels between chess and business are clear.

Companies put chess principles into action on a regular basis, often without even realizing that they are strategically positioning their pieces in a series of moves that have been utilized multiple times through the years. No wonder, therefore, that we can find a chessboard in the home or office of top CEOs or world leaders. The list of US presidents enthusiastic about chess is long, from Lincoln to Jimmy Carter to, more recently, Bill Clinton and Barack Obama; outside the USA we can mention Mikhail Gorbachev, Yasser Arafat, Angela Merkel and even important historical personalities like Mandela or Napoleon, and even some European dictators.

Sometimes chess is even an obsession: the President-elect of Mexico, Enrique Pena Nieto, who credits his success to his chess playing ability, was said to have delayed a strategy meeting simply in order to finish a chess game! Most of the world’s billionaires are chess players: Gates, Ellison, Soros, van Oosterom, and others; even quite young entrepreneurs  today,  like  Miami’s  Care  Cloud founder  Albert Santalo, A.J. Steigman, founder and CEO of Soletron, and co-founder and CEO of Facebook,  Mark  Zuckerberg, have a history of playing chess and using its principles in creative business  transactions.

Peter Thiel, one of the early investors in Facebook and the founder of PayPal, has history as a chess master. He maintains that it is essential “to know the value of the pieces”. Each piece in a chess game has a specific value. By knowing the value, it is easier to make decisions about game strategy and placement. Similarly, by knowing the value of employees and other associates, it can be easier to make business decisions regarding job responsibilities and other related decisions.

Justin Moore, child chess prodigy, was ranked in the top 20 youth chess players in the United States by the time he was a teenager. Moore is now CEO of Axcient, a cloud services provider. According to Moore, too many companies lose sight of their goal and get sidetracked into reactionary activities. As a chess player, Moore understands the value in planning an endgame, and explains that businesses must model the same behavior. By not being waylaid by the activities of a competitor, it is easier to remain focused on the ultimate goal of the company. Due to the importance that in the business strategy is given to the chess game, two researchers, Hunt and Cangemi in the study, “Want to improve your leadership skills? Play chess!” came to the conclusion that in order to bridge the gap between scholarship and entrepreneurship, and to build better leaders capable of handling future demands; the well-researched and powerful tool of Chess should be incorporated into the early grade curriculum, as well as in graduate leadership, business, industrial, and educational programs. Chess can be the catalyst to enhance the skills of graduates and leaders alike to remain competitive in a global economy.

We could say that according to people in business, in order to succeed, it is becoming more and more advisable to have the mindset of a chess player. In literature, there are several examples about the parallelism between chess and business, but rarely there are specific examples on a real chessboard; the scope of this article is to discuss a clear and real example of chess strategy in business.

The chess game is a competition between two subjects. Therefore, from a business point of view, this fits well when we refer to a duopoly. One of the most interesting and fascinating duopoly markets of the last several years is the one between the two giant airplanes manufacturers: Boeing and Airbus. It is difficult to find other markets where two actors play. In the case of the big airplane market, there are only Boeing and Airbus because the barrier to entry into this market is quite high.

Having only two players, the market dynamics and strategies can be displayed on a chessboard and can be interpreted through the eyes of a chess player. A tangible example is given by the competition between the models of the Boeing 747 and Airbus 380. Boeing introduced the B747 in 1970 and for the following 37 years had the monopoly in big, long range airplanes. This allowed Boeing to gain enormous profitability with the advantage of investing and competing in other segments of the market where Airbus had a presence. For this reason, people at Airbus realized that if they really wanted to compete with Boeing, they needed to attack the B747. Therefore, after a long gestation period starting in 1988 and continuing through the early months of 2000, the board management at Airbus decided to develop the A380 (introduced in 2007), a four engines aircraft like B747, but 20% more efficient and with an entire second floor along its fuselage, able to provide seating for 555 people in a typical three-class configuration or up to 853 people in an all-economy class configuration; while the B747 carries up to 524 passengers.

The precondition for success looked to be close at hand, but something went wrong. While the European engineers were working on the A380 project, their counterparts in USA were figuring out a different scenario. Instead of proposing the classical schema of connection between great hubs and then taking a second flight to the final destination, the idea was to connect directly two minor airports. In other words, instead of taking a short range aircraft from Stockholm flying to London, then London-New York (major hubs connection) by flying a big long range aircraft and then a short range aircraft to cover the distance New York-Las Vegas, the proposal was to fly directly from Stockholm to Las Vegas.

Hub and Spoke
Point to Point

The challenge was to create an aircraft remaining competitive by carrying less passengers compared to A380 or B747. This was a necessity because the demand for direct flights is not the same as among major hubs. In order pursue this task, engineers in the USA developed the 787 Dreamliner (introduced in 2011, 224-330 passengers seats versions), with a carbon-composite fuselage (lighter material than aluminium), equipped with two engines and able to fly longer distances while consuming less jet fuel than the A380. Without going into so much detail, we can say that history has shown that the airline companies have preferred the new model introduced by Boeing with B787, and for this reason Airbus started to develop its own version of a long-range, fuel-efficient airplane, called the A350-XWB (300-350 seating), which entered in service in 2015.

If we now look at a chessboard, we can imagine B747 and A380 as the two queens of the black and white pieces set (actually, one of the B747 nickname is “Queen of the Sky”). The idea of the player with white pieces was to attack undisturbed the black queen, but as shown in the picture, the black bishop (B787) was moved to block the white queen’s attack, and as a consequence the player with the white set moved the rook (A350) to contrast the bishop.  It has to be underlined, especially for the chess experts in order to avoid outraging them, that the description above is clearly inappropriate; it is not entirely in agreement with the chess logic, but it is important because it gives a remarkable image of the strategies.

In economic terms, there are models that allow us to understand and above all to predict the impact of the introduction of a new aircraft in a market. One of these relatively simple models is for instance “the Cournot competition” that was applied in 1988 by the professor Richard Baldwin and by Paul Krugman, the laureate economy Nobel prize in 2008, to study the competition between the aircraft models of Airbus and Boeing. The model worked quite well, but as shown in the example above it is a matter of hypothesis and therefore strategies because if we do not take into account that our competitor could introduce something new in the market, inevitably our prediction will be wrong.

Other important economic studies have often taken into account the “static” situation of the market, similar to very interesting works of Klepper (1990, 1994) and Neven & Seabright (1995). Even relatively recent studies like Irwin and Pavcnik in 2004, which examines exactly the competition between Airbus and Boeing after the introduction of A380, did not consider a possible aircraft outside the segment of A380 and B747 that could affect the market. However, in 2004 in defense of the authors, the idea of the B787 Dreamliner was very vague. Nevertheless, the history of the aircraft market evolution has proved that a certain degree of unpredictability should be taken into account.

Finally, the example of the competition between A380 and B747 is meaningful because is a good example to highlight the importance of having a vision of the future and to avoid the limitations of near-term thinking only. We can also say that even though we have good tools to perform the economic analyses and we choose models that do not take into account some possible moves by our competitors, our prediction will fail in any case; for this reason it is important to have in business the attitude of a chess player!


About the Author
Luigi Morsa (Ph.D.) is an Aerospace Engineer and Project Manager working in Germany at the consultant company SII engineering & IT. Luigi’s passion for project management has led him to contribute to two books by Dr. Harold Kerzner, the pioneer and globally recognized expert in project management. More in detail, Luigi wrote the case study “The Airbus A380” and the chapter on “Innovation Management Software” for the books Project Management Case Studies, Fifth Edition (Wiley, 2017) and Innovation Project Management (Wiley, 2019), respectively. In 2018, he was a speaker at the Project Management Institute (PMI)® EMEA Congress to discuss the complexity of the aircraft-industry market, with particular emphasis on the relationship between the product and customer needs.

References

  1. https://www.cleverism.com/chess-principles-make-better-corporate-strategist/
  2. Samuel J., Hunt,; Joseph Cangemi; Want to improve your leadership skills? Play chess!, Education; Spring 2014, Vol. 134 Issue 3, p359
  3. Luigi, Morsa; The Airbus A380 Airplane, case study for the book “Project Management Case Studies” 5th Edition by Harold Kerzner, Wiley, April 2017
  4. Richard Baldwin, Paul Krugman; Industrial Policy and International Competition in Wide-Bodied, chapter for the book “Trade Policy Issues and Empirical Analysis” by Robert E. Baldwin, University of Chicago Press, 1988
  5. Klepper, G., 1990. Entry into the market for large transport aircraft. European Economic Review 34, 775– 803.
  6. Klepper, G., 1994. Industrial policy in the transport aircraft industry. In: Krugman, P., Smith, A. (Eds.), Empirical Studies of Strategic Trade Policy. University of Chicago Press for the NBER, Chicago.
  7. Neven, D., Seabright, P., 1995. European industrial policy: the airbus case. Economic Policy 21, 313– 358.
  8. Douglas A. Irwin, Nina Pavcnik, Airbus versus Boeing revisited: international competition in the aircraft market, Journal of International Economics 64 (2004) 223– 245

Stephen Denning on Business Agility

Stephen Denning is a former director of the World Bank, renowned speaker and author (his most recent book, The Age of Agile, has 4.5 stars on Amazon). As a keynote speaker at IIL’s Leadership & Innovation 2019 Online Conference, he gave a fascinating take on how to adopt an Agile Mindset through what he calls the “Three Laws of Business Agility.”

We received so many great questions during the 15-minute Q&A that we didn’t have time to get to them all. Thank you to Stephen for taking the time to answer each and every question. This blog post is a compilation of some of our favorites.

The recording of Stephen’s keynote, and all other speaker presentations, are available to watch on demand through June 9. Log in or register here.

To implement the Agile mindset seems to require change in processes etc. How to overcome the “fear of change”?

In general, the fear of change is fear of being changed, not change itself. If the change is good, and well communicated, and introduced in an inspiring way, change isn’t difficult. Most people want to make things better.

What is your advice for people/organizations that are reluctant to share knowledge?

In general, it’s an issue of distrust, which must be solved at an institutional level.

Can you elaborate more about customer focus vs. customer obsession? What should be the goal for organization: focus or obsession? 

There was much talk of customer focus in the 20th Century but it was mainly talk. The customer’s needs were secondary to the firm’s. Obsession means putting the customer as the real #1.

Please explain the concept of network team in more detail? Are these teams able to function independently as well as a together if need be? 

Yes. They must be able to do both.

Agile is necessary, but not sufficient: what would be, if to choose, one key ingredient besides Agile, to change the culture of the organization into a human-centered one?

Leadership storytelling is an important change tool. Human values like honesty and integrity are obviously also important. Being a good citizen must also come into the picture.

Do you know if there is a relation between human-centered organizations and revenue? 

You can certainly go broke focusing only on being human-centered. What is now possible though is to be both profitable and human-centered.

How do mid to senior-level managers get the agile buy-in from the top if it is not there?

They need to become leaders with their own inner compass and values.

Construction comes to mind as another field to apply agile. Not too much word on the success of this yet. 

I know of one construction firm that is on an Agile journey. Agile will happen in every sector.

Given cultural differences, is Agile as effective in countries where perhaps the customer is not the center of focus?

Agile is an inexorable global movement that will eventually reach all countries. You can embrace it now or embrace it later. It’s when, not whether.

What is the main characteristic of “fake” agile?

It’s parroting the words of agile without the belief, the values or the actions.

Is Agile applicable for small teams working online from different places?

Separating teams physically has obvious problems, but it has been done. Co-location is much easier.

Since leaving the World Bank, have they managed to stay agile?

They were not Agile in my day. They were very bureaucratic. There is a movement now to introduce Agile, and it has quite a bit of energy, but it is still early days. This is a marathon, not a sprint.

How would you handle the reliability-assurance of knowledge in an era of fake news and artificial intelligence?

Honesty, intellectual rigor, examining the evidence, doing the analysis—none of this is new. The Ancient Greeks spelled it out very clearly. It’s just with technology, there’s more of it to deal with.

Is storytelling like lessons learned?

Storytelling is a vast subject. You can find out more in my book, The Leader’s Guide To Storytelling.

I am not a natural storyteller. But I have heard twice today that is perhaps a skill I should develop. Any tips?

You can find out more in my book, The Leader’s Guide To Storytelling. Or for a more lighthearted look at it, my book, Squirrel Inc.

You mention agile is NOT a methodology but there are a lot of institutes giving certification training. How do you measure agile “mindset” in people and in organizations?

(This question was answered during the live Q&A.) Well, mindset is in one sense an ethereal thing and it can be hard to grasp but at the same time when you see it you can recognize it. When you see managers who are focused on enabling their staff to do things rather than controlling them, when there is trust in organizations vs. distrust. And you can sense immediately there is a difference; a different way of thinking and feeling and acting in the workplace. The measurement is more on the consequence or the result of the mindset and you see that in the way the teams flourish and the benefits for customers and the way the organization flourishes. It is one of the more difficult aspects of the whole transition is for people to realize that it is a mindset and to understand the elements of the mindset and to learn to embrace them and live them. It becomes second nature to you.

Because of the popularity of Stephen’s keynote, it will also be featured at our upcoming Agile & Scrum Online Conference. Learn more and see the speaker lineup here.


Customer Satisfaction is a Myth!

By J. LeRoy Ward,  PMP, PgMP, PfMP, CSM, CSPO   |   Executive Vice President – Enterprise Solutions, IIL

The other day I was scrolling through my LinkedIn feed and saw that someone had posted a picture of one of those business/inspirational quotes, attributed to no one in particular, in an attempt to gain a lot of likes or some agreeable comments. It read:

“A SATISFIED CUSTOMER IS THE BEST BUSINESS STRATEGY OF ALL”

I thought about that for a second and thought, “Nope, that’s a terrible strategy”—one destined to leave a company eating the dust of its competitors as those competitors steal their customers because those customers expect more.

It’s not a worthy strategy for project managers, either. We work mightily each day to deliver the “goods” to our clients through the projects and programs designed to move our companies and organizations forward. Just as companies should never try to satisfy its customers, we should never strive to satisfy our clients. Why?

Well, let’s say you just finished having dinner at a very nice restaurant. You usually leave a 20% tip, but tonight you were so impressed, you’re leaving a 30% tip.

What was it about the overall experience, and the server in particular, that compels you to do something you rarely do? Perhaps the server:

  • Was polite, friendly and greeted you warmly, maybe even by name if you had dined there before.
  • Anticipated your needs to the extent you rarely had to ask for anything. By the time you were turning around to get his or her attention, they were there attending to your needs.
  • Was knowledgeable about the menu. Any question you had about the fusion-this or the port wine-reduction-that, your server provided detailed information about the ingredients and how your selection was prepared.
  • Made sure that your dinner arrived piping hot, just the way you like it. It wasn’t sitting under some heat-lamp getting lukewarm while the server was out back having a cigarette.
  • Kept filling and refilling your water glass without being asked.
  • Ensured your bread basket was never empty.
  • Brought the check promptly, and, it was accurate. You didn’t need your accountant to double-check the numbers.
  • Wished you a fond farewell making sure you didn’t leave any personal items behind.

If you’ve ever had that kind of experience and a friend later asked you “How was your dinner?” I bet you didn’t say, “I was satisfied with the restaurant and the service.” Heck no. I bet you said something along the lines of, “That was the nicest restaurant I’ve eaten at in a long time. We had a great time. Well worth the few extra bucks for the ambience and food, and the server was top-notch.”

Now, think of your client, the one you’re managing that project for at the moment. Don’t they expect the same level of service from you and your team that you experienced at that restaurant? Of course they do.

At the end of the project wouldn’t you want your client to say, “Wow, (your name here) was simply outstanding. Delivered ahead of schedule, below budget, and gave us more than we asked for.  And, (your name here) was so professional, always on top of things and kept us informed and engaged. I’ve never worked with someone like (your name here) before. The next time we have a project to do, I’m requesting (your name here) as the project manager.” Of course you would.

Over the years I’ve noticed that clients really don’t want to be “satisfied.” Why? Because achieving satisfaction is just meeting the requirements. And even though that’s the traditional definition of quality, it’s a pretty low bar these days. Clients want to be wowed, delighted, or even astonished. They want, and expect, us to go above and beyond given the level of investment in, and the importance of, their projects.

Now, many reading this post might ask “But LeRoy, isn’t that gold-plating and isn’t gold-plating verboten in traditional quality circles?” The answer is yes, but that’s all in the past in my view. Here’s how I see it.

We can gold-plate the deliverable, or, we can gold-plate the service, or both. In my experience, clients would like both, but if nothing else, gold-plating the service (how we do something, rather than what we are delivering) is what I think people really want and appreciate. They want to know we care and are willing to move heaven and earth to get the job done. They want to see us as advocates for their cause, not just checking off requirements delivered on our traceability matrix thinking that’s what project success really is.

Of course, there are those who are willing to accept a “satisfactory” experience if the price is low enough. That’s why, despite all the whining and complaining people do regarding air travel, for example, discount airlines make tons of money packing planes to the gills. Heck, even the major airlines offer “cheap seats” if you’re willing to cram yourself into a small seat, sit way in the back, and have to pay for a beverage. You see, all these air carriers have figured out that the flying public will endure the pain of the experience for the low cost of getting from Point A to Point B. But, that’s in our “private” lives as consumers. In business, it’s a different story.

Even though organizations negotiate tooth and nail to get things at the lowest cost they can, that same client is simply not willing to accept a substandard experience regardless of the price. Whatever they paid, they want the best experience in the world.

Project success, as I’m sure you have experienced, is no longer based on meeting the triple constraints. Far from it. In fact, the authors of A Guide to the Project Management Body of Knowledge (PMBOK® Guide) have added a few more to the traditional time, cost, and schedule constraints. But I want to add what is turning out to be the most important one after scope, time, and cost: the experience. And by that I mean the experience they had when working with you as their project manager. And, it better be a good (no, great) one.

According to PwC’s Future of Customer Experience Report, seventy-three percent (73%) of those surveyed say that a positive customer experience is a key influence in their purchasing decisions. Thirty-two (32%) percent say they would terminate a business relationship with an organization after just one bad experience.

Are you any different than these folks? I doubt it. I’m not. Are your clients? No way.

Satisfaction is what the gurus of quality spoke about all those years ago. But, like everything else, the world has changed. Mick Jagger and Keith Richards once wrote “I Can’t Get No Satisfaction.” They were right, because everyone, your clients included, expects more!

More insights await at IIL’s Leadership & Innovation Online Conference, opening on March 7th. Join us for keynotes with Q&A, video presentations, two self-paced courses, plus networking and PDUs.


About the Author
J. LeRoy Ward is a highly respected consultant and adviser to Global Fortune 500 Corporations and government agencies in the areas of project, program, and portfolio management. With more than 38 years of government and private sector experience, LeRoy specializes in working with senior executives to understand their role in project and program sponsorship, governance, portfolio management and the strategic execution of projects and programs.


The Importance of Influencers In Your Strategy – An Analysis of Millennials

by Sofia Zafeiri

With technology finding its way into every aspect of our lives, it comes without question that the landscape of campaigns has changed rapidly over the past decade. It is now clear that aggressive sales not only won’t win customer loyalty but might end up even harming a brand as the aggression often comes out as desperate or irrelevant.

Analysis of the psychology of consumer and buying habits has been the holy grail for Marketers and PR professionals. Although consumers need to feel power over their own choices, in a mutually interdependent world, all of us rarely act on our own will without further influence. From peer pressure to online reviews, we seek out a group of people we can either relate to or trust to proceed with option A or B.

Within the reference group of influencing consumer buying behavior, several groups have been identified:

  • Primary groups: Are groups within which people have strong ties and connections, such as family, friends, and coworkers.
  • Secondary groups: Are formal groups which require less continuous interaction, such as religious and professional groups.
  • Aspirational groups: Are groups of people buyers aspire to join. (Within this group falls the majority of today’s online influencers. A singer, an athlete or typically a blogger/socialite are the people whose point of view or advice will influence the final buying decision.)

Another tool buyers are turning to is YouTube. Being the second largest search engine after Google and with over 3 billion searches per month, Millennials view their way in or out of a brand based on the video content. Among 18-24-year-olds — a key buying demographic — a whopping 62% trusts endorsements from popular YouTubers.

 

How are Millennials engaging with brands on YouTube?

 

The skip ad button is inevitable, and paid ads barely get their five seconds of fame, as more than 80% of viewers will skip the ads if they can. On the other hand, with “How to” being the most used search words on YouTube it creates limitless PR opportunities for brands.

 

The infographic below offers some research data on Millennials’ behavior online and source of influence.


About the Author
Sofia Zafeiri is the Social Media Coordinator at IIL. She graduated from NYU with an Ms in Public Relations and Corporate Communications. Before moving to New York City, she worked for a variety of organizations in Europe.

 

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