Among these, Sun Tzu and the Art of Modern Warfare by Mark McNeilly is my favorite. Much of this article is inspired by Mr. McNeilly's insights and conclusions - I can only hope that my ideas for homebuilders are worthy of his outstanding research.

Sun Tzu's original organization of ideas revolves around 13 specific areas of war and statecraft. For this analysis, I have selected 13 specific quotes from the original text and will attempt to use them in the context of the conflict between small/midsize builders (SM) and the regional/national homebuilder (RN). My advice will, of course, be for the small and mid-sized homebuilder because:

1. These are the homebuilding operations I and my company have worked with for the past 25 years.
2. Everyone loves the underdog (real or perceived).Who wants to help the giants get bigger? And so we proceed -
3. Who wants to help the giants get bigger? And so we proceed -

Winning Without Battle
"Thus those skilled in war subdue the enemy's army without battle ... They conquer by strategy."

Here at the beginning, in the Chinese tradition, we address the key idea of our vision - the SM does not possess the same resources of land, capital, and staying power, as the RN. Therefore, he must compete without pitting himself directly against his larger, stronger opponent. He must use guile, and learn to use his enemy's strengths against him.

SM Tip - When possible, locate near enough to a RN project to benefit from the traffic that their large advertising budgets produce. Capitalize on their efforts.

"Know the enemy and know yourself; in a hundred battles you will never be in peril. When you are ignorant of the enemy, but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and yourself, you are certain in every battle to be in peril."

Only a fool does battle without preparation. Knowing and understanding the practices, procedures, policies, and tactics of your RN competitors is an absolute necessity for the SM trying to survive and prosper in an environment populated by larger, stronger competitors. And, equally important, is the willingness to truly analyze the strengths and weaknesses of your own organization. The leader of a successful homebuilding company does not see the world and his position in it as he would like it to be - he sees it as it really is!

SM Tip - To learn about the competition, visit them - physically at their project sites and virtually on their websites. Look at what they do, and honestly compare it to what you do. And when you come up lacking - fix it at once.

Strengths and Weaknesses
" In war, numbers alone confer no advantage."

While the RN certainly has some advantages due to more extensive resources, he also has several clear and distinct disadvantages - specifically:

Longer lines of supply and communication (multiple levels of management, larger numbers of employees, national contracts which may require specific materials and suppliers) - these tend to slow the decision making process of the RN.

Specific policies and procedures which may tend to thwart innovation and flexibility. To overcome whatever advantages size alone may afford, it is absolutely necessary for the smaller builder to understand the weaknesses inherent in "bigger" and to act in ways that the larger builder cannot. The advantages of superior maneuverability and more rapid decision making are squandered by the small homebuilder who only changes course slowly and reluctantly.

SM Tip - Be bold, embrace change, and understand that your success is related to utilizing the benefits that come from having the leaner, more efficient organization.

Flexibility
"The general must rely on his ability to control the situation to his advantage as opportunity dictates. He is not bound by established procedures. A general prizes opportune changes in circumstances."

Here again, Sun Tzu speaks to the importance of flexibility, and directly to one of the SM's strengths - the ability to seize the moment when circumstances dictate swift and decisive action. Yet the small builder must remember that his larger foe is constantly attempting to overcome this disadvantage by hiring better people and empowering them to act unilaterally. As strange as it seems, the RN is attempting to act more like his nimbler, entrepreneurial competitor.

SM Tip - Even as you implement systems and procedures to increase efficiency, as you grow your business, fight with all your strength to hold onto the agility and common sense that brought your initial success.

Preparation
" To... not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues."

In business as in warfare, it is the unexpected which causes the greatest damage. Planning, preparation, and a commitment to spending the resources necessary on the decision making process are vital to successfully navigate today's complex homebuilding environment. Committing time, capital, and people to planning and preparation may not seem as productive as "doing something." But these resources are not being wasted - they are being invested.

SM Tip - If you don't have a written 3-year business plan, updated periodically, you are not really prepared. P.S. to us at HBN, periodically means quarterly.

"He who excels at resolving difficulties does so before they arise."

Here Sun Tzu speaks for what today we call wargaming and contingency planning. It is not enough to plan for success - we must also prepare for hardships and adversity. By their very nature, the good times homebuilding has experienced for the past ten years tend to make us less cautious, and a little bit sloppy. This situation is even more dangerous for the SM - with less regional diversification, less access to capital, and less staying power in a downturn, he must be ready for slowdowns or missteps and act quickly and correctly.

SM Tip - Have a predetermined measure of what constitutes a sales slowdown, and an appropriate plan in place for corresponding overhead reductions. This is not a fun exercise - yet the time to think about it is "before it arises."

Speed
"What is of the greatest importance in war is extraordinary speed: one cannot afford to neglect opportunity."

While reaffirming the importance of maximizing opportunity, this quote is profound as it relates to the speed-based competition of today's marketplace. Consumers want instant gratification, 24/7 service, and a builder who responds not only well, but quickly. Asking clients to wait two weeks for a price or a proposal is really asking them to look elsewhere for a builder.

SM Tip - On the highway "Speed Kills." In business, as in war, it is a lack of speed that is suicidal. Work incessantly to reduce construction and pre-construction cycle times.

"Generally, he who occupies the field of battle first and awaits his enemy is at ease; he who comes later to the scene and rushes into the fight is weary."

To understand this statement in today's world of business, one need only look at Microsoft - whose unbridled success came not from being the best, but rather from being the quickest to market with something that worked.

Vision and Leadership
"He whose ranks are united in purpose will be victorious."

Many people speak of teamwork, but here Sun Tzu truly gets to the heart of the matter. All successful teamwork is built upon the foundation of a common purpose, and a shared vision. This is not so much about a specific plan, but rather it is about core beliefs, mutual support, and a faith that each individual is part of a larger collective objective.

Management must never forget that it not only needs to create the common purpose, but it must also get buy-in from all the members of the organization.

SM Tip - Make sure that your company has a vision, a purpose, and stated core values. Then create a program that guarantees that every employee and associate knows and understands them.

"The general must be first in the toils and fatigues of the army. In the heat of summer he does not spread his parasol, nor in the cold of winter don thick clothing ... He waits until the army's wells have been dug and only then drinks; until the army's food is cooked before he eats; until the army's fortifications have been completed, to shelter himself."

The role of leadership in business, as well as war, cannot be overrated. Throughout history battles have turned on the examples set by generals and sergeants alike. And while words alone can inspire, they lack the power of a committed leader whose selflessness sets the tone for an army, or a company.

SM Tip - "Do as I say, not as I do" is not a valid option for the successful small to mid-sized builder. Pay attention to the example you set.

The positions, strengths, and intents of the enemy are key factors in the determination of a battle strategy. In the world of business this translates to researching, and shopping the competition, so that you know their products and philosophies as well as you know your own. Collect and analyze your competitors' literature. Walk their models as though you were a customer. Miss no chance to learn as much about them and their product as you can.

SM Tip - Fight the natural tendency to belittle the competition. Be honest with yourself. You cannot remedy areas where the competition is superior if you cannot accept that reality. Staffing and Delegation " A sovereign of high character and intelligence must be able to know the right man, should place the responsibility on him, and expect
results."

What can be more important than finding and hiring the best people, and then giving them the opportunity to realize their full potential? From Peter Drucker's first texts to Jim Collins' Good to Great, management gurus have constantly expounded on the premise that great organizations exist because of outstanding people and terrific systems. And here, the small builder has an advantage if he understands how to use it. By their nature, smaller companies are inherently more appealing to first rate people - more challenges, more opportunities, more camaraderie, more freedom. To make these advantages real, the SM must delegate willingly, encourage intellectual growth constantly, reward emotionally and financially liberally, and allow his employees to find and be themselves.

SM Tip - Don't hesitate - hire good talent whenever you find it. Outstanding abilities are always a good investment!

Allies
"If an enemy has alliances, the problem is grave and the enemy's position strong; if he has no alliances, the problem is minor and the enemy's position weak."

By inference, this quote explains the importance of allies to the SM. As the difference in size and resources between the RN and the SM becomes increasingly greater, it is more important than ever for the smaller builder to find like minded allies so that their pooled resources allow them to compete in such areas as land acquisition, marketing, purchasing, and specialty services .

SM Tip - Better to own 25% of a hundred-lot subdivision that you couldn't afford alone, than 100% of nothing.

Likewise - Better to pay 1/2 of a fifteen-thousand dollar marketing brochure extolling the virtues of both you and a fellow builder, than to own all of an inferior marketing piece for $7,500.