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Sun Tzu and Sustainable Competitive Advantage
MuChiu Chang
Dept. of Information Management
Ching Yun University, 229, Chien-Hsin Rd., Jung-Li, Taiwan 320


Competitive Advantage (SCA) has been

a shate@c m c e m to enterprises. In the era of knowledge economy, such an advanrage migrates to the human-brain oriented
intangible assets, or, inleUectual property right WR). Combined
with suategy , this brings up the impartanee of multidisciplinary

integration and business renovation in management infrast"
for the sake of SCA. B e c a w a smug philosophical foundation is
the key to the success in such a renovation. we explore the philosophical foundation for the SCA based on "Sun Tzu: The Art of
War". F m t of aU, we find that using modeling and simulation for
SCA evaluation and decision making is a modern eend of implementing Sun Tzu' s concept of "teqle calculation". Our palentpending works in virmal validation and &cation
of produn
specicatiom by modeling simulation have suategic importance
in securing a marker which can be deemed a SCA.
Second, Sun Tzu's defensive philosophy of "securing ourselves
EIS? is preferable because it is a probarted combat no matter in
IPR or building up company' s SCA.
The human-braio orientation of P K impacts the hnditional
business management concepts and infrastructw e whi& are
deemed I s s incentive. We found lhat though Sun Tzu invoked
the impartaoee of "D-"to unify p p l e and encourage people to
fight but he did provide any hint to the problem of "Where does
the "Doo"come from?" nor did he provide any solution to the
problem of 'What is the "Doo"that can encourage people to think
and to offer the f d t s of their intellectual activitiesr'. Though we
have found that the awership of IPR and the company' s vision
and branding sh'ategy m y be the mapping of Sun TZU's "Dad' in
the modern hnowledgc economy time, we still prapase tntemi ve re
searches in philosophy. especially the Chinese ancient philosophy
for wcavatiao in-depth.
PinaUy, we notice that IPR can bring new o p p h d t i e s to individuals with know-how and sldll, while INTERNET and world
wide web OKWm along with open source softwareprovide a new
plalfam for innovators in education (e-learning), creating innovation and manipulating marketing and sh'ategy with low cost. This
means Ihal Open source saflwan provides a IOW-UISt WlutiOn fM

creating SCA.
Index TemsSustainable Competiti ve Advantage. Sun Tzu, intellectual property fight (PR). knowledge economy. logistics, supply chain, modeling simulation, vinual validation and verication,
open source softwar e, e-learning

Sustainable competitive advantage (SCA) is the long-term interest of an enlerpfise whose concept development has been reviewed by Hoffman [211. According to Hoffman's review, SCA is
a strategic issue about resource allocation and marketing strategy
maneuvering. From the aspect of resource, DeNisi 161 addresses
thac only resources that are rare. valuable and difficult to imitate
can provide SCA. The examples are:

1) Human capital (most impanant and cfitical because it is
most difficult to imitate)
2) Brand
3) Reputation
4) Equity
Also, Straub I331 addressed that SCA comes from three ways,
which are:
I ) Human resourceslexpertise (core factor)
2) Technology
3) Relationships
I n another wards. SCA means superior in information asymmetries while the core eompetences are:
I ) You know something that your competitors don't or earlier
than your campetiton do.
2 ) You know someone that your competitors don't or earlier
than your competitors do.
Meanwhile, we noticed that brand constitutes an important
pan of SCA [I][30].All these idea lead to the importance of intellectual property rights (IPR), which are the inlangible assets of
a company, to SCA [231[261.
AS to the strategy aspect, by Ferguson' s denition [ZO],SCA is
the answer to the problem of "Why should we buyjmm you?". This
brings us to the Michael Porter' s competitive force model [31[17]
about the concepts of "enfry of competitors" (how easy or difficult
i s it for new entrants to stan to compete. which barriers do exist)
and "the rhreaf o j i u b s f i f u f e s "(how easy can our product or service
be substituted. especially cheaper).
Therefore. SCA is a combined efforts of manipulating IPK and
strategy which calk for a multi-disciplinary integration. Moreover. Ferguson [ZO]mentioned that SCA relies on two very human characteristics: insight and trust. Also the importance of
training to human resources and SCA has been emphasized [4].
Such a human-brain orientation brings challenges and the need
of renovation to the business management both in infrastructur e
and concepts. Because any prnctical renovation must based on a
strong philosophical foundation. and "Sun Tzu: The Art of War"
is deemed I
the philosophy ongin of strategy, we explore the
philosophical foundation for the SCA based on "Sun Tzu".
"Sun Tzu: The an ofwar in 13chapters" isone ofthe treasured
Chinese philosophy and wisdom in strategy. Sun Tzu's contnb ulion was strongly recommended by Si Ma-Qian in his "Shi Ji" as:
"conquered the capitol ojChu in the wesf, threaten Qi and
~ ~ ~
Jiin in the north, build up fhe fame o j h i s C D Z I abmad
omongsr fhe feudal princes, Sun Tzu conrribufedU lot IO
fhese achievemenfr."
In this paper, all the English phrases ofSun Tzu arecited from a
popular English translation of the original Chinese treatise of Sun
Tzu by LIONEL GILES, M.A. [24]
In Chapter 2, "Waging War", Sun Tzu proposed the earliest
idea of integrated logistic support and supply chain [14]. Also,
because of the tremendous expenditur e of logistics and resource
consumption which may damage the country badly:
"...rhe expenditure 01 home and (II the front, including enrenoinmeat ojguests, rmnll ilems ruch as glue undpoinr,

0-7803-8519-5/04/$20.00@ 2004 IEEE

and rum? spenr on choriors ond armor, will reach the lo101 of U rhousand ounce.?of silverper dop Such is the cmr
of raiiing an a m y of IW,wO men..., f the campaign ir
pmrrucred, rhe r e s ~ u n e iof the Stare will nor be eyuoi Io
rhe rrmin, "

Sun Tzu proposed two concepts:
I ) Conquer without actually destroying the enemy:
In Chapter 3, "Attack by Stratagem", Sun Tzu said:
"In rhe procrical urr O,"W.UT, rhe berr thing of all is io cuke
rhe e n e m y ' ,munr?
whole orid inrocr, ..., supreme excellence consi.sf,rin breaking rhe enemy'.? resi.?rance withour
fighiin g...."
2) If a war is inevitable, the victory should be secured as fast as
In Chapter 2, "Waging War", Sun Tzu said "In WUT,
rhen, lei )our great object be uicro1): nor lmgthy campaign.?."
Bared on these two concepts, Sun TZUdeveloped his philosophy
in strategy and tactics.
In the era of knowledge economy and INTERNET, IPR has become a strategic iswe to the SCA of an enterprise 1341. Since there
are points that Sun Tzu'sconcepts may have mapping in our modern world, and also. there are paints that Sun Tzu'sconcepts need
to be modied in accordance with modern knowlcdge and business
management, we lry 10 explore new thretd and innovation in the
philosophical foundation for the IPR-oriented SCA based on Sun
From our study of US patent daiabare. we notice b a t IPR
bnngs new opportunities tu individuals with know-how and skill.
Also, our experiences show that INTERNET and world wide web
(WWW) along with Open Source softwme provide a new platform
for innovators in learning. creating innovation and manipulating
mark cling and strategy with low cost.

The basic concept of our works is to use modeling simulation to
perform trade-aff between performance and life cycle characteristics of a product at the conceptual design stilge so that a product
specification can be optimized and demonstrated in the balance of
the gain in performance and pro1 and the risks in resource consumption for customer service and logistics. Then we freeze the
specification and rtan to build prototype for prototype-field test
and pmduction as in Fig. 2
In the concept of I S 0 9000. for an I S 0 90W certified manufacturer, we can expect that the quality of its product meets the
specification. and thus meets the customer's need. But if the specification itself is wrong and not able to full1 the customer's requirement. no any I S 0 cenificated manufactur er can pmduce satisfactory product in accordance with the wrong specification. Therefore, our works can combine with I S 0 certificate mechanism LSI in
Fig. 3. Because specification and certificate mechanism are strategic means in marketing competition. the virtual specification Talidation and verification mechanism we proposed has highly strategic mark edng value.
Resource consumptio
in customer service,


supply chain, etc.


Fig. I. Balmcc trade-oK in a sysfcm design

In Chapter 1,"Laying Plan", Sun Tzu proposed the importance
of pnar appraisal or temple calculation:
"Now rhe general who %,ins U barrle motes many cdoulotions in his rrmple ere the barrle i.?f o u g h t The general
who loser n barite makes bur few calculurions beforehand.
Thus do many co1cslation.s lead lo v i c r o v , and f e w calcu~





lotions ro defror."

With the development of computer science and mathematic
modeling techniques. war-game on the military interests has been
prevailed [27][321. In the commerciill sector, Also, there is a business war game which is a simulation of competition in a marketplace [16]. In the engineenng arca, modeling simulation hils been
used in reliability and Physics of failure studies 1191[28]. We also
notice that reliability is an imponanl speciation and a driven
factor to many life cycle characters of a system, such as customer service, logistic, supply chain, etc.. Meanwhile. those life
cycle characters of a system may consume lots of compmy' s resources and c ~ ~ n t e r a cwith
the performance concerns of a system design. There should be a trade-off as in Fig. I . while such
a trade~off would be most effective during the conceptual design
phase [14]. According to our works [81[9], the resource consumptions and risks for customer service and logistics in system's life
cycle are strongly dependent on be design decisions made during
thc concept design phase. and are difficult to BSSCES a p r i o r i . Meanwhile, when the design decisions made dunng the conccptual design stage become specification, most af the life cycle fcatur es are
settled down. If there is anything wrong i n the specification during the prototype-field test, it will be costly for us bath in budge
and schedule to modify the specification, or even worse. the whole
project will be failed. Hence we devclop a patent-pending virtual
validation and verificaion mechanism for product specification by
using modeling simulation [7][10][11][12][13].


Fig. 2. Virmal specification demonstration

Fig. 3.

Virtual specification validarian mechnniam and I S 0 ceniflcation

Intemational Engineering Munagement Conference 2004

The concepts of SCA and IPR have very goad mappings in the
Sun Tzu's philasoph y. In Chapter 4, "Tactical Dispositions", Sun
Tzu said
"The good fighters of old firsrpur themselver beyond the
porribiiiry of defeof. and then woiirdforan opporttmiry of
drfeaiing the enemy."
Also. in Chapter 3, "Attack by Stratagem", Sun Tzu stressed the
importance of alliances:
"Thhur the highesr form of generalship ir to balk [he U emy's plane the next best is ro prewnr the jmcrion of the
enemy's f0n:es.
Such a philosophy just fits the idea of Mike 1341 that IPR is to
build market banien to protect the company from competition.
give design freedom, offer complementsly protection and form b a ~
sis for new alliances.
In Chapter 5, "Energy", Sun Tzu cxplained the direct and indirect mvneuv ering:
"To en~urethnt your whole 1to.v may withsfand the b m m
of the enemy'r attack and remain unshaken - thir ir e.ffected by mmeuv e m direcr and indirecr. Thai the impact
of your army may be like a grindrrone dashed against on
egg - rhis ir effected by the science of weak points and
stmng. In all fighting. the dirvcr merhod may be used for
joining battle. bur indirect marhodr will he needed in order to secure victory Indirect tnctic~,efficimriy applied,
aye inexhnu,~tiblras Heaven and Eanh, unending us the
flow of rivers and sirrams: like the sun and moon, they
end but 10 besin anex,; like rhe four ~euon.r,they pars
u w q tu return once more,"
and the importance of accumulating energy and prompt decision
in releasing the energy:
"The o n ~ e tof rmops i i iikr the rush of0 mrrent h,hich
will even mli stonef along irz its coume. The quolity of
decision ir like the well-timed .swop of U falcon which
rnobles if to strike ond desrmy its victim. Therefore the
good fighter will be terrible in his onxer, and prompt in
hij decision. Energy may be likened to the bending of U
cmssbo%,;decision, fo the relearing of (I rrigger"
In the global mark et competition, accumulating IPR by either
R&D within the company or patent pool alliances is just like to
accumulate energy. Only with the IPRs will the company be able
10 respond to the swift change of the global mark et promptly and
survive by either a direct or indirect manew enng. IPR has been
the crucial factor for an enterprise tu be competitive internationally or even merely in a domestic mark et 1221.
In Chapter 6. "Weak point and Strong", lPRs are just like the
strong points which may be used to against the competitor' s weak
points. Mikkoalso made a similar claim that building an own, even
nnrr ow. IPR portfolio makes enterprise a more credible player in
the mark ets 1341.
In the other way, we noticed that IPR is a matter of time and
resource. i.e. is a protracted combat in time and resource investment 1221, no matter in R&D. patent application or IPR litigations.
Meanwhile, Ribet [29] a h addr essed that it takes time tn build up
thc SCA for a company. This may ~ontradict to Sun TI"'s philos~
ophy in "securing rhr victor). OS fast as passible". Hence the Sun
Tzu's defensiw philasoph y of "put ourselves beyond the poszibilir).
of defeat" become dominant. That is to ".wcum ourrelvrsfnnn being sued by our competitors in tlte market" first. then to seek oppor tunities to make profits. Thus a endeavored R& Dactivity to seek
technology breakthr "ugh and protect the gained knowhow as IPR
would be the first priority 10 secure our s u r ~ i ~ina lthe mark et.

Since IPRs and SCA a r e fruits of human intellectual activities, obviously. it is human that can create and control IPRs, and

rhus build up SCA. Moreover, we must stress that it is the human
brain that can creatz IPR. The human civilization and industry development has evolved from a human-lahour-dominant type to a
knowledge-dominant or human-brain-dominant type 1221. Such a
human-brain onentation impacts the philosophy of management
in the era of knowledge economy 1151. In a human-dominant or
capital-dominant type of industry , the capitalist or the man who
controls the T ~ S O U I C C E ,such as f w d or money, pays the money to
build factones and hires people to work, the productivity comes
from capital, tangible assets and labours. At this stage, the role of
human as a labour is replaceable and expendable. Thus the corporation model is " l p a y , you w r k , I win". When the civilization
evolved, the concept of stock mark e l and stock share comes in.
company employee can share the fruits with the capitalist under
the discretion of the employer. Then the corporation model becomes "lpoy, you work, l win and you may shore". Until this stage.
the dominant component of productivity remains the same. However, when we come to the era of knowledge economy. the dominant component of producti vity transits to human inrellectual activities. the traditional concept of management become less incentive because people can be forced lo work but cannot he forced
to think. The role of human as a intelligent member becomes irreplaceable, or not so easy to be expendable. There must be in^
centiues to encourage people to think and share the solutions. A
win-win parallel partnership based on mutual tmst seems to be
more incenti ve than a tap-do wn boss-employee relationship. However, ther e are still concerns of bring expendable for members who
have offered their genuine soIu1ioos. Thus, allowing the individual
member who creates the innovations to hold the lPRs of his in no^
vations and share the profits that comes from his lPRs seems to be
B more likely evolution trend. The creation of Bayh-Dole Act of
1980 in the United States [5][311 stands for such a trend. Now. the
corporation model becomes "/pa): we work, we %,inand *,e share".
At the time of Sun T u , it is a human-labour-dominant type civilization. Therefore, Sun Tzu'sphilasoph y discriminates the roles
of human as the commander and the soldier, while the commander
should be of wisdom and soldier should be kept un-informed or in
total ignorance:
In Chapter I, "Laying Plan", Sun TZUsaid "The COMMANDER standr f o r rhe vinue.r of virdori, sincerely,
bmrvolence, oura age and rlricmesr.
In Chapter 3, "Attack by Stratagem", Sun Tzu
said "The generai, unoble to contml his irritation. will
launch his men to the as.~ualilike swarming oms, with rhe
result that one-third of his men me rlai,,, while the town
stili remains untoken. Such me the disarrmes effects " f a
siege... NOM,
the general ir the bulwnrk of the State: $the
bulwark is complere ur allpoinrs: the State will be ~ t m n g :
fthe bulwark isdefective, the State willbe weak... He will
win who hor military copaciry and i,v not intetfefered with
by the wvereigtz.
I n Chapter I I , "The Nine Situations", Sun TZU
raid: "He be able to mysiifi his oflcers and men by
f u l x reports and nppeurarzcrs, and thus keep them in toto/
ignorance ... He burns his boors and breoks his cookina,k:like n shepherd driving U Jock of sheep, he drives
his men thir way und that, and nothing k n o w whither he
ir going. ''
The old Chinese idiomatic phrase,
"The I U C C ~ S Sof U commander ir built on fhr bodie.~r f f h e
ten ihourund dead soldiers",
may depict the realistic scenaio of this philosophy. However, in
the era of knowledge, dead penon is useless. We need people to
be alive, mergetic and intelligent to find out the solution. Such
a discnminati ve philosophy may be harmful 10 the mutual-lmst
upon which a win-win pannership is built.
In Chapter 1, "Laying Plan". Sun TZUproposed that:
"The MORAL LAW (Dao) cuuses the people to be in compietr accord wirh their mie,. .so rhar de? wilifollow him
rrgurdless offheir lives, undisnayed by m y danger".


Iniemational Engineering Management Conference 2004


Since. in the time of knowledge economy, there is no concern
of live or death. the leader of an enterprise only needs his members to think and contrib ute his wisdom 10 solve problem. Under
this circumstance, a proper "Dou'', or incenti ye, which may be the
ownership of IPR, will be mandatory to encourage people to think
and to share.
When letting the innovators secure the ownership of their own
IPRr, the leader of U company should further build company' s
vision and image to genuinely convince the company' s members
a i the company' s value. This is essential to unify the moral of
the company and also fundamental to the branding strategy 1261.
From these view points, we may say that the mapping of Sun T Z U ' S
"Dad' in the modern knowledge cconomy time consists of at lcast
two pans, which a r e the ownership of IPR and the company' s vision and branding strategy


The world-wide web (WWW) and INTERNET let information
be disulb uted and collected free of charge 1341. At the same time,
because open source software focuses its major effons at basic infrartructur e such as operating systems and web servers and is free
of charge. it tends to become an attracti ve Solution in education
or, e-learning, and to focus on rapid innovation 1181. For individuals or small scale business st the initiation stage with limited
resources, such a low-cost platform provides a favourable solution
for letting their innovations be acquainted or marketed. Meanwhile, open soucce software makes it possible that innovations be
developed and implemented into prototypes in a shan time and
in a low cost. This is a niche to the public interests Our patentpending research fruits mentioned above are all created on a open
sourcc platform under a stringent budget and schedule limitation. Meanwhile, the web sile of 9Tek Co., http~//,"
also built by open source software, can he deemed a good demonstration of using open source software in building a platform for
e-learning and IPR marketing

John Lock (1632-1704) proposed in his The Second Treathe OJ
Civil Covemment the following idea [25]:
Every M m ham o Proper@ in his own Perron. This No
Body has any Right to but himself
This idea induced the break of political feudalism with bloody
revoluti~ns. and even more, the communism which is, fundamentally. a system of social organization in which property (especially
real property and the means of production) is held in common 121.
Then what would happen if the means of production become
mainly the intangible IPR in this era of knowledge economy?
First of all, we believe that L0cl;'s definition of property and
right should be certainly extended to include LPR ofthe knowledge
economy. Though the logic of patenting is to monopolize ideas and
build up barrier [34], which seems to create a new economical feudalism blockage, such a character in its defensive view of "secure
ourseluesfmm being sued by our competitors in the market" stated
before isjust a way to break such a blockage. The keys are that wf
must be well educated to be able to create new innovation or IPR
and that we must market our innovation or IPR properly, which
will be discussed later.
As the matter of facts, in the Chinese history since the Spring
and Autumn penod (722-481 BC). there have been lots of civilians
be granted a high social rank or position by knowledge contrib ulion while such a high social rank or position was monoplized by
the aristocrats. Sun Tzu, himself, is one ofthe good examples for
this. Since elites can get promotion by conrrib wing knowledge
how to let the superior know them or know what knowledge they
can offer becomes a problem of Chinese elites through our history
which, in a modern terminology, is a problem of marketing.
With the boom of INTERNET and e-commer ce, there are large
spaces, almost unlimited, for well-educated and experienced individuals to create innovations oftheir own independently . From OUT
research of the United States patent database [81[9], we found that
in the e-commerce age, many patented innovations which concern
about commercial methodology are created and owned by professional individuals. Our observations showthat IPR isno longer the
privilege of the super power, there are niches for innovative individuals or small companies. Also, hecause ofthe diversity ofpatent
holding, development of alliance or patent pwI becomes important
far obtaining more commercial benefit and mark et share.

As stated above. the two keys for individuals or small scale company to survivein the era ofknowledge economy areeducation and
IPR marketing. Our experiences show that open source software
plus INTERNET may provide a new and low-cost svategic IPR
platform for SCA.


Using modeling simulation and high computation for situation
evaluation and decision making is a modern implementation of
Sun Tzu's philosophy of temple calculation. Because specification
and certificate mechanism are swat@ means in marketing competition, the virtual specification validation and verification mechanism we proposed has highly strategic marketing value.
We must remark that building modeling simulation capability
is a task of multi-discipline integration and an important fundamental research with highly strategic mark eting value. Therefore,
it is worthy of intensi ve investments of B government for the state's
long term benet.
Meanwhile, IPR is to protect the company from competition
and give design freedom, i.e. to put thc company in a secured position first. then can the company manipulate its lPRs as strong
points by direct or indirect maneuvering to attack the competitor's weak points and to gain victory promptly. Such a defensive
philosoph y isdominant when considering that the legal war ofIPR
is time and resource consuming so that "fast victory", as required
by Sun Tzu, is impassible.
From the human-brain orientation of IPR. we propose to allow the individual member who creates the innovations to hold the
lPRs of his innovations and share the profits that comes from his
IPRs, which is a corporation model of " / p a y , we %,ark, we win and
we shore". so that fher e are incenti ves to encourage people to think
and offer the solutions, and let the innovators free from the w o w
of being expendable. In another word, the "right" of the fruits of
intellectual activities cannot be shared or dep" ved, but the profit
can be shared.
Here we also remark that Sun Tzu evoked the i m p n a n c e of
"Dao" in encouraging people to unify and fight, but he did not answer the question of W h e n does the "Dao" come from? nor the
question of Where is the " D a o " t h n t con encourage people to think
and to share?. Though we have found that the ownership of IPR
and the company' s vision and branding strategy may be the mapping of Sun Tzu' s"Dao" in the modern knowledge economy time,
we still propose intensi vc researches in philosophy. especially the
Chinese ancient philosopb y for more deep excavation.
being sued by
With the defensive view of ''secure ourrelvesf"
our competitors in the marker'' as stated before, there are chances
for intelligent individuals to get eminent by his innovations and
1PRs. In Chinese history, there have been examples, similar to the
fairy tale of "Cinder ella". that elites be acquainted and appr eciated by the superior and break through the blockage.
Then we come to the keys that we must be well educated to be
able to create new innovacion or IPR and that we must mark et
our innovation or IPR properly. According to our experiences.
m e n source software DIUE INTERNET movide a new and IOW-cost
strategic platform for e-learning and marketing

Intemational Engineering Management Conference 2004


Open rlundordr v e r s ~ sopen source in e ~ l e a m i n g .
Macquarie University E-learning Centre of Excellence, May 23,

[I81 Jamcs Drhicl.

We would l k e 10 express our deepest appreciation to 9Tek Co.
for providing us cyber resources for e-learning exploration. Also,
we would like to thmk Mrs. MElFENG CHAO, the general manager of 9Tek Co.. for providing us valuable information in Chinese ancient archive INTERNET search and my son, LICHUNG


CHANG, for mnslating Chinese verbs into Ping-Ying English.



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