The Art of War for Commercial Disputes – Part II

Sun Tzu said:

“Conquerors estimate in their temple before the war begins.  They consider everything. The defeated also estimate before the war but they do not consider everything. Estimating completely creates victory. Estimating incompletely causes failure. When we look at it from this point of view, it is obvious who will win the war.”

Sun Tzu’s Art of War, a 2,500 year old military manual recording the strategies of a Chinese Warrior who lived around the time of Confucius, is a classic which influences five-star generals to this day. It has also become an essential tool for business executives around the world. Why is this ancient book so useful?

For over 20 years I have been interested in the work as a rich vein of ideas for fighting and winning modern day commercial conflicts.  I am writing regular blog posts scavenging the manual to illustrate the lessons I learned and applied fighting disputes for clients in my 30 year career as a commercial lawyer. 

This week I look at the importance of planning in relation to preparation for a commercial negotiation.

As the quote makes clear, the role of planning before any major negotiation takes place cannot be overstated.  Sun Tzu is saying, in essence, that he who makes the best plans stands the best prospect of achieving a favourable outcome.  Take two parties with roughly complementary strengths and weaknesses and roughly equal bargaining positions – one plans well and one badly, the former will always in my experience achieve a strong outcome in the negotiation. In Part III of this Blog next time, I give examples from my 30 years     of practice as a lawyer of how careful but smart planning can substantially favour a party that is much weaker in terms of bargaining power than the stronger party. Before doing so, let’s drill down into what Sun Tzu says about planning.

Sun Tzu says there are five principles or elements of planning – Tao (character), Tien (climate), Dee (structure), Gian (leadership) and Far (law). Modern readers of Sun Tzu interpret these elements in 21^st century language as: character, climate, structure, leadership and information.  All of these are important. Of all of them, I would say that the importance of information is priceless.

What do these elements mean in practice in the context of a commercial dispute?

Character (Tao)

Character means the essential nature of an organisation.  In the context of a commercial dispute, it is the essential nature of the two enterprises in dispute.

Climate (Tien)

Climate refers to the general business conditions and political culture in the context of the dispute.

Structure (Dian)

Structure refers to a party’s negotiating team’s structure i.e. chain of command.

Leadership (Gian)

This is self-explanatory: who is managing and driving the negotiation?

Information (Far)

This refers to all information about the dispute and both parties to it – so far as can be ascertained.

Conclusion

As noted above, information is by far the most important of these.  Behind those structure is important and leadership is key.  Character and Climate will be of limited relevance in most commercial disputes but in some could be key (say a dispute between a government and a multi-national).

The leader of the negotiating team is obviously crucial.

Structure is almost as important. If there is an unclear chain of command, and if different parts are duplicating or, worse, are unaware of what other parts are doing, this can be disastrous.

Information is however the five star General amongst these principles.

We carry out as full a SWOT analysis as possible – Strengths, Weaknesses, Opportunities, Threats.

Taken together, we build up a full picture of our position through and

Next time, we will see some examples of how I applied these principles in practice acting for clients in commercial disputes.

David Middleburgh runs Maxwell Commercial Services. His a Solicitor Advocate and an Insolvency Practitioner. He gives strategic legal, commercial advice on complex and contentious commercial disputes and on business strategy generally.