apply-terrain-strategy

Apply Terrain Strategy

Classify the competitive terrain before engaging, occupy favourable ground before the opponent, never fight where the terrain advantages them, and create terrain — through standards, switching costs, or ecosystem position — that structures the contest in your favour.

Why This Is Best Practice

Origin: Chapter 10 of The Art of War — Di Xing (地形, Terrain) — argues that knowledge of the terrain is a prerequisite for victory. "He who knows these things, and in fighting puts his knowledge into practice, will win his battles. He who knows them not, nor practices them, will surely be defeated." (Ch.10, Giles trans.) Chapter 4 (Tactical Dispositions) establishes the invincibility-first principle: make yourself impossible to defeat before seeking the opportunity to defeat the opponent. This requires occupying terrain the opponent cannot dislodge you from.

Adopted by: Michael Porter's competitive advantage framework — cost leadership, differentiation, focus — is a terrain classification system: which ground do you occupy and does it structurally protect your position? Geoffrey Moore's Crossing the Chasm operationalises the narrow-beachhead approach (occupy a narrow, defensible segment completely before expanding) — the direct business application of the fortified-terrain principle. Amazon's marketplace, Apple's App Store, and Salesforce's AppExchange all create terrain — through platform economics — that structures competition in the platform owner's favour.

Impact: Companies that choose terrain well before committing resources win a structural advantage that compounds over time. Companies that fight on the opponent's chosen terrain — competing in the incumbent's strongest segment, on the incumbent's technology platform, through the incumbent's distribution channel — face a structural disadvantage regardless of product or team quality.

Why best: Terrain selection is a commitment decision — once you are in a market, switching terrain is expensive. Choosing correctly before commitment avoids years of fighting from an inferior position. Creating terrain (standards, ecosystems, network effects) converts a temporary competitive advantage into a structural one that is difficult to replicate.

Sources: Sun Tzu, The Art of War (Giles trans. 1910) — Ch.4 (Tactical Dispositions), Ch.10 (Terrain); Porter, Competitive Advantage (1985) — generic strategies as terrain positions; Moore, Crossing the Chasm (1991) — beachhead strategy; Rochet & Tirole, Platform Competition in Two-Sided Markets (2003) — platform terrain

Steps

Step 1: Classify the terrain type

Sun Tzu identifies six terrain types, each mapped here to business equivalents:

Terrain	Military description	Business equivalent	Strategic implication
Accessible (通)	Both sides can traverse freely	Open, commoditised market; no switching costs; easy entry for both	First-mover advantage is critical; occupy the premium position before the opponent
Entangling (掛)	Easy to enter, hard to exit	Mutual dependency (integration, standards, partnerships); both sides locked in	Negotiate the terms of mutual dependency before entering; unfavourable exit terms make this dangerous
Temporising (支)	Neither side benefits from fighting	Market where neither you nor the opponent can win a decisive position	Do not enter; wait for conditions to change
Narrow (隘)	One side can block the other's passage	Bottleneck market: key distribution channel, regulatory approval, technical standard	Whoever holds the pass wins; race to occupy; if opponent holds it, do not attempt to force through
Precipitous (險)	One side has the high ground	Asymmetric terrain: you hold a defensible position (brand, technology, IP, regulation)	Occupy and defend; do not concede the high ground; if opponent holds it, lure them down
Open (曠)	Wide-open, flat terrain	Commodity market; scale determines outcome	Win only with cost leadership; avoid without scale advantage

Step 2: Identify who currently holds the high ground

For each terrain type, determine: does your opponent already hold the advantaged position, or is it unoccupied?

Occupied terrain: If the opponent holds a narrow pass (distribution channel monopoly), a precipitous position (strong IP or regulatory barrier), or has established network effects on accessible terrain, engaging directly is a losing proposition. Find different terrain or a different approach to the same terrain (bypass, new standard, new channel).

Unoccupied terrain: If the high-value position is unoccupied — no dominant player in the premium segment, no established standard in the technical space, no first-mover in the new geography — the race is to occupy before the opponent.

Step 3: Occupy before the opponent arrives

"Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted." (Ch.6, Giles trans.)

In business: the first company to establish a strong position in a favourable segment occupies terrain that the opponent must either fight to take (expensive) or accept as lost. This is the strategic logic behind:

• Occupying a technical standard before it becomes dominant
• Establishing the first enterprise contracts in a new industry vertical before the incumbent notices the segment
• Publishing the reference architecture or open-source library that becomes the de facto standard
• Building the network effects (marketplace, platform) before the opponent reaches critical mass

Step 4: Fight on terrain that advantages you; refuse terrain that advantages them

This requires the discipline to decline engagements that feel attractive but are structurally unfavourable.

Do not fight on the incumbent's terrain:

• Do not compete feature-for-feature in the segment where the incumbent has the deepest customer relationships
• Do not enter through the distribution channel where the incumbent has exclusive or preferred relationships
• Do not race on a technology platform the incumbent controls

Create your own terrain:

• Build a new channel (direct sales, online, ecosystem partner) that bypasses the incumbent's distribution advantage
• Establish a technical standard in an adjacent area that draws the next-generation customers to your platform
• Create switching costs in your occupied segment that make it as narrow and defensible for you as the incumbent's core is for them

Step 5: The invincibility-first principle — make yourself impossible to displace before seeking to displace the opponent

"The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy." (Ch.4, Giles trans.)

Before expanding to new terrain, fortify your current position:

• Deepen customer relationships and increase switching costs in your core segment
• Secure exclusive or preferred partnerships in your primary channel
• Build the operational capability to sustain your position against a determined response
• Ensure your unit economics are defensible — an opponent who can sustain losses longer than you can will wait you out

Expand only after your current position is genuinely defensible. Expanding from weakness stretches your position and creates multiple 虛 (empty) points for the opponent to exploit.

Step 6: Create terrain — ecosystem, standard, platform

The highest form of terrain strategy is not selecting existing terrain but creating new terrain that structurally advantages your position.

Terrain creation mechanisms:

• Technical standard: Propose and adopt an open standard in an emerging area; become the reference implementation; competitors must build to your standard
• Platform / marketplace: Build a two-sided market where both buyers and sellers need to be present; network effects create terrain that is prohibitively expensive to replicate
• Ecosystem integration: Build integrations with the tools your customers already use; switching costs compound with each integration
• Regulatory first-mover: Obtain regulatory approval in a new category before the category is contested; approval becomes a narrow pass that delays competitors by 12–36 months

Rules

• Classify the terrain before committing. Entering a market without understanding the terrain type produces unnecessary costs and strategic exposure.
• Never fight on the opponent's home terrain. Their structural advantage on that terrain compounds with their resource advantage. Find adjacent terrain where the advantage does not apply.
• Occupy before the opponent arrives. Unoccupied favourable terrain is the rarest and most valuable resource in competitive strategy. Move fast when it is available.
• Make your position invincible before expanding. Extending from an insecure base creates multiple weak points. Secure the core before expanding.
• Death ground is real. When you have no retreat — failing company, last capital, losing deal — commit fully. The knowledge that retreat is impossible sharpens execution in ways that a comfortable position does not.

Examples

Apple App Store (narrow terrain — controlling the pass): The App Store is a narrow terrain play: Apple controls the only legitimate distribution channel for iOS applications, extracting 30% of revenue from every transaction on the platform. Developers must come through the pass Apple controls. The terrain — narrow, with Apple at the gate — makes every competitor's application dependent on Apple's approval and economics.

Salesforce AppExchange (platform terrain creation): Salesforce created a two-sided marketplace where CRM applications and customers both need to be present. Once the ecosystem reached critical mass, the platform terrain became self-reinforcing — new customers come for the ecosystem, new ISVs come for the customers. Competitors must build an entire ecosystem, not just a better product, to displace Salesforce in its segment.

Geoffrey Moore's bowling alley (accessible terrain — occupy one pin at a time): Moore's bowling alley strategy for technology startups: do not enter the accessible terrain of the broad market; occupy a narrow, defensible segment (the first bowling pin) completely. The first segment provides the reference customer, the use case depth, and the operational capability to take the adjacent segment. Each occupied segment narrows the terrain for the next.

Death ground in negotiation: A supplier with no alternative customers negotiating with a dominant buyer is on death ground. The strategic response to death ground: commit fully and make the commitment visible. "We have invested everything in this relationship — if it does not proceed, we will be forced to exit the market entirely." This inverts the leverage: the buyer now faces the risk of losing the supplier entirely, which changes the negotiation terrain.

Common Mistakes

Choosing terrain by market size, not by strategic fit: The largest market is rarely the most favourable terrain for a smaller entrant. The incumbent is strongest in the largest market. Choose terrain where the structural dynamics favour you, even if that segment is smaller.

Entering narrow terrain controlled by the opponent without a bypass: A distribution channel monopoly, a regulatory approval gate, or a technical standard controlled by the incumbent cannot be forced. Find the bypass — a new channel, an adjacent regulatory category, an open alternative standard.

Expanding before the core position is defensible: The temptation to expand while the core is still insecure produces a stretched position with multiple weak points. Secure the core, then expand from a position of strength.

Failing to recognise temporising terrain: Some markets are genuinely structured so that neither entrant can achieve a decisive position. Entering temporising terrain produces resource consumption without strategic gain. Wait for conditions to change before entering.

Not creating terrain: Occupying existing terrain is defensive strategy. Creating terrain (standards, platforms, ecosystems) is offensive strategy that compounds over time. Invest in terrain creation early — it is expensive but produces structural advantages that resist competitive response.