Openly accepting near-term losses, a sponsor launches a project in territory a rival division claims, as a strategic investment whose real return is a stake in that ground.
Borderline: whether this move is justified depends on the situation, and only the person in it can judge.
An example
Small-business cyber coverage, the head of specialty lines at a regional insurer believed, would be a large market within five years, and the commercial lines division, which claimed every small-business customer, had no plans for it. She proposed a cyber product for small firms with a pro forma showing losses for three years, and called it what it was in the operating committee: a strategic bet on a market commercial lines was not serving. She asked for a loss cap of $4 million and a two-year review against policy count and claims experience. The commercial lines president objected that small business was his territory. She agreed that it was, and offered to transfer the book to his division at the review if he chose to take it on. The committee approved the cap, and commercial lines started its own cyber working group the next quarter.
Why it works
Strategic vocabulary makes the money-losing project look better, so approving it feels like endorsing expansion. Leaving the rival's territory alone looks worse once the project occupies part of it, because the rival's sole claim is broken before any return appears. Blocking the project looks costlier, since the blocker seems unimaginative and the rival must now defend its ground with real resources. It needs budget tolerance to absorb the loss, a credible strategic story, territory that no formal mandate locks, and a sponsor patient enough to survive the gap between the loss and the payoff.
The thinking behind it
Thomas C. Schelling Schelling's The Strategy of Conflict (1960) argues that the power to bind oneself can be a source of strength: a party that visibly removes its own option to retreat forces the other side to adjust. A loss-making product already in the market, with a committed budget and a review date, is that kind of commitment. The rival can no longer treat the territory as uncontested and has to respond, in the market or in the forum.
Jeffrey Pfeffer Pfeffer's Managing with Power: Politics and Influence in Organizations (1992) argues that getting things done requires diagnosing who holds power and building it deliberately. A claimed market is a source of power inside a company, because it brings budget and standing. An open strategic bet builds a position in that market while leaving the decision in the forum that allocates territory, which is what keeps it legitimate.
When it fits
Strategic bets in contested territory suit a sponsor with the budget tolerance to absorb a visible loss, a market the rival is not serving well, and territory that no formal mandate locks. You need a strategic case a committee will accept, and the patience to survive the gap between the loss and any payoff.
How to use it well
State the bet plainly: say the project will lose money, why, for how long, and what the company gets if it works. The open loss is what separates this from hidden spending, because it gives the committee a bounded decision and makes the rival answer in the market or in the forum, where both sides have to show their plans.
- Ask for a loss cap and a dated review against measures anyone can check.
- Name the territory question openly, and offer the rival a role, such as taking over the business at the review.
- Staff the project with people who can make the product work, since occupation without results invites a quick shutdown.
- Report the losses on schedule and in full.
What it costs and where it backfires
You spend real money, and if the bet fails the loss carries your name in plain view. The rival division may turn the contest into a lasting feud and fight you elsewhere. The move stays clean only while the losses are reported in full and the strategic case is one you believe: understating the losses, or presenting an open-ended drain as bounded, crosses into misrepresentation.
When it is used on you
If a sister unit plants a loss-making project in your territory, ask the forum that allocates territory to rule on ownership, and ask whether the loss is capped. Then bring your own plan for the same customers, since an unserved market is the sponsor's best argument.