Playing to Win: How Strategy Really Works
by A.G. Lafley and Roger L. Martin
Former P&G chairman A.G. Lafley and former dean of University of Toronto’s Rotman School of Management Roger Martin explain, “in our terms, a strategy is a coordinated and integrated set of five choices: a winning aspiration, where to play, how to win, core capabilities, and management systems.”
Winning Aspiration
“Aspirations are statements about the ideal future” such as Nike’s mission: “‘To bring inspiration and innovation to every athlete in the world’… At a later stage in the process, a company ties to those aspirations some specific benchmarks that measure progress toward them. At Olay, the winning aspirations were defined as market share leadership in North America, $1 billion in sales, and a global share that put the brand among the market leaders… Start with consumers, rather than products, when thinking about what it means to win.”
Where to Play
“The choice of where to play defines the playing field for the company (or brand, or category, etc.). It is a question of what business you are really in… Where-to-play choices occur across a number of domains, notably these: Geography… Product type… Consumer segment… Distribution channels… Vertical stage of production…”
“Choosing where to play is also about choosing where not to play. This is more straightforward when you are considering where to expand (or not), but considerably harder when considering if you should stay in the places and segments you currently serve. The status quo—continuing in the locations and segments you’ve always been—is all too often an implicit, unexamined choice.”
“Ultimately, there are four dimensions you need to think about to choose where to play and how to win:
- The industry. What is the structure of your industry and the attractiveness of its segments?
- Customers. What do your channel and end customers value?
- Relative position. How does your company fare, and how could it fare, relative to the competition?
- Competition. What will your competition do in reaction to your chosen course of action?”
How To Win
“Winning means providing a better consumer and customer value equation than your competitors do, and providing it on a sustainable basis… Michael Porter called it competitive advantage—the specific way a firm utilizes its advantages to create superior value for a consumer or a customer and in turn, superior returns for the firm.”
“All successful strategies take one of these two approaches: cost leadership or differentiation.”
- “In a cost leader, managers are forever looking to better understand the drivers of costs and are modifying their operations accordingly… Standardization and systemization become core drivers of value… Cost leaders can create advantage at many different points—sourcing, design, production, distribution, and so on… Only the true low-cost player can win with a low-cost strategy.”
- “In a differentiator, managers are forever attempting to deepen their holistic understanding of customers to learn how to serve them more distinctively… Differentiators can create a strong price premium on brand, on quality, on a particular kind of service, and so forth… Competition will follow your technology. Technical superiority alone is not sustainable.”
Core Capabilities—Play to Your Strengths
“Powerful and sustainable competitive advantage is unlikely to arise from any one capability (e.g. having the best sales force in the industry or the best technology in the industry), but rather from a set of capabilities that both fit with one another (i.e. that don’t conflict with one another) and actually reinforce one another (i.e. that make each other stronger than they would be alone)… As Porter notes, not all of the elements need to be unique or impossible to replicate. It is the combination of capabilities… that must be inimitable.”
“Companies can be good at a lot of things. But there are a smaller number of activities that together create distinctiveness, underpinning specific where-to-play and how-to-win choices… A company needs to invest disproportionately in building the core capabilities that together produce competitive advantage.”
“When thinking about capabilities, you may be tempted to simply ask what you are really good at and attempt to build a strategy from there. The danger of doing so is that the things you’re currently good at may actually be irrelevant to consumers and in no way confer a competitive advantage.”
“In a corporation… with different brands, categories, and markets, each different business line makes its own where-to-play and how-to-win choices within the context of organizational choices. Logically, then, each unit must have an activity system that supports its choices, a system that is informed by the corporate-level map. In other words, layers of capabilities occur throughout the organization, and the activity systems look at least a little different in different parts of the company… However, if there is nothing in common between these different activity systems, it is a sign that the organization has businesses that may fit poorly in the same portfolio.”
The book includes examples of how P&G leverages its capabilities across business units. For example, knowledge transfer from the fragrance business led to the launch of Gain, a scented laundry detergent. Quilting technology developed for paper towels was used to launch Glad ForceFlex trash bags. P&G also brought its ethnographic approach to consumer research to Gillette when it acquired the company.
Manage What Matters
“These reviews focused on very basic, very fundamental questions with the intent of helping the team make better strategic choices… Was P&G winning in this category? … What were the opportunities related to unmet consumer needs? What were the most promising innovations and technologies? What were the threats to category or country or channel structural attractiveness? What core capabilities was the business lacking? What was its most troubling or threatening competitor?”
“People’s default mode of communication tends to be advocacy—argumentation in favor of their own conclusions and theories, statements about the truth of their own point of view… The kind of dialogue we wanted to foster is called assertive inquiry. Built on the work of organizational learning theorist Chris Argyris at Harvard Business School, this approach blends the explicit expression of your own thinking (advocacy) with a sincere exploration of the thinking of others (inquiry). In other words, it means clearly articulating your own ideas and sharing the data and reasoning behind them, while genuinely inquiring into the thoughts and reasoning of your peers.”
“The stance we tried to instill at P&G was a reasonably straightforward but traditionally underused one: ‘I have a view worth hearing, but I may be missing something.’ It sounds simple but this stance has a dramatic effect on group behavior if everyone in the room holds it… The goal was to create a culture of inquiry that would surface productive tensions to inform smarter choices.”
What Would Have to be True?
“Asking a single question can change everything… What would have to be true for the option on the table to be a fantastic choice? … This question helpfully focuses the analysis on the things that matter. It creates room for inquiry into ideas, rather than advocacy of positions. It encourages a broader consideration of more options, particularly unpredictable ones… Next, the group reflects on the set of conditions and asks which of those conditions seem the least likely to hold… The best strategic choice gradually becomes clear.”
Moments of Truth
“In consumer terms, the notion behind moments of truth is that a company’s performance is the sum total of all its interactions with its customers, the moments in which the brand promise is wither realized or not in the consumer’s mind. It is when the consumer enjoys the Gain fragrance for the first time, when Tide with Bleach actually does whiten his whites… It is when the product experience reinforces the brand promise and helps start a first-time purchaser down the path toward repurchase, regular usage, and, ultimately, brand loyalty.”
“The notion that there are two crucial moments of truth—when the consumer encounters the product in the store for the first time and when he or she first uses at home—was significant for P&G. Previously, the whole company had focused primarily on that second moment—the at-home, in-use moment. We wanted to highlight and elevate the significance of the first moment of truth, illustrating just how important that in-store experience is to winning. Is the product in stock? It is prominently positioned on the shelf? Does the packaging help the consumer understand the performance promise and the value proposition? Is it merchandised in a way that reinforces the brand promise and builds on it? Does something in the merchandising and in-store marketing compel the consumer to pick up that product, rather than the one right beside it or down the aisle? Indicating that winning would require winning both of the first two moments of truth signaled an important shift for the company.”
Simplicity and Clarity
“One of the biggest lessons I had learned in my years at P&G was the power of simplicity and clarity. I found that clearer, simpler strategies have the best chance of winning, because they can be best understood and internalized by the organization. Strategies that can be explained in a few words are more likely to be empowering and motivating; they make it easier to make subsequent choices and to take action… The better the choices were understood, the more likely they would lead to action.”
Lafley, A.G., Roger L. Martin, Playing to Win: How Strategy Really Works. Harvard Business Review Press, 2013. Buy from Amazon.com
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