Playing To Win
How Strategy Really Works
Former Proctor and Gamble CEO A.G. Lafley and a college Dean Roger L. Martin (it’s OK if you’ve never heard of them, neither had I) team up to make one of the more respected books on strategy. They are not playing to make friends, they are…playing to win.
30 second summary
Strategy is about making specific choices to win in the marketplace.
Deliberately choosing a different set of activities than competitors to deliver unique value to customers and consumers.
Strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.
Strategy must be rooted in a desire to meet user needs in a way that creates value for both the company and the consumer.
2 more minutes of summary
A strategy is a coordinated set of 5 choices:
- a winning aspiration,
- where to play,
- how to win,
- core capabilities,
- and management systems.
Companies blinded by marketing myopia are blinded by the products they make and they fail to see the larger purpose or true market dynamics. What business are we in? The Railroad companies considered themselves in the railroad industry rather than the transportation industry, which was short-sighted.
Winning aspirations should be crafted with the consumer in mind first and foremost. Start with consumers first and then think about products, not vice versa.
Play to win.
Break aspirations down from the entire company to individual departments. What is winning for this function of the business?
Chapter 3 – Where to Play
- Geography – countries and regions
- Product type
- Consumer segment
- Distribution channel
- Vertical stage of production – when to outsource and where to add value
A choice to serve everyone and everywhere is a losing choice.
“Continuing the status quo – serving the consumers and channels you currently serve – is all too often an implicit, unexamined choice.” p58
“Choosing a playing field identical to a strong competitor’s can be a less attractive proposition than tacking away to compete in a different way, for different customers, or in a different product lines.” P.60
Avoid 3 pitfalls: reusing to choose where to play, attempting to play everywhere, accepting where you are now as ideal, or attempting to buy your way out of an inherited and unattractive choice (through acquisition). P61
- Understand you must choose where not to play
- Don’t embark on a strategy without making these where choices. If everything is a priority, then nothing is.
- Look for unexpected places to attack. Don’t take your competitors on head-on.
- Don’t start on multiple fronts all at once
Chapter 4 – How to Win
Product and technology alone are not enough. Everyone makes good products.
First there is a “Low cost strategy”…but remember, there is only one true low-cost competitor…the lowest cost. Companies that pursue this strategy are always seeking to squeeze money out of their supply chain. Cost reduction is relentlessly pursued.
Second there are “Differentiated” strategies…doing something different than your competitors. In this strategy, the brand is relentlessly built and the understanding of consumer behavior and preference is king. Focus on finding ways to delight the customer in a distinctive way in order to produce their willingness to pay for your products.
These are the only two types of strategies. Both require the pursuit of distinctness.
Strategic thinking capabilities inside of a company are critical. This should go without saying.
How to win decisions go hand in hand with where to play decisions
Don’t only consider these how to win choices for customer-facing groups.
Competition will follow you technologically. If you do something unique, soon enough others will match and/or beat it. Technological superiority alone is not sustainable.
Chapter 5 – Play to your strengths
You must focus on those capabilities which align with how to win and where to play. Don’t waste time building up non-strategic functions/capabilities in the company.
“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. Rather than starting with capabilities and looking for ways to win with those capabilities, you need to start with setting aspirations and determining where to play and how to win.” P.114
5 capabilities: P.115
- Understanding the consumer
- Creating and building brands
- Partnering and going to market with customers and suppliers
- Leveraging global scale
“The goal, then, is integrated and mutually reinforcing set of capabilities that underpin the where to play and how to win choices and that are feasible, distinctive, and defensible.” P119
Consider your activity system (much like the southwest diagram where all the activities tie into the strategic differentiating activities). The larger nodes are the core capabilities while the smaller nodes are the activities that support those core capabilities. P127
Discuss and debate your activity system. And refine it. Don’t settle for generic activity system – it must be unique and defensible. Explicitly test for uniqueness and distinctiveness. P128
Chapter 6 – Manage what matters
Making a good strategy is all well and good, but you must implement the management systems that will allow you to execute. “A company needs a robust process for creating, reviewing, and communicating about strategy; it needs specific measures to ensure that the strategy is working.” P129
“A strategy discussion is not an idea review. It is not a budget or forecast review. A strategy discussion is how we are going to accomplish our growth objectives in the next 3-5 years.” P131
Advice for how to hold a meeting on strategy: Limit the number of people, prepare with an agenda before of the topics to be discussed, do not make a formal presentation, and limit the amount of material people can bring to the meeting (3 pages of content). This should foster a genuine conversation. Be dialogue oriented. P132
The kind of dialogue we wanted to establish is called assertive inquiry…which blends the explicit expression of your own thinking (advocacy) with a sincere exploration of the thinking of others (inquiry). P136 “I have a view worth hearing, but I may be missing something.”
Conversational tips: advocate your idea but ask for input; paraphrase to ensure understanding; and explaining a gap in your understanding of other’s views and asking for more information. p. 137
Consider the “OGSM document,” which outlines Objectives, goals, strategy, measures for a brand, category or company. This could become a document that everyone in the brand is aware of, familiar with, and uses in decision-making. This document can help with alignment of innovation development, for example. P139
OGSM document example p. 140
“Strategy is formulated at all levels of the organization, and to be successful, it needs to be clearly communicated at all levels as well.” You can’t quite do that with a powerpoint – needs to be simple and clear so it can be shared broadly. The single page OGSM is a possible solution. P.141
P&G undertook specific investments in order to support their strategy, including investing in market research and innovation. “Build systems around core competencies.” p.144-145
If you are putting all of this effort into identifying a strategy, you have to put measurements in place. P149
WPI = Weighted Purchase Intent, which measures all the possible consumer value additions in a product. P.153. Example story of P&G having the most technologically advanced diaper, but they weren’t winning the marketplace. When they reexamined all the different ways that a consumer evaluated the diaper, they realized they were deficient in many places. And when they scored all the diapers against the WPI, they saw the market leader was also the WPI leader, and they saw this in many categories. The WPI predicted market success. P.153-154
“The purpose of a business is to create consumers and to serve them better than anyone else can.” P.157 A.G. Lafley
Chapter 7 – Think through strategy
There are four dimensions you need to think about to choose where to play and where to win: the industry, customers, relative position (how does your company fare relative to the competition), competition (what will they do in reaction to your actions). These are analyzed extensively. p.161-177
The strategic logic flow is a series of questions that lead to a strategic choice. P.161
Michael Porter’s market forces on p. 164 in order to analyze the industry.
Customer Value analysis is also discussed on 167 with discussion of channel specific issues. One critical consideration is to think of your end-consumers and your B2B customers. Consider your whole value chain.
P&D retooled their market research group to be less quantified and turned them into the CMK group (consumer and market knowledge) which performed quantified and qualified research. For a differentiated strategy to work, you must know the end consumer. P170
Good summary on p176 called “a framework for strategy.”
End of chapter bullet points
- Do explore all four critical dimensions: industry, customers, relative position, competition.
- Do look beyond your current understanding of the industry, pushing to generate new ways to segment the market.
- Don’t accept that entire industries are or must be unattractive.
- Do consider both channel and end consumer value equations. You have to have win-win.
- Don’t expect consumers or customers to tell you what they value; your job is to figure it out.
- Compare your capabilities with those of you competitors.
- Consider what your competitors will do.
Shorten Your Odds
This chapter seems again to be discussing best practices for having the strategic conversation within your company.
Frame options as choices. This helps people get a feel for them. You can complain about sales in a segment, but that gets you nowhere. Lay out the choices. It’s simple but effective. P188
Use the expression “what would have to be true” to evaluate strategic possibilities. When someone proposes a possibility, reverse engineer it using this logical approach.
Encourage skepticism in the strategy discussion. Skepticism is good.
Use “what would have to be true” for the evaluation of research projects. “What would have to be true for this to get commercialized successfully?” p205
“Eventually companies without winning strategies die.” P211
Remember, there are 5 questions
- Have you defined winning, and are you crystal clear about your winning aspiration?
- Have you decided where you can play to win (and where not to play)?
- Have you determined how, specifically, you will win where you choose to play?
- Have you pinpointed and built your core capabilities in such a way that they enable your where to play and how to win choices?
- Do your management systems and key measures support your other four strategic choices?
Have you used the strategic logic flow framework to understand the industry, channel, and customer values, your own relative capability and cost positions, and competitive reactions in a way that can underpin sustainable where to play and how to win choices?
Have you reverse engineered the strategic possibilities and asked what would have to be true to ensure that this possibility is the one that gives you the best chance to win?
“The playbook” summarizing those points above. P213
Six strategy traps that companies tend to fall into
- The “do it all” strategy
- Don Quixote strategy – take on big competitors
- Waterloo strategy – too many fronts
- Something for everyone strategy
- Making high level aspirations and never laying foundation beneath them.
- Program of the month strategy.
Six telltale signs of a winning strategy
- Activity system that is different from all competitors.
- Customers who adore you unconditionally and others who don’t get it.
- Competitors who are making profit doing what they are doing. They don’t have to attack you.
- More resources to spend on an ongoing basis than competitors have. You are therefore winning the value equation and have the biggest margin between price and costs and the best capacity to add spending to take advantage of an opportunity to defend your turf.
- Competitors who attack one another, not you.
- Customers who look first to you for innovations, new products and service enhancements to make their lives better.