Playing to Win: How Strategy Really Works
How Strategy Really Works is a book about strategy, written by A.G. Lafley, former CEO of Procter & Gamble, and Roger Martin, dean of the Rotman School of Management. The book covers the “transformation” of P&G under Lafley and the approach to strategy that informed it.
This approach grew out of the strategy practice at Monitor Company and subsequently became the standard process at P& G. Over the course of our careers, we worked to develop a robust framework around our strategic approach, a way to teach the concepts to others, and a methodology for bringing it to life in an organization. … Ultimately, this is a story about choices, including the choice to create a discipline of strategic thinking and strategic practice within an organization.
What is Strategy?
Really, strategy is about making specific choices to win in the marketplace. According to Mike Porter, author of Competitive Strategy, perhaps the most widely respected book on strategy ever written, a firm creates a sustainable competitive advantage over its rivals by “deliberately choosing a different set of activities to deliver unique value.” Strategy therefore requires making explicit choices— to do some things and not others— and building a business around those choices. In short, strategy is choice. More specifically, 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.
Too often CEO’s allow the urgent to cloud out the important. “When an organizational bias for action drives doing, often thinking falls by the wayside.”
Rather than develop strategies, many leaders tend to approach strategy in one of the following ineffective ways:
- they define strategy as a vision;
- they define strategy as a plan;
- they deny that long-term strategy is possible;
- they define strategy as the optimization of the status quo; and
- they define strategy as following best practices.
“These ineffective approaches,” Lafley and Martin argue, “are driven by a misconception of what strategy really is and a reluctance to make truly hard choices.”
While everyone wants to keep options open as long as possible, only making and acting on choices allow you “to win.” Great organization choose to win — tough choices force your hand but, if you let them, they also focus your organization.
When a company sets out to participate, rather than win, it will inevitably fail to make the tough choices and the significant investments that would make winning even a remote possibility.
Playing to win, however, means you might be wrong.
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. … The five choices make up the strategic choice cascade, the foundation of our strategy work and the core of this book.
Specifically, strategy is the answer to these five interrelated questions:
- What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.
- Where will you play? A playing field where you can achieve that aspiration.
- How will you win? The way you will win on the chosen playing field.
- What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way.
- What management systems are required? The systems and measures that enable the capabilities and support the choices.
As you can imagine, in small organizations a single choice cascade might exist, whereas in large organizations multiple “levels of choices and interconnected cascades.” Nested cascades means that choice happens at almost every level in the organization.
Aspirations are statements about the ideal future. At a later stage in the process, a company ties to those aspirations some specific benchmarks that measure progress toward them. … Aspirations can be refined and revised over time. However, aspirations shouldn’t change day to day; they exist to consistently align activities within the firm, so should be designed to last for some time.
Where to Play
The winning aspiration broadly defines the scope of the firm’s activities; where to play and how to win define the specific activities of the organization— what the firm will do, and where and how it will do this, to achieve its aspirations.
Where to play represents the set of choices that narrow the competitive field. The questions to be asked focus on where the company will compete— in which markets, with which customers and consumers, in which channels, in which product categories, and at which vertical stage or stages of the industry in question.
How to Win
Where to play selects the playing field; how to win defines the choices for winning on that field. It is the recipe for success in the chosen segments, categories, channels, geographies, and so on. The how-to-win choice is intimately tied to the where-to-play choice. Remember, it is not how to win generally, but how to win within the chosen where-to-play domains.
… To determine how to win, an organization must decide what will enable it to create unique value and sustainably deliver that value to customers in a way that is distinct from the firm’s competitors. 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.
Great strategies allow a certain fit between the where-to-play and how-to-win choices that make the company stronger.
Two questions flow from and support the heart of strategy: (1) what capabilities must be in place to win, and (2) what management systems are required to support the strategic choices?
The final strategic choice in the cascade focuses on management systems. These are the systems that foster, support, and measure the strategy. To be truly effective, they must be purposefully designed to support the choices and capabilities.
[S]trategy is an iterative process in which all of the moving parts influence one another and must be taken into account together.
The heart of strategy, according to Lafley and Martin, is deciding where to play and determining how you will win there.
What business are you in?
Most companies, if you ask them what business they’re in, will tell you what their product line is or will detail their service offering. Many handheld phone manufacturers, for example, would say they are in the business of making smartphones. They would not likely say that they are in the business of connecting people and enabling communication any place, any time. But that is the business they are actually in— and a smartphone is just one way to accomplish that.
The book was an excellent read and the kindle edition is only $7.99!How Strategy Really Works. This approach grew out of the strategy practice at Monitor Company and subsequently became the standard process at P&G.
Playing to Win: How Strategy Really Work s (Book Summary)
📈 Jeremey DonovanFollow
SVP Sales Strategy at SalesLoft
- Like 102
- Comment 7
Strategy is a coordinated and integrated set of five choices – a winning aspiration, where to play, how to win, core capabilities, and management systems – that uniquely meet a consumer’s needs, thereby creating competitive advantage and superior value for a business. Strategy is a way to win—and nothing less.
I. The 5 Choices That Define Strategy
1. A winning aspiration
- Aspirations are statements about the ideal future that serve as the guiding purpose for the enterprise.
- Start with people (consumers and customers) rather than money (stock price)
- Don’t aspire to participate; aspire to win with the customers who matter most and against the very best competitors. Good enough is not an option.
- Winning aspirations should be crafted with the consumer explicitly in mind; guard against marketing and product myopia
- When setting winning aspirations, you must look at all competitors and not just at those you know best. What are they doing strategically and operationally that is better than you? Where and how do they outperform you? What could you learn from them and do differently?
2. Where to play
- Where to play represents the set of choices that narrow the competitive field so that you can devote disproportionate resources – (a) consumer segments incl. who, which price tier, & serving which needs (b) geographies (c) distribution channels (d) product categories (e) vertical stages of the industry (f) against which competitors
- Choosing where to play is also about choosing where not to play.
- You should avoid three pitfalls when thinking about where to play. The first is to refuse to choose, attempting to play in every field all at once – i.e being all things to all customers. The second is to attempt to buy your way out of an inherited and unattractive choice. The third is to accept a current choice as inevitable or unchangeable.
- Look for places to play that will enable you to attack from unexpected directions, along the lines of least resistance. Don’t attack walled cities or take on your strongest competitors head-to-head if you can help it.
- Don’t start wars on multiple fronts at once. Plan for your competitors’ reactions to your initial choices, and think multiple steps ahead. No single choice needs to last forever, but it should last long enough to confer the advantage you seek.
3. How to win
- The where-to-play and how-to-win choices should flow from and reinforce one another
- To determine how to win, an organization must decide what will enable it to create unique value and sustainably deliver that value to customers in a way that is distinct from the firm’s competitors. 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.
- Choose to compete either as a cost leader or a differentiator. While all companies make efforts to control costs, there is only one low-cost player in any industry—the competitor with the very lowest costs. The alternative to low cost is differentiation. In a successful differentiation strategy, the company offers products or services that are perceived to be distinctively more valuable to customers than are competitive offerings, and is able to do so with approximately the same cost structure that competitors use.
- Differentiation between products is driven by the activities of the firm: product design, product performance, quality, branding, advertising, distribution, and so on.
- Competition will follow your technology, trying to at least match it and ideally beat it. Technical superiority alone is not sustainable
4. Core capabilities
- The goal is an 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.
- 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.
- Porter noted that 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
- The activity system is a visual representation of the firm’s competitive advantage, capturing on a single page the core capabilities of the firm.
- P&G believed it could win through (1) consumer understanding, (2) brand building, (3) R&D / innovative product design, (4) global scale, and (5) go-to-market ability via strong partnerships with both suppliers and channel customers
- Core capabilities often span: (a) product innovation / quality (b) packaging / design (c) distribution (d) marketing / brand (e) business model (f) production / sourcing (g) partnerships (h) service
- A company must understand its existing core capabilities and consider them when deciding where to play and how to win. But it may need to generate and invest in new core capabilities to support important, forward-looking where-to-play and how-to-win choices, too.
5. Management systems
- Systems that create, review, and communicate the strategy, including: (a) strategy dialogues (b) innovation program reviews (c) brand-equity reviews (d) budget and operating plan discussions (f) talent assessment & development reviews.
- What gets measured gets done. Expected outcomes should be noted in writing, in advance. Specificity is crucial. These measures should span financial, consumer, and internal dimensions, to prevent the team from focusing exclusively on a single parameter of success.
- A strategy discussion is not an idea review. A strategy discussion is not a budget or a forecast review. A strategy discussion is how we are going to accomplish our growth objectives in the next three to five years. Some meetings focused on a single strategic question, and the team rarely tried to wrestle with more than three questions in a single meeting.
- The review meeting became what we hoped it would be: an inquiry into the competitiveness, effectiveness, and robustness of a strategy. First, there would be no presentation, only a discussion of the strategic issues agreed on in advance. Second, we limited the number of folks in the room, down from twenty-five to just four or five from the business plus the CEO and the corporate leaders who would bring specific experience or knowledge on the strategy issue. Third, participants would not be allowed to bring more than three new pages of material to the meeting to share—we did not want the participants to race off and create yet another PowerPoint deck with answers to the questions raised in the letter. The group would spend three or four hours chewing on the few critical issues together.
- Presidents had to submit a monthly letter directly to the CEO and had a monthly or (at minimum) quarterly meeting, either in person or on the phone.
- The kind of dialogue we wanted to foster is called assertive inquiry. This approach blends the explicit expression of your own thinking (advocacy) with a sincere exploration of the thinking of others (inquiry).
- OGSM, a one-page document that captures objectives, goals, strategy, and measures for a brand, category, or company.
- Direct, broadcast messages to the organization are another systems tool.
II. Strategy Logic Flow
Ultimately, there are four dimensions you need to think about to choose where to play and how to win:
- What are the distinct segments (geographically, by consumer preference, by distribution channel, etc.)?
- What is the structural attractiveness of each segment? To understand structural attractiveness, we can turn to Mike Porter’s seminal five-forces analysis and ask about the bargaining power of suppliers, the bargaining power of buyers, the degree of rivalry, the threat of new entrants, and the threat of substitutes
2. Customer Value Analysis: To understand the consumer value equation, you must truly get to know your consumers through ethnographic study — to engage with them beyond the quantitative survey, through deeper, more personal forms of research—watching them shop, listening to their stories, visiting them at home to observe how they use and evaluate your products.
3. Relative Position
- Capabilities: How do your capabilities stack up, and how could they stack up, against those of your competitors in meeting the identified needs of customers (both channel and end consumer)
- Costs: What is the degree to which the organization can achieve approximate cost parity with competitors or distinctly lower costs than competitors
4. Competition: Is there some competitive response that could undermine or trump the where-to-play and how-to-win choices? A strategy that only works if competitors continue to do exactly what they are already doing is a dangerous strategy indeed.Strategy is a coordinated and integrated set of five choices – a winning aspiration, where to play, how to win, core capabilities, and management systems – that uniquely meet a consumer’s needs, thereby creating competitive advantage and superior value for a business. Strategy is a way to win—and no ]]>