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Playing to Win

AG Lafley & Roger L Martin 2013, 260pp

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“Itreatstrategy-makingasdevelopingasetofanswerstofiveinterlinkedques>ons.Theques>ons—whichcascadelogicallyfromthefirsttothelast–are“depictedontheleDThetrickistohavefiveanswersthatareconsistentwithoneanotherandactuallyreinforceoneanother.

Tocreateastrategy,youhavetoiterate—thinkaliFlebitaboutAspira>ons&Goals,thenaliFlebitaboutWheretoPlayandHowtoWin,thenbacktoAspira>ons&Goalstocheckandmodify,thendowntoCapabili>esandManagementSystemstocheckwhetheritisreallydoable,thenbackupagaintomodifyaccordingly.

The Strategy Cascade

Nested Choice Cascades – In larger organizations, there are multiple levels of strategy cascades, at the corporate-level (P&G), category level (Hair Care) and brand-level (Head & Shoulders)

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StrategyisChoice

•  Strategyprac>cesynonymouswithmanagementun>lthe1950s,whenitbegantoemergeasitsowndiscipline–  Rela>velyyoungfield–  Afullyagreed,universaldefini>onofstrategyyettoemerge

•  M&L(Mar>n&Lafley)defineStrategyasaboutmakingspecificchoicestowininthemarketplace–  MichaelPorter:afirmcreatesasustainablecompe>>veadvantageoverits

rivalsby“deliberatelychoosingadifferentsetofac>vi>estodeliveruniquevalue”.HenceStrategyismakingexplicitchoices.

–  M&Ldefineitas“anintegratedsetofchoicesthatuniquelyposi>onsthefirminitsindustrysoastocreatesustainableadvantageandsuperiorvaluerela>vetocompe>>on”•  Strategyisacoordinatedandintegratedsetoffivechoices:awinningaspira>on,where

toplay,howtowin,corecapabili>es,andmanagementsystems.Thisisdepictedinastrategycascade(seeprevpage)

–  Thereisnooneperfectstrategy;findthedis>nc>vechoicesthatworkforyou.(seenextslide)

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“Don'tmistakenon-choicesforstrategy”(h7p://www.bridgespan.org/publicaAons-and-tools/strategy-development/roger-marAns-

unconvenAonal-wisdom.aspx#.VMS8MxOSyoX)

•  Theveryessenceofstrategyisexplicit,purposefulchoice.Strategyissayingexplicitly,proac>vely:"We'regoingtodothesethingsandnotthosethingsforthesereasons."

•  Theproblemwithalotofstrategiesisthattheyarefullofnon-choices.Probablymostofushavereadmorethanafewso-calledstrategiesthatsaysomethinglike,"Ourstrategyistobecustomercentric."Butisthatreallyachoice?–  Youonlyknowthatyou'vemadearealstrategicchoiceifyoucansaytheoppositeofwhatthatchoiceis,andit's

notstupid.So,thinkabout'customercentric.'Theoppositewouldbewhat?Weignoreourcustomers?Howdoesthatwork?Canyoupointoutmanycompaniesthatsucceedandmakelotsofmoneyignoringtheircustomers?Well,thenbeingcustomercentricisnotastrategicchoice.

–  Here'sanotherexample:"We'regoingtobeopera>onallyeffec>ve.We'regoingtoshowaFen>ontoexecu>on."Youseethesesentencesallthe>meinstrategies,butthey'renotstrategicchoices.Alwaysthinkoftheopposite."We'renotgoingtobeopera>onallyeffec>ve."Iftheoppositeisstupidandisdemonstratedbythefactthatnobodywho'shadanykindofsuccesshaseverdoneit,thenit'snotstrategy.YougetaliFlebitofcreditforthat—likegefngaD-minusgrade—butIwouldhopethatmostnonprofitsaspiretobegreaterthanthat.

•  IoDenusethemutualfundindustryasanexampleofwheretheleadingplayershavemaderealchoices.Vanguard'sfounderJohnBoglesays,"Pickingstocksisstupid.It'sbadfortheinvestors.Itwastestheirmoney.Justbuyindexfunds."That'sallVanguardoffers.Howdoweknowit'snon-stupid,thatithasastrategy?BecauseFidelitysaystheopposite,"Porkoliomanagersaretheabsoluteheartofthestrategy.Weputtogetherporkoliosthatarecustomizedtoourclients'needs."Sowehavetwosupersuccessfulmutualfundcompaniesmakingtheoppositechoices.That'sstrategy,andthat'swhatyoushouldseek.

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Thisisnotfromthebook,butfromaninterviewofRogerMar>n.Includedbecauseitillustratesakeystrategictenet.

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1.WinningAspiraAon

•  Winningaspira>ondefinesthepurposeofyourenterprise,itsguidingmissionandaspira>oninstrategicterms–  Whatdoeswinninglooklikeforthisorganiza>on?

•  Unlessanaspira>onisnotmeaningfulandpowerfulenough,itwillnotmo>vatethelowest-levelemployee.Awinningaspira>onhastoconnectintoadeeperideaofwhattheorganiza>onexiststodo.

•  Startwithpeople(consumers),andframeyourambi>onsaroundthem–  PeterDruckersaid,“thepurposeofanorganiza>onistocreateaconsumer”–  BewaryofMarke>ngMyopia(TheodoreLeviF)–andlookateverythingthroughtheproductlens

•  Awinningaspira>onthatiscraDedaroundsolvingtheconsumers’problemswillhelpavoidusgefngtooproductfocused–  P&G’shomecarebusinesshas“reinventcleaningexperiences,takingthehardworkoutofhouseholdchores”asitsaspira>on,nothavingthe

mostpowerfulcleanserorbleach–  Fromunresolvedconsumertensionscomeinsightsthatleadtobigideas

•  Donottrytoexpresswinningaspira>oninfinancialterms•  Dothinkaboutwinningrela>vetocompe>>on–thinkbeyondyourtradi>onalcompe>tors(Fordhastoworry

notjustaboutChrysler,BMWbutalsoaboutTeslaandZipcar)•  P&Gwinningaspira>on

–  “Meaningfullyimprovethelivesoftheworld’sconsumersbydeliveringthemostvaluablevalue-crea>ngbrandsineverycategoryandindustryinwhichP&Gchosetocompete,andtherebyachieveleadershipsales,profitandvaluecrea>on”

•  Olaywinningaspira>on–  “Becomingaleadingskin-carebrand,helpingestablishakeypillarintheP&Fbeauty-carebusiness,andwinconvincingly

inourchosenchannelsandmarkets”

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2.Wheretoplay

•  Wheretoplayrepresentsthesetofchoicesthatdefinewherethecompanywillcompete–  Inwhichmarkets(geography)–  Withwhichconsumers

•  Whatgroupofconsumerswillyoutarget?Inwhichprice>er?Mee>ngwhichconsumerneed?•  Don’taFackwalledci>esortakeonyourstrongestcompe>torshead-to-headifyoucanhelpit

–  Throughwhichproducts•  Whatkindofproductsandserviceswillyouoffer?

–  Throughwhichchannels•  Howwillyoureachyourconsumers?Whatwillyouoffer?

–  Atwhichstages(ver>cal)oftheindustry•  Wherealongthevaluechainwillyouengage?•  Don’tdismisstheen>reindustry---therearealwayshigh-marginsegmentsinanyindustry

•  Wheretoplayisaboutselec>ngregions,consumers,products,channelsandstagesofproduc>onthatfitwelltogether–thataremutuallyreinforcingandmarrywellwithrealconsumerneeds.–  Some>mesitisabroadconsumercategorywithinanarrowgeographicsegment,some>mesviceversa…

contextmaFers•  Choosingwheretoplayisalsochoosingwherenottoplay–youcantchoosetoserveall

marketsorcategorieswell• 

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3.Howtowin

•  Therearebroadly2genericwaysofwinning–  Costleadership

•  Costleaderscancreateadvantageatmanydifferentpoints–sourcing,design,produc>on,distribu>onetc

–  Differen>a>on•  Differen>atorscancreateastrongpricepremiuminbrand,onquality,onapar>cularkindofservice

etc

•  Onceyouadoptapar>cularstrategy,youalsoneedtostructureyourselfinconsonancewiththat–  Acost-leaderisstaffedverydifferentlyfromadifferen>ator.Standardiza>onbecomes

coredriverofvalue.•  Keepinmindthatroutes-to-marketalsoincludepartnerships/JVs/licensingetc

andyouneednotgoitalone•  Wheretoplayandhowtowinarenotindependentvariables–thebeststrategies

havemutuallyreinforcingchoicesattheirheart–  Theyareactuallyintertwinedandshouldbeconsideredtogether

•  Whathow-to-winchoicesmakesensewithwhichwhere-to-playchoices?•  Whichcombina>onmakesthemostsenseforyourcompanyinlightofthecontext,itsstrengthsetc

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4.WhatcapabiliAesmustbeinplace?•  Capabili>esreferstotherangeofac>vi>esandcompetencies

(strengths)thatunderpinthewhere-to-playandhow-to-winchoices–  Organiza>onsneedtomakedis>nc>vechoicesonwheretoplayandhowtowin,andtailoranac>vitysystemtodeliveronthesechoices

–  P&G’skeycapabili>es(therearemanybuttheseareabsolutelyfundamentaltowinningintheplacesandmannerthatithaschosen)aredeepconsumerunderstanding,innova>on(transla>ngconsumerunderstandingtomust-useproducts),brand-building,go-to-marketabilityandglobalscale•  Inisola>on,eachcapabilityisstrong,butinsufficienttogenera>ngtruecompe>>veadvantageoverthelong-term.Ratherthewayallofthemworktogetherandreinforceeachotheriswhatgeneratesenduringadvantage.Thatcombina>onishardforcompe>torstomatch

•  Capabili>esarebestunderstoodasopera>ngasasystemofreinforcingac>vi>es(MichaelPorter)-–  Avisualrepresenta>on(map)oftheseac>vi>esiscalledac>vitysystem(seemapnextpage) 8

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Ac>vitySystemMapMichaelPorter

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The activity system is a visual representation of the firm’s competitive advantage, capturing on a single page the core capabilities of the firm. The core capabilities are shown in blue ovals, and the links between these nodes represent subordinate nodes, which reinforce the core capabilities, and make them stronger

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•  Whenar>cula>ngcorecapabili>es,youneedtodis>nguishbetweengenericstrengthsandthecri>cal,mutually-reinforcingac>vi>esthatcreatedis>nc>veness(manufacturingstrengthisnotascri>calacapabilityasconsumerunderstanding)–  Capabili>esshouldnotbetakenasgiven–youshouldnotlooktowinwiththe

capabili>esthatyouhave–insteadworkbackwardsfromyouraspira>onsandwhere-to-play+have-to-winchoicestodeterminethecapabil>iesthatyouneed.Onlythencanyouseewhatyouneedtostartdoing,keepdoingandstopdoinginordertowin

•  Onceyouhavedeterminedthecorecapabili>es,drawanac>onplanforthemanddeterminehowmuchtoinvestinthese,andwhichtohoneetc

•  Anac>vitysystemisofnowvalueunlessitsupportsapar>cularwhere-to-playandhow-to-winchoice

•  3ques>onsmustbeansweredbeforeyoufinallydecideontheac>vitysystem–  Isitfeasible(realis>cfromaninvestmentpov,managabletosustain)?–  Isitdis>nc>ve(doesitconferacompe>>veadvantageoveryourpeers)–  Isitdefensible?

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4.WhatcapabiliAesmustbeinplace?(contd)

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MulAlevelCapabilityPlanning•  ReinforcingRods–Inamul>-brand/mul>-categoryorganiza>on,therearecertain

corecapabili>escommontoallbrands/categories/SBUs.Thesesharedcorecapabili>esarecalledreinforcingrods–theyrunthroughmul>pledivisionsandlinkdifferentpartsoftheorganiza>ontogether

•  Whenbuildingac>vitysystemsacrossmul>plelevels,startfromthelowestlevelandbuildup.

•  Thecapabili>esattheindiviisible(lowest)leveldrivetheonesabove•  Alllevelsabovetheindivisible(ground-level)ac>vitysystemareaggrega>onsthat

mustaddnetcompe>>veadvantageinsomeway–  Sinceaggrega>oninvolvessomecost(overhead),ithastoprovidemorethana

countervailingbenefit–elsethosebusinessesarebeFeroffseparate.Thesebenefitscouldbethrough•  Sharedac>vi>es–cost-savings•  Knowledgeandskilltramsfer

–  Theaggregator’sprimaryjobistohelpthelevelbelowcompeteeffec>velythroughsharedac>vi>esandtransferofskills

–  Ac>vi>esthatdon’taddvaluetoac>vitysystemsbelowshouldbereducedbecausetheydestroyvalue•  Onlyifthehair-carecategorycandemonstratevalueviasharingandskilltransfer,thatisgreater

thanthefinancialandadmincostitimposesonH&S,Panteneetcshoulditexistasalevelofaggrega>oninthecorpora>on.Else,itshouldbeeliminated.

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5.Whatmanagementsystemsdoweneed?

•  Thesearethesystemsthatfoster,supportandmeasurethestrategy–  Tobetrulyeffec>ve,theymustbepurposefullydesignedtosupportthechoicesandcapabili>es–  Don’tstopatcapabili>es–askwhatmanagement(Recruitment,BrandManagement,Researchetc)

systemsareneededtofosterthosecapabili>es•  Whilethesesystemsmaydifferacrosscompanies,theyshouldensurethat

–  Choices(andstrategy)arecommunicatedtothewholeco•  Essen>allyatP&Gtheycommunicated3points,insimpleevoca>velanguage

–  Whotheendconsumeroftheproductwas–  Howtowintheconsumervalueequa>on(bywideninggapbetweenvalueitofferedtoconsumersandthecostof

deliveringthatvalue)–  Winthe2mostimportantmomentsoftruth(in-storeandduringuse)

•  Inaddi>ontoformalcommunica>onbytopmgtdownwoards,strategyreviewsanddiscussionsalsohelpspreadtheabovemessage

–  Employeesaretrainedtodeliveronchoicesandleveragecapability–  Plansaremadetoinvestinandsustaincorecapabili>es(ac>vitysystemkeynodes)over>me–  Effec>venessofthechoicesandprogresstowardsaspira>ons/goalsaremeasured(‘whatgets

measuredgetsdone’)•  Thesemayincludedashboards,reviewsetc•  ReviewscouldusetheOGSM(Objec>ves,Goals,Strategy,Measures)documenttoensurecommonground

onstrategy

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StrategyLogicFlow

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•  Howdoyouarriveatthechoiceofwheretoplayandhowtowin?•  TheStrategyLogicFlowframeworkprovidesameanstothinkthroughtheprocessofdecidingwhere

toplayandhowtowin•  Itasksyoutolookat4dimensionsofstrategychoice–industry,customers,rela>veposi>onand

compe>torreac>on(seebelowandnext2slides)

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StrategyLogicFlow…contd.

Dimension Sub-Component Questions to ask Keep in mind (1) Industry Analysis To determine Where to Play – ideally tilt yourself towards structurally attractive industries. Once you have determined relative attractiveness you can decide whether to invest more or divest or migrate…

Segmentation What might be the distinct segments of the industry (by geography, by consumer benefit, by channel etc)? Map all possible segments.

Consumer benefits (kind of like a jobs to be done) can change --- cavity care became generic and healthy mouth became relevant

Attractiveness What is the relative attractiveness of those segments, now and in future?

To understand structural attractiveness of various industry segments, use Porter’s 5-forces model (see penultimate slide)

(2) Customer Value Analysis How well do you understand the pain points and needs of your consumers and your channel partners

Channel Understand the channel value equation. Does the trader prefer high margins or low? What will help trade increase their ROI?

Understanding channel concerns requires deep engagement – co-locating teams, joint exercises to shave off costs all help.

End Consumer What do consumers want, need and value

Go beyond quanti surveys, Ethnographic approaches help understand unspoken desires

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StrategyLogicFlow…contd.

Dimension Sub-Component Questions to ask Keep in mind

(3) Analysis of Relative Position Explore your relative position on two fronts: capabilities and costs

Capabilities How do your capabilities stack up, against those of your competitors in meeting the identified needs of consumers (and channels)?

Can you configure your capabilities to enable your co to meet the needs of consumers in a distinctively valuable way, underpinning a differentiation strategy or a cost-leadership approach, so as to achieve a sustainable competitive advantage?

Costs What is the degree to which the co can achieve approximate cost parity, or distinctly lower costs than competitors?

Does the co have a scale, branding, learning curve or product dev advantage that enables it to achieve cost parity or leadership?

(4) Competitive Analysis Is there some competitive response that could undermine or trump the where-to-play and how-to-win choices?

Anticipate competitive response. Your competitor is unlikely to be sitting still. How hard will be protect his position? This is guesswork to some extent but still worth doing.

You don’t want to design a strategy that a competitor can copy overnight. Only those strategies that yield a sustainable competitive advantage are worth investing in.

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ReverseEngineeringistheidealprocesstoensurethatyoumakethesoundstrategicchoice•  Makesureyouworkthroughthestrategyframeworkandlogicflowinasocial

context-itneedsadiverseteamwitheachbringingtheirdis>nctperspec>vetobearontheproblem.Collabora>oniskey

•  Askyourselfthecri>calques>on–whatwouldhavetobetrueforthistowork?–tofindoutthebeststrategyforthebusiness–  Theprocessforexploringwhatwouldhavetobetruegoesthrough7steps

1.  Framethechoice:convertissuesintoatleast2mutuallyindependentop>ons(criteria:bothcannotbepursued)

2.  Generateabunchofstrategicpossibili>es(where-to-play+how-to-win)thatwillhelpusachievetheabovechoices.Don’trestrictyourselfonlytotheseeminglyrealis>c–exploreunusualchoicesaswell

3.  Reverse-engineerthelogicofeachpossibilitybyspecifyingwhatmustbetrueforthepossibilitytobeaterrificchoice.Notethisisnotaboutarguingwhatistrue,butwhatwouldcondi>onsorcriteriahavetoholdorbetrueforthethistowork?(Seenextpage)–  Makesurethattheop>onsarereviewedandreverse-engineeredbysomeoneotherthantheperson

whofirstsuggestedthepossibility.Haveaexternalfacilitatorideally…–  UseAsser>veInquiry,notAdvocacyastherhetoricalmethod(seelastslide)

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ReverseEngineeringProcess

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ReverseEngineeringProcess…contd

4.(contd).Foreachofthestrategicpossibili>es,comeupwithstatements/condi>onsthatexplainwhathastobetrueforeachoftheboxesinStrategyLogicFlow

–  Onceafullsetofcondi>onsisar>culated,askyourself:ifalltheothercondi>onswerefoundtoholdbutnotthis,wouldthiseliminatethepossibility?Thishelpsyoudis>nguishbetweennice-to-haveandmust-havecondi>ons

–  Theprocessofreverseengineeringisfinalonlywhenallmembersinvolvedintheprocessagreeonthesamemust-haveandnice-to-havecondi>onsforallthepossibili>es

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4.  Iden>fybarrierstochoice:Assesswhichofthecondi>onsyourteambelievesaretheleastlikelytoholdtrue–  Whichcondi>onsworrytheteamthemostandwhichonestheleast?–  Thesecondi>onscons>tutethebarriersthatkeepyouandtheteamfrom

choosingthepossibility.Un>lyouknowiftheyaretrueornot,youcannotmoveahead

5.  Designvalidteststofindifthesebarriershold(condi>onsaretrue)–  Thesecanbethroughsurveyinga1,000consumersorbytalkingto1supplier.It

couldbepurelyquan>orquali.–  Thecri>calissueiswhetherthedecision-makinggroup(anditsmostskep>cal

member)regardsthetestasvalid•  Some>mesyoumayneedmul>pleteststoes>matevalidity

6.  Conductthetestforthecondi>onyouaremostunsureof.Ifthatholds,theneliminatetheen>repossibility,withouttes>nganyothercondi>on(sinceanessen>altesthasbeenfailed)–  Sincetes>ngisoDenthemostexpensive+>me-consumingpart,thefewerthe

teststhebeFer–  Nowmoveontothepossibilitywiththenextmostunsurecondi>on,andsoon

un>lyouareleDwiththefinalchoice7.  Choose! 18

ReverseEngineeringProcess…contd

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PorterFiveForcesAnalysisMichaelPorter

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•  Thever>calaxis–threatfromnewentrantsandthreatofsubs>tuteproducts–determineshowmuchvalueisgeneratedbytheindustry(andcanbesplitupamongsttheindustryplayers.

•  Thehorizontalaxisdetermineswhichen>ty–suppliers,producersorbuyers–willcapturetheindustryvalue

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Asser>veInquiry(vsSimpleAdvocacy)ChrisArgyris

Inthebook,PlayingtoWin:HowStrategyReallyWorks,Lafleyrevealshisprinciplesforfruikulconversa>on.•  Inanyconversa>on,organiza>onalorotherwise,peopletendtooveruseonepar>cularrhetoricaltool

attheexpenseofalltheothers.People'sdefaultmodeofcommunica>ontendstobeadvocacy-argumenta>oninfavorortheirownconclusionsandtheories,statementsaboutthetruthoftheirownpointofview.

•  "Thestancewetriedtoins>llatP&Gwasareasonablystraighkorwardbuttradi>onallyunderusedone:ItiscalledAsserAveInquiryandwaspopularizedbyOrganiza>onTheoristChrisArgyris.

•  Thisapproachblendstheexplicitexpressionofyourownthinking(advocacy)withasincereexplora>onofthethinkingofothers(inquiry).Inotherwords,itmeansclearlyar>cula>ngyourownideasandsharingthedataandreasoningbehindthem,whilegenuinelyinquiringintothethoughtsandreasoningofyourpeers.

•  Inotherwords,Itsays'Ihaveaviewworthhearing,butImaybemissingsomething.'Itsoundssimple,butthisstancehasadrama>ceffectongroupbehaviorifeveryoneintheroomholdsit.One,theyadvocatetheirviewasapossibility,notasthesinglerightanswer.Two,theylistencarefullyandaskques>onsaboutalterna>veviews.”

•  Sohowdoyouemploy"asser>veinquiry?"Herearethreesteps:–  Advocateyourownposi>on,theninviteresponses.Trysaying,“ThisishowIseethesitua>onandwhy.Howdo

youseeit?”–  Paraphrasetheotherperson’sviewandaskfortheirtake.“Itsoundstomelikeyourargumentisthis.Isthat

whatyou'resaying?”–  Explainagapinunderstanding.“Itsoundslikeyouthinkthisacquisi>onisabadidea.Couldyoutellmehowyou

cametothatconclusion?”

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