Playing to win: How strategy really works

by A.G. Lafley

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.

Mission and vision statements are elements of strategy, but they aren’t enough. They offer no guide to productive action and no explicit road map to the desired future.

Plans and tactics are also elements of strategy, but they aren’t enough either. A detailed plan that specifies what the firm will do

Emergent strategy has become the battle cry of many technology firms and start-ups, which do indeed face a rapidly changing marketplace. Unfortunately, such an approach places a company in a reactive mode, making it easy prey for more-strategic rivals. Not only is strategy possible in times of tumultuous change, but it can be a competitive advantage and a source of significant value creation. Is Apple disinclined to think about strategy? Is Google? Is Microsoft?

Many leaders try to optimize what they are already doing in their current business. This can create efficiency and drive some value. But it isn’t strategy.

The optimization of current practices does not address the very real possibility that the firm could be exhausting its assets and resources by optimizing the wrong activities, while more-strategic competitors pass it by.

Sameness isn’t strategy. It is a recipe for mediocrity.

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.

every good marketer knows, awareness precedes trial.

The team members discovered, to no one’s surprise, that Olay’s existing customers were price sensitive and only minimally invested in skin care.

They seek out a preferred brand on a regular basis and try new offerings from it. They become loyal devotees. These were the consumers Olay needed,

Olay needed to shift the perception of beauty care in the mass channel, selling higher-end, more prestigious products in a traditionally high-volume environment.

Olay needed to convince skin-care-savvy women that the new Olay products were just as good as, or better than, higher-priced competitors. It began with advertising in the same magazines and on the same television shows as those populated by the more expensive brands; the idea was to put Olay into the same category in the consumer’s mind.

We opened our labs to some of the top dermatologists to come in to see the work we were doing.” Independent tests, which showed Olay products performing as well as or better than department store brands costing hundreds of dollars more,

“So, $12.99 was really good, $15.99 not so good, $18.99 great.

“But $15.99 was no-man’s-land—way too expensive for a mass shopper and really not credible enough for a prestige shopper.”

Olay had a strategic problem that many companies struggle with—a stagnant brand, aging consumers, uncompetitive products, strong competition, and momentum in the wrong direction.

So, why was Olay able to succeed spectacularly where so many fail? The people at Olay aren’t harder working, more dedicated, bolder, or luckier than everyone else. But their way of thinking about the choices they made was different.

They had a clear and defined approach to strategy, a thinking process that enabled individual managers to effectively make clearer and harder choices. That process, and the approach to stra...

there is a brand-level strategy that articulates the five choices for a brand such as Olay or Pampers. There is a category strategy that covers multiple related brands, like skin care or diapers. There is a sector strategy that covers multiple categories, for example, beauty or baby care. And finally, there is a strategy at the company level,

The first question—what is our winning aspiration?—sets the frame for all the other choices.

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.

A revitalized and transformed Olay was expected to establish skin care as a strong pillar for beauty along with hair care.

Establishing and maintaining leadership of a new masstige segment, positioned between mass and pres...

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 represents the set of choices that narrow the competitive field.

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.

Olay made two strategically decisive where-to-play choices: to create, with retail partners, a new masstige segment in mass discount stores, drugstores, and grocery stores to compete with prestige brands and to develop a new and growing point-of-entry consumer segment for anti-aging skin-care products.

P&G tends to do well when the consumer is highly involved with the product category and cares a good deal about product experience and performance.

We wanted to play where P&G’s core strengths would enable it to win.

With ten countries representing 85 percent of profits, P&G had to focus on winning in those countries. We asked where consumers expected P&G brands and products to be sold, that is, mass merchandisers and discounters, drugstores, and grocery stores.

We wanted to shift from a pure invention mind-set to one of strategic innovation; the goal was innovation that drove the core.

Core consumers were a theme too; we pushed businesses to focus on the consumer who matters most, targeting the most attractive consumer segments.

The majority of babies would be born, and households formed, in emerging markets. Economic growth in these markets will be as much as four times as high as in the OECD (Organisation for Economic Co-operation and Development) developed markets.

We were a company of premium-priced products, always going after product superiority. We tended to play, as a company, in the premium tiers in almost all categories.”6 To compete in the developing world, Bergh says, a change in orientation was required: “We needed to begin broadening our portfolio and developing competitive propositions, including cost structures that would allow us to reach deeper into these emerging markets. There are a billion consumers in India, and we were reaching the top 10 percent of them.”

In sum, there were three critical where-to-play choices for P&G at the corporate level:

Grow in and from the core businesses, focusing on core consumer segments, channels, customers, geographies, brands, and product technologies. Extend leadership in laundry and home care, and build to market leadership in the more demographically advantaged and structurally attractive beauty and personal-care categories. Expand to leadership in demographically advantaged emerging markets, prioritizing markets by their strategic importance to P&G.

Remember, it is not how to win generally, but how to win within the chosen where-to-play domains.

Where-to-play and how-to-win choices must be considered together, because no how-to-win is perfect, or even appropriate, for all where-to-play choices.

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—

For Olay, the how-to-win choices were to formulate genuinely better skin-care products that could actually fight the signs of aging, to create a powerful marketing campaign that clearly articulated the brand promise (“Fight the Seven Signs of Aging”), and to establish a masstige channel, working with mass retailers to compete directly with prestige brands.

G’s competitive advantages are its ability to understand its core consumers and to create differentiated brands. It wins by relentlessly building its brands and through innovative product technology.

Core Capabilities

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?

they partnered with product ingredient innovators (Cellderma), designers (IDEO and others), advertising and PR agencies (Saatchi & Saatchi), and key influencers (like beauty magazine editors and dermatologists, for credible product performance endorsements). This networked alliance of internal and external capabilities created a unique and powerful activity system.

At P&G, a company with more than 125,000 employees worldwide, the range of capabilities is broad and diverse. But only a few capabilities are absolutely fundamental to winning in the places and manner that it has chosen:

Deep consumer understanding.

Innovation. Innovation is P&G’s lifeblood. P&G seeks to translate deep understanding of consumer needs into new and continuously improved products.

Brand building. Branding has long been one of P&G’s strongest capabilities.

Go-to-market ability. wrelationships. P&G thrives on reaching its customers and consumers at the right time, in the right place, in the right way.