Playing to win: How strategy really works

by A.G. Lafley

Global scale. P&G is a global, multicategory company.

Management Systems

strategy is an iterative process in which all of the moving parts influence one another and must be taken into account together.

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, for...

A clear and powerful framework for thinking about choices is a helpful start for managers

As a rule of thumb, though, start with people (consumers and customers) rather than money (stock price).

a company must play to win. To play merely to participate is self-defeating.

Once the aspiration to win is set, the rest of the strategic questions relate directly to finding ways to deliver the win.

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. A too-modest aspiration is far more dangerous than a too-lofty one. Too many companies eventually die a death of modest aspirations.

Guess what happened? Toyota, Honda, and Nissan all aimed for the top, making the hard strategic choices and substantial investments required to win. GM, through Saturn, aimed to play and invested to that much lower standard. Initially Saturn did OK as a brand.

GM couldn’t and wouldn’t keep up. Saturn died, not because it made bad cars, but because its aspirations were simply too modest to keep it alive.

business process outsourcer (BPO).

there was no obvious reason why the deal would help P&G to win. P&G wanted more than cost-effectiveness and a commitment to a predefined service level from an outsourcing deal. It wanted flexibility, a partner that could and would innovate with P&G to create value that didn’t exist in the current structure.

Passerini soon came up with a new option. Instead of signing one deal, P&G would outsource various GBS activities to best-of-breed BPO partners, finding one ideal partner to manage facilities, another to manage IT infrastructure, and so on.

as he explains, he chose partners considering another essential criterion: “For each one of them, there was a common denominator: interdependency. It played out in different ways. For HP, they were a distant fourth player in the industry. With P&G, they gained instantaneous visibility and credibility. As important as they are to us, because all of our systems operate on the HP platform now, we are equally important to them [as their lead customer].

If the aspiration for GBS was to come to a good-enough solution, then the best-of-breed option would never have been created.

What choice would help P&G win? And how could that choice create sustainable competitive advantage?

The desire to win spurs a helpfully competitive mind-set, a desire to do better whenever possible.

“Give me anything I can turn into a service, and I’ll save you seventeen cents on the dollar.”

Providing services wasn’t the strategy. Providing better services at higher quality and lower costs—while serving as an innovation engine for the company—was the strategy. It was a strategy aimed at winning.

We asked P&G’s businesses to focus on winning with those who matter most and against the very best.

We wanted them to focus outward on their most important consumers and very best competitors, rather than inward on their own products and innovations.

Companies in the grips of marketing myopia are blinded by the products they make and are unable to see the larger purpose or true market dynamics.

These companies spend billions of dollars making their new generation of products just slightly better than their old generation of products. They use entirely internal measures of progress and success—patents, technical achievements, and the like—without stepping back to consider the needs of consumers and the changing marketplace or asking what business they are really in, which consumer need they answer, and how best to meet that need.

Winning aspirations should be crafted with the consumer explicitly in mind.

In P&G’s home-care business, for instance, the aspiration is not to have the most powerful cleanser or most effective bleach. It is to reinvent cleaning experiences, taking the hard work out of household chores.

When setting winning aspirations, you must look at all competitors and not just at those you know best.

“Who really is your best competitor? More importantly, 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?”

by thinking about options instead of choices and failing to define winning robustly, these leaders choose to play but not to win. They wind up settling for average industry results at best.

The company was overinvested and overextended. It was not winning with those who mattered most—consumers and customers.

strategy is a coordinated and integrated set of where-to-play, how-to-win, core capability, and management system choices that uniquely meet a consumer’s needs, thereby creating competitive advantage and superior value for a business.

“If it is true that we can’t get a decent return from the existing business, we should get out of the business entirely.”

In Europe, Asia, and Latin America, manufacturing overcapacity and private-label dominance were turning the category into a commodity.

In emerging markets, prices and willingness to pay were so low that brand differentiation conferred little to no advantage.

A niche strategy in emerging markets—to target just those few customers who valued premium performance—was nearly impossible because the capital requirements to make paper products mean a bu...

The good news was that the business could be structurally attractive in North America;

The family-care team could pare back and choose to play only in North America,

With geography decided, where-to-play shifted to products.

Given the unattractive nature of the global tissue and towel businesses, it made some sense to test potentially more profitable product categories.

But this approach meant that instead of innovating on its existing products, the team was chasing more-speculative product categories.

The team began with Bounty and with consumers. Deep consumer understanding is at the heart of the strategy discussion.

To be effective, strategy must be rooted in a desire to meet user needs in a way that creates value for both the company and the consumer.

In considering where to play among consumer segments, the Bounty team asked some critical questions: Who is the consumer? What is the job to be done? Why do consumers choos...

“If you asked, virtually 100 percent of people would say Bounty is a great brand and a really good product. Then some would go off and buy something else. What’s wrong with this picture?”

Pierce and his team set out to truly understand consumer needs, habits, and practices as they relate to paper

In watching and talking to consumers, they found that there were three distinct types of paper towel users. The first group cared...

For this group, Bounty was a ...

The second segment consisted of consumers who wanted a paper towel with a cloth-like feel.

The final segment had price as their top priority, though not as their sole concern, says Pierce: