Playing to win: How strategy really works

by A.G. Lafley

At a high level, the choice is whether to be the low-cost player or a differentiator.

Cost leaders can create advantage at many different points—sourcing, design, production, distribution, and so on.

Remember that there is no one single how-to-win choice for all companies. Even in a single market, it is possible to compete in many different ways and succeed. Choosing a how-to-win approach is a matter of thinking both broadly and deeply, in the context of the playing fields available to the company.

Structuring a company to compete as a cost leader requires an obsessive focus on pushing costs out of the system, such that standardization and systemization become core drivers of value. Anything that requires a distinctive approach is likely to add cost and should be eliminated.

In a differentiation strategy, costs still matter, but are not the focus of the company; customers are. The most important question is how to delight customers in a distinctive way that produces greater willingness to pay.

they are intertwined and should be considered together: what how-to-win choices make sense with which where-to-play choices?

which combination makes the most sense for your organization? From there, the next step is to understand the capabilities that will be required to support the where-to-play and how-to-win choices.

Never give your current brand user a product-based reason to switch away.

Competition will follow your technology, trying to at least match it and ideally beat it. Technical superiority alone is not sustainable.

Play to Your Strengths

The acquisition is only really successful if you’re a better owner of the business than either the previous owner

That usually gets down to your capabilities, in our case, your consumer capabilities, your branding capabilities, your R&D capabilities, your go-to-market capabilities,

“The first thing I want you to do is to spend two weeks in India. I want you to live with these consumers. I want you to go into their homes. You need to understand how they shave and how shaving fits into their lives.”

An organization’s core capabilities are those activities that, when performed at the highest level, enable the organization to bring its where-to-play and how-to-win choices to life.

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

“competitive strategy is about being different … [and] means deliberately choosing a different set of activities to deliver unique value,” an activity system must also be distinctive from the activity systems of competitors.

In 2000, P&G’s where-to-play choices were coming together (i.e., grow from the core; extend into home, beauty, health, and personal care; and expand into emerging markets),

and its how-to-win choices were also becoming clear (i.e., excellence in consumer-focused brand building; innovative product design; and leveraging global scale and retailer partnerships).

everyone would be given three votes on what constituted the core capabilities of the company, along the following criteria:

first, for a given capability, the group had to be reasonably sure P&G already had real, measurable competitive advantage in that area and could widen its margin of advantage in the future.

Second, the capability had to be broadly relevant and important to the majori...

it had to be a company-level rather than business-level capability that distinguished...

Third, the capability had to be decisive, a real competitive advantage that was the difference...

P&G certainly needs to be good at manufacturing, but not distinctively good at it to win. On the other hand, P&G does need to be distinctively good at understanding consumers, at innovation, and at branding its products.

When articulating core capabilities, you need to distinguish between generic strengths and critical, mutually reinforcing activities.

A company needs to invest disproportionately in building the core capabilities that together pr...

When thinking about capabilities, you may be tempted to simply ask what you are really good at and attempt ...

The danger of doing so is that the things you’re currently good at may actually be irrelevant to consumers and in no w...

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. Then, you ...

the group came to five core capabilities:

Understanding consumers. Really knowing the consumers, uncovering their unmet needs, and designing solutions for them better than any competitor can. In other words, making the consumer the boss in order to win the consumer value equation.

Creating and building brands. Launching and cultivating brands with powerful consumer value equations for tru...

Innovating (in the broadest sense). R&D with the aim of advancing materials science and inventing breakthrough new products, but also taking an innovative approach to business models, ex...

Partnering and going to market with customers and suppliers. Being the partner of choice by virtue of P&G’s willingness to work together on joint busines...

Leveraging global scale. Operating as one company to maximize buying power, cross-brand synergies, and development of...

GBUs oversee categories, brands, and products, providing a holistic, consistent approach to each element on a worldwide basis. At the same time, MDOs have responsibility for a continent, region, country, channel, or customer, paying close attention to its specific needs and demands.

The GBUs and MDOs work together to create a global approach with local applicability and customization.

This matrix allows P&G to drive scale where it is needed but to stay ...

An activity system is of no value unless it supports a particular where-to-play and how-to-win choice.

When you have a feasible activity system, you can ask more questions: is it distinctive? Is it similar to or different from competitors’ systems? This is an important point.

the company. At P&G, the activity system for baby care differs from the systems for laundry or skin care. Hospital sampling programs and relationships

with nurses and health systems are important supporting activities to a baby-care choice to capture new moms early.

However, if there is nothing in common between these different activity systems, it is a sign that the organization has businesses that may fit poorly in the same portfolio.

For a corporation to have a chance of delivering greater value together than the units could individually, there must be some core activities in common—

1. Start at the Indivisible Level

When building an activity system, you will know that you are in the right spot if the following conditions hold true: (1) the activity system would look more or less the same down one level, but (2) it looks meaningfully different up one organizational level.

In the case of Head & Shoulders, for instance, one level down from brand would be individual product (Head & Shoulders Classic Clean, Head & Shoulders Extra Volume, and so on). If you were to build the activity system for each of these products and ...

But going up a level from brand to the hair-care category, the activity systems would be quite different. A...

The ground-level maps (e.g., Head & Shoulders and Nice ’n Easy) can be thought of as indivisible activity systems: below this level, the activity system doesn’t divide into distinct maps,

A level can contribute a net benefit in two ways—through two kinds of reinforcing rods. First, it can provide the benefit of a shared activity.