If it wouldn’t be for the authors’ success at P&G this would be a completely run of the mill strategy 101 book. But it was a good refresher for me.
“Too often, CEOs in particular will allow what is urgent to crowd out what is really important.” (Lafley and Martin, 2013, p.3). Moreover we often describe things as strategy which are not. “Grow or grow faster is not a strategy. Build market share is not a strategy. Ten percent or greater earnings-per-share growth is not a strategy. Beat XYZ is nit a strategy. A 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. Strategy is a way to win - and nothing less.” (Lafley and Martin, 2013, p.50).
“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.” (Lafley and Martin, 2013, p.3). “a strategy is a coordinated and integrated set of five choices: a winning aspiration, where to play, how to win, core capabilities and management system.” (Lafley and Martin, 2013, p.5).
“the abstract concept of winning should be translated into defined aspirations. Aspirations are statements about the ideal future.” (Lafley and Martin, 2013, p.19). “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.” (Lafley and Martin, 2013, p.20). “Remember, it is not how to win generally, but how to win within the chosen where to play domains.” (Lafley and Martin, 2013, p.24).
What is winning?
“What does winning look like for this organization?” (Lafley and Martin, 2013, p.35).
“As a rule of thumb, though, start with people (consumers and customers) rather than money (stock price). Peter Drucker argued that the purpose of an organization is to create a customer, and it’s still true today.” (Lafley and Martin, 2013, p.36).
“When setting winning aspirations, you must look at all competitors and not just those you know best.” (Lafley and Martin, 2013, p.45). “Do craft aspirations that will be meaningful and powerful to your employees and to your cosumers.” (Lafley and Martin, 2013, p.47).
Where to play?
“It’s a choice about where to compete and where not to compete. (…) Geography (…) Product type (…) Consumer segment (…) Distribution channel (…) Vertical stage of production.” (Lafley and Martin, 2013, p.57).
How to win?
“All successful strategies take on of these two approaches, cost leadership or differentiation.” (Lafley and Martin, 2013, p.84). When products are perfect substitutes the cost leader drives the market and makes the largest profits which it can re-invest. “When a firm offers a product or services that buyers consider unique, the pricing and profic dynamics are quite different. The firm provices a uique offering is a price-setter, not a price taker; the demand for the unique offering depends upon the price the firm sets – the higher the price, the lower the demand and vice versa. But this time, because the producer of a unique offering serves the entire market, the firm feels the shift in demand directly.” (Lafley and Martin, 2013, p.235). “At some point, the marginal revenue us lower than the marginal cost and the firm has pushed price too far.” (Lafley and Martin, 2013, p.236). “For a particular group of customers, the firm is a monopoly supplier.” (Lafley and Martin, 2013, p.237).
A differentiation strategy implies deep and holistic understanding of customers and commitment to innovation while the former means sacrificing nonconforming customers. (Lafley and Martin, 2013, p.86).
“Do work to create new how-to-win choices where none currently exists.” (Lafley and Martin, 2013, p.97). “Do consider how to win in concert with where to play. The choices should be mutually reinforcing.” (Lafley and Martin, 2013, p.97). “Industry dynamics might be changeable.” (Lafley and Martin, 2013, p.97). “In Peter Drucker’s terms, Pampers disposable baby diapers “created customers.” (Lafley and Martin, 2013, p.98). “Determine whether a product innovation is really brand specific or ultimately category generic. Never give your current brand user a product-based reason to switch away.” (Lafley and Martin, 2013, p.101).
Play to your strengths
“Capabilities that both fit with one another (…) and actually reinforce one another.” (Lafley and Martin, 2013, p.112). “In 2000, P&G’s where-to.play chouces were coming together (i.e. grow form the core; extend into home, beauty, health, and personal care; and expand into emergin 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 partnership). These choices needed to be translated into the set of capabilities required ti deliver.” (Lafley and Martin, 2013, p.113).
“things you are currently good at may actually be irrelevant to consumers and in no way confer a competitive advantage. Rather than starting with capabilities and looking for ways to win with those capabilities, you need to start with setting winning aspirations and determining where to play and how to win.” (Lafley and Martin, 2013, p.114).
Manage what matters.
“A strategy discussion is not an idea review. A strategy discussion is not a budget or forecast review. A strategy discussion is how we are going to accomplish our growth objectives in the next three to five years.” (Lafley and Martin, 2013, p.131).
“I found that clearer and simpler strategies have the best chance of winning, because they can be explained in a few words and internalized by the organization. Strategies that can be explained in a few words are more likely to be empowering and motivating.” (Lafley and Martin, 2013, p.156).
Shorten your odds
“In the end building a strategy isn’t about achieving perfection; it’s about shortening the your odds.” (Lafley and Martin, 2013, p.183). “Do stay focused on the most important questions (what would have to be true for this to be a winning possibility?)” (Lafley and Martin, 2013, p.201). “Rather than have them talk about what they thought was true about the various options, I would ask them to specify what would have to be true for the option on the table to be a fantastic choice. The result was magical. Clashing views turned into collaboration to really understand the logic of the options.” (Lafley and Martin, 2013, p.204).