Strategy is not complex. But it is hard. It’s hard because it forces people and organizations to make
specific choices about their future—something that doesn’t happen in most companies. Dr .Mahboob
Khan
Asian American Pacific Islander Month DDSD 2024.pptx
Winning strategy-By.Dr. Mahboob Khan
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Successful Strategy is an Integrated Cascade of Choices
By.Dr.Mahboob Khan
Strategy is not complex. But it is hard. It’s hard because it forces people and organizations to make
specific choices about their future—something that doesn’t happen in most companies. Dr .Mahboob
Khan
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TOP 20 INSIGHTS
1. Make five choices to create a business strategy: 1) Articulate a
winning aspiration; 2) Determine where to play; 3) Know how to
win in your chosen location; 4) Develop the core capabilities
required to win; and 5) Implement the management systems that
support success.
2. Consider the attractiveness of a given market for other parts of
your business. P&G committed to skin care because the skin care
market creates brand loyalty, is highly profitable, makes up 25% of
the entire beauty market, and generates consumer insights that can
be transferred to P&G’s other products in categories like hair care
and fragrance.
3. Avoid complacency during triumphant times. While P&G's Bounty
had 40% of the paper towels market, an analysis revealed there
were two types of customers where Bounty fell short: people who
wanted a soft, cloth-like feel and people who were price sensitive.
This led to two new hit products: Bounty Extra Soft and Bounty
Basic.
4. When you try something new, consider your geographic areas of
strength or top customers first. P&G uncovered that they derive
85% of profits from 10 countries. They therefore considered how
to launch and stabilize in these 10 core countries and prioritized it
over blind global growth.
5. Pricing is a key component of a winning strategy. Before P&G
launched “Total Effects,” a high-end product that they intended to
sell from drugstore shelves, they determined how to attract both
prestige shoppers who typically bought skin care at department
stores and “mass shoppers” who don’t like to spend too much.
6. Pick your partners wisely. P&G purposely went with HP as its IT
partner. Since HP was a distant fourth player, rather than the very
top, in the industry, this decision meant that P&G became HP's
priority as its largest client.
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7. P&G’s complete re-branding of Olay proves that smart answers to
the five strategy questions pay off. As a result, “Olay had double-
digit sales and profit growth every year for the next decade: and
turned into a $2.5 billion brand.
8. To beat competitors, consider all opportunities along the value
chain. Hershey's makes a more "expensive" chocolate bar using
high-quality ingredients. Mars makes a "cheaper" candy bar with
less expensive ingredients. But they can charge about the same for
their candy bars because Mars buys premium shelves in stores to
even out the playing field.
9. Consider existing capabilities when Go-to-Market (GTM) strategy is
in-development. P&G launched Olay as a prestige product on mass
retailer shelves, and created a new “masstige” (mass + prestige)
segment. This channel choice leveraged their strong relationships
with mass retailers and other big box stores.
10. In 2000, only 20% of P&G’s revenues came from emerging
markets, whereas 40% of revenues at competitors, Unilever and
Colgate, came from those geographies. Strategic choices about
which geographies and products to focus on led to 35% of revenue
from emerging markets 11 years later.
11. Develop capabilities with outsourcing. P&G partnered with
“product ingredient innovators (Cellderma), designers…and key
influencers (like beauty magazine editors and dermatologists)” to
increase capabilities to win in skin care.
12. Don’t overlook the potential for management systems to
support your strategy. When P&G doubled down on investment in
Olay, they created a corollary human resources initiative nick-
named “Love the Job You’re in” to attract top talent to that division.
Special benefits included enhanced professional development
opportunities.
13. A key sales decision for Olay was to create a new type of
marketer – a “technical marketer” who bridged the worlds of
marketing and skin care experts. This person could more easily
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gain the trust and sponsorship of beauty editors and
dermatologists.
14. You can apply a winning mindset to a variety of business
activities. Although P&G’s Global Business Services (GBS) unit is an
internal entity created to provide services like facilities and IT, it
competes with outside companies. The head of GBS reasons that “if
the business units like them, they will buy them.” This policy
ensures offerings are competitive and cutting-edge.
15. Don't take an overly simplified approach to define what
winning looks like. While in many broad categories P&G had the far
majority of market share, a closer look at specific products and
geographies revealed that "the best competitors were often found
to be local companies, private-label competitors, and smaller
consumer goods companies."
16. Think carefully about your path to win. In 1984, P&G wanted
to win in laundry without a competitive response from Wisk, so
when Liquid Tide launched, the company didn't go after Wisk's
market share. Instead, they focused on the overall market growth.
17. Consider the unexpected benefits that a “non-core” or
otherwise unattractive business might have for your broader
company. P&G sells fine fragrances not because they fit neatly
within other product categories but because the consumer insights
generated through fine fragrances’ offers extend to their core
categories like hair care and skin care.
18. Consider alternative ways of winning. P&G developed
“ForceFlex” technology for trash bags that allowed them to stretch
more and tear less. But the market was already very competitive
between the Glad and Hefty brands. So, P&G started a joint venture
and licensed the technology to the Glad makers and enjoyed a
share of the profits.
19. Remember that a winning strategy is time-dependent. Its
keys for success become less potent as time passes due to shifting
dynamics and evolving competitive landscapes. The important
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thing for an organizational leader, according to Lafley, is to “build
up strategic thinking capability within your organization.”
20. P&G culture was not initially conducive to strategy
discussions. Unit leaders independently created plans and pitched
them to higher-ups in long, one-sided presentations without
meaningful dialogue. This practice changed when executives
encouraged an “assertive inquiry” style of communication, and
emphasized a mindset of, “I have a view worth hearing, but I may
be missing something.”
SUMMARY
In Playing to Win, former P&G CEO A.G. Lafley details how to develop and
implement a successful strategy for your business, with a cornerstone
principle which stresses the importance of playing to win, not just
playing the game. A winning aspiration focused on customer needs’
satisfaction is the beginning, but the most essential questions follow:
Where will you play, and how will you win there? According to Lafley, all
these choices should be well-researched, data-driven, and considered in
light of competitor behavior. Lastly, to implement the strategy, a
business needs to identify and develop core capabilities and take a
management approach that supports a culture of strategy overall.
A WINNING ASPIRATION
Some companies articulate their winning aspiration and call that the
strategy. Defining the winning aspiration is a necessary part of the
strategy, but it is only the first step. These statements may include
metrics such as revenue, profitability, and market share, but those
numbers will be second to words and phrases that describe your
customer and how you aim to serve them. Without the customer at the
center, the other aims are futile. For example, rather than saying they
have a market-leading, profitable skin care line, P&G ‘s winning
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aspiration could be “helping women have healthier, younger-looking
skin” or “helping women feel beautiful.”
Companies or executives who’ve become too focused on product
features and performance have “marketing myopia,” which means they
are “blinded by the products they make and are unable to see the larger
purpose or true market dynamics.” The people your products serve
should always remain top of mind, or the winning aspiration will become
stale. Because a winning aspiration is only the start of a comprehensive
strategy, it can and should remain generalized. Answering the four other
strategy questions will provide the necessary detail. Some examples
include:
• Starbucks – “To inspire and nurture the human spirit – one person,
one cup, and one neighborhood at a time.”
• Nike – “To bring inspiration and innovation to every athlete* in the
world. *If you have a body, you’re an athlete.”
• McDonald’s – “Be our customers’ favorite place and way to eat.”
Empowering individual business units to set their own winning
aspirations can transform all aspects of an organization, even units that
don’t sell externally. For example, P&G created an internal entity called
“Global Business Services” that provided services like information
technology support, facilities management, and employee services to
P&G business units worldwide. The business model was financially
healthy, but P&G leaders focused on winning had a higher standard for
GBS.
Filippo Passerini was in charge of GBS and determined that in its field,
GBS wasn't really winning. He wasn't confident that as currently
structured, GBS was creating the most value for P&G. What if they spun
GBS off and functioned as a separate entity providing services to other
companies? What if they dissolved GBS and contracted with a company
that would handle the different services independently?
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These were the sole options on the table for a time until Passerini
pitched another approach. To have a winning strategy for providing
services to P&G business units might mean a combination approach. The
ability to get the best services, at the lowest costs, with the greatest
additional benefits, meant contracting with more than one service
provider in a "best of breed" approach rather than a single conglomerate,
which was the prevailing model at the time.
“Passerini saw that specialization could increase the quality and lower
the cost of BPO solutions…Plus, there was risk mitigation in having
multiple partners, and they could be benchmarked against one
another…Finally, outsourcing would free up remaining GBS resources to
invest in P&G core capabilities,” the book explains.
Aspiring to win requires much more than obtaining a majority market
share. It means truly understanding customers and not losing sight of
their needs. It means not just “playing to play” or get the job done but
instead, always looking for ways to generate more value for both
customers and your firm.
WHERE TO PLAY
Though “where” connotes geography, the question of where to play to
deliver on a winning aspiration includes five categories: 1) geography; 2)
product type; 3) consumer segment; 4) distribution channel; and 5)
vertical stage of production. To employ a sound strategy means to gather
extensive information in each of these areas and to make a conscious
choice along each parameter.
Here are some other vital questions to consider when developing your
strategy. Which geographies are the biggest and most profitable markets,
or are there certain countries where your firm has experience and
expertise? What product types are in demand, or what product or service
choice will enable a distinct advantage and command high margins for
the longest time? How are consumers segmented, and which segment is
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most attractive? Is there a natural channel choice or one in which
customers are accustomed to buying? And, what might be the benefits of
expanding operations into different levels of the value chain?
Some of these five "where to play" choices will hold different weights
depending on the situation and company at hand. For example, startups
spend lots of time developing and refining a specific product or service. A
mature company seeing little growth might rejuvenate sales by re-
analyzing their consumer segmentation to find pockets of growth. Across
the five "where to play" questions, the most important consideration is
analyzing both the quantitative and qualitative data in light of your
current goals and capabilities, making conscious choices that reflect your
winning aspiration.
P&G began every effort to determine the “where to play” choices with an
in-depth exercise to understand the consumer.
“Only through a concerted effort to understand the consumer, her needs,
and the way in which P&G can best serve those needs is it possible to
effectively determine where to play – which businesses to enter or leave,
which products to sell, which markets to prioritize, and so on.” P&G had
a robust consumer research arm in-house to conduct qualitative studies
like home visits, but they outsourced surveys and other quantitative
research.
In considering “where to play,” don't just go for the lowest hanging fruit.
A market that may otherwise look competitive and daunting may be a
good choice for your firm if the offering is truly distinctive, and the entry
strategy is smart. In 1984, laundry detergent was primarily powdered.
Unilever's Wisk brand was blazing the trail with an innovative liquid
form. When Tide decided to enter as Liquid Tide, they knew they were
going up against a strong competitor. But P&G executives had chosen
“where to play” based on predictions that liquid detergent would
experience strong overall growth. Therefore, though "Wisk did not give
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up a share point to Liquid Tide," the market grew overall, and Liquid
Tide brought new liquid detergent customers into the field. "Liquid Tide
created new consumers for liquid detergent, and none of them had a
loyalty to Wisk.”
HOW TO WIN
Answering the "where to play" questions is a steep task, but defining
"how to win" is just as important. “Winning means providing a better
consumer and customer value equation than your competitors do, and
providing it on a sustainable basis,” the authors state.
Products and services “win” when they are either differentiated (and can
charge price premiums), or when they have “cost leadership” and can
offer a nearly similar product to competitive offerings but charge
significantly less. Due to its size and scale, P&G can keep production
costs low and charge competitive prices. But it primarily competes as a
differentiator, seeking to find the new product technology or customer
segment that is untapped or unserved. Achieving this requires a robust
research and development arm, as well as a deep understanding of
customers’ behavior. P&G has both.
Gain was a struggling P&G laundry detergent product. Its brand manager
at one point pleaded with the CEO to kill the brand. The Gain brand was
virtually out of business when management asked the team to give it
“one more try.” The team started by analyzing the consumer segments
for laundry detergent to uncover insights about how to win. They
discovered that "a small but passionate group of consumers wasn't well
served by Tide or by any other competitive product. “This segment cared
very much about the sensory laundry experience – about the scent of the
product in the box, the scent during the washing process, and especially
the scent of clean clothes.”
Gain product executives decided that they could win in laundry
detergent, in their own way, by becoming the product to meet this need.
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This shift required a concerted effort to re-brand and improve the
product to meet the expectations of this segment. Designers re-thought
the packaging to make it vibrant, busy, and unmistakably bold. Scent and
the sensory experience of using Gain were featured prominently in
advertising and stores. Gain is now a billion dollar brand.
Gain is an example of invigorating a stagnant brand by analyzing “how to
win” in a specific consumer segment. Pampers diapers are another
example of how P&G discovered how to win, but this time, in a new
geography. Executives had decided to expand Pampers into Asia but
struggled with how to feasibly sell the product at a price point that
would resonate with consumers there. Typically, when entering an
emerging market, executives would decide on one of two approaches to
product design, both strategies aimed at keeping product costs low to
make selling at a lower price feasible. The first is the "trickle-down"
approach, whereby product innovations are only introduced to emerging
markets after their distinguishing technology had grown stale elsewhere.
The second tactic was a "bare-bones" method in which designers strip
away many of the premium product attributes, leaving an affordable yet
subpar product. But P&G had a different idea for diapers in Asia.
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Instead of choosing one of the two expected options, P&G executives
took a third approach. This method was in keeping with P&G’s standard
practices elsewhere in the company – “start with the consumer.” Rather
than delivering an outdated or subpar product in Asia, they decided to
learn as much as they could about the habits and practices of diapering
babies in Asia. The executive in charge urged her team, saying “Let’s find
out what those consumers actually need and build that diaper. You only
build what they need; you don’t build all the bells and whistles that only
consumers in developed markets expect.” The team found that winning
in diapers in Asia required making a diaper that could be sold for about
the price of an egg. They repositioned their marketing to highlight how
disposable diapers can improve cleanliness, reduce disease, and help
babies get a better night’s sleep. The simpler product at a reasonable
price point, together with the brand repositioning, meant P&G’s Pampers
were positioned to win in Asia.
THE CAPABILITIES REQUIRED
According to Lafley and Martin, “Capabilities are the map of activities
and competencies that critically underpin specific where-to-play and
how-to-win choices.”
The capabilities that your firm will need to execute a successful strategy
naturally flow from your choices about where to play and how to win
there. Examples of these capabilities include branding and marketing,
channel relationships and distribution networks, or industrial design and
manufacturing. As a new strategy is launched, laying out a plan to
develop or acquire the capabilities required is paramount. Lafley
outlines the five core capabilities that P&G leverages. These all come into
play in some fashion throughout P&G's strategy-setting exercises.
• Deep consumer understanding – P&G has a unique ability to know
customers so well that they can reliably identify and meet new
needs before customers themselves or competitors can spot them.
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• Innovation – P&G’s primary goal with their innovation capability is
to develop never-before-seen products or ways of doing business
that meet previously unserved customer needs, or to improve
existing products in the same way.
• Brand building – P&G has a strong focus on not only creating and
building strong brands but on training future leaders in the ability
to do so themselves. This ensures their distinctive brand building
capability will only continue.
• Go-to-market ability – P&G recognizes the importance of not just
reaching customers but reaching them at the “right time” and in the
“right way.” Perfecting this intersection leads to increased sales,
which includes added benefits for retail partners.
• Global scale – At P&G, global scale is leveraged for the benefit of all
units. Consumer and geography insights, buying power, and back-
office functions like HR and IT are all improved through the scale
and size of P&G.
MAKING STRATEGY PART OF CULTURE – A
MANAGEMENT SYSTEM
Lafley as CEO and other senior executives at P&G were becoming
increasingly frustrated with business unit leaders who, during annual
strategy review meetings, would bring endless PowerPoint
presentations and an ironclad argument as to why the chosen strategy
was the way to go. Where were the frank discussions and honest
dialogue?
Per the book, “Unfortunately, the management teams had been trained
over decades to see strategy reviews as anything but an opportunity to
share ideas. Traditionally, it had been their job to build an
unimpeachable plan and to defend it to the death.”
CEO Lafley had experienced enough of these meetings and decided to
shift the culture to make strategy a core part of P&G’s culture. Here are a
few key changes he made.