By A.G. Lafley and Roger L. Martin

Playing to Win

How Strategy Really Works

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If you want to learn how to develop a winning strategy

for your business, there’s no better person to ask than

A.G. Lafley. The former CEO of Procter and Gamble

was the most successful chief executive in the history

of the 175-year-old company, and arguably one of the

greatest corporate strategists of his generation.

Lafley retired from the global consumer products and

pharmaceutical giant in 2010, having joined P&G

fresh out of Harvard Business School some three

decades earlier. Under Lafley’s steady leadership,

P&G’s value increased by more than $100 billion, and

it doubled its roster of billion-dollar brands. Moreover,

the number of brands with sales between $500 million

and $1 billion increased five-fold with Lafley at the

helm.

Never one to rest on his laurels, Lafley has partnered

with acclaimed corporate strategist Roger Martin,

Dean of the Rotman School of Management at the

University of Toronto. In Playing to Win: How

Strategy Really Works, Lafley & Martin outline the

five-step strategic framework that Lafley used to great

success during his time at the helm of P&G – and it

works for companies of any size.

Now, you may already be thinking: “Lafley & Martin

may be smart guys. But there are already so many

books, articles, and courses on strategy. Does the

world really need another one?”

It’s true that there are plenty of resources available on

how to formulate a winning strategy for your business.

But the fact is, despite all of these great tools, far too

many business people continue to get it wrong.

Lafley & Martin see this happening in their consulting

practices every day. And it drives them crazy. So

Lafley & Martin decided to de-mystify and simplify the

strategy-making process with Playing to Win.

“At first, strategy can seem magical and mysterious,”

write Lafley & Martin. “It really isn’t.”

Simply put, strategy is an integrated set of choices

about winning. These are choices that uniquely

position your firm in your industry to create

sustainable advantage and superior value, relative to

your competition. For Lafley & Martin, strategy is

about answering these five simple questions:

1. What does winning look like for us?

2. Where are we going to play in order to win?

3. How are we going to win where we play?

4. Where are our core competencies that are going

to enable us to win where we decide to play?;

and lastly;

5. What management systems and measures are

going to help us execute our strategies?

None of these questions are particularly complicated

– and we’ll see why below – yet executives around

the world struggle with them each and every day.

Why? Because people fundamentally hate making

choices. “Choices are difficult. Choices involve

taking risks, and not only risk to the business, but

personal risk. And so we want to keep our options

open”, argue Lafley & Martin.

Also, too many talented business leaders fail to make

the time for strategic planning, because they’re

consumed with running the day-to-day business.

They mistakenly think that winning in the marketplace

is all about flawless execution. “If I execute better

than the next guy, I'm going to win,” they tell

themselves. But the problem, according to the

authors, is that execution without the direction of a

strategy – without the choices of a strategy – doesn’t

work. You might win occasionally. But you're probably

not going to win consistently, reliably or sustainably.

The good news is, strategy can be learned. Drawing

on examples from Lafley’s time at P&G to hammer

home their key points, the authors provide a “do-it-

yourself” guide to strategy development. Grounded

in the five strategic questions mentioned above, they

provide readers with the concepts, processes and

practical tools they need to develop a winning

strategy for their business, workgroup or organization.

And it all starts with a story about face cream …

Reinventing Oil of Olay

By the late 1990s it became clear that P&G really

needed to win in skin care.

Skin care (including soaps, cleansers, moisturizers,

and other treatments) constitutes about a quarter of

the total beauty industry, and has the potential to be

highly profitable. But unfortunately for P&G, none of

its skin care brands were gaining any traction in the

marketplace.

In particular, its flagship brand, Oil of Olay, was

struggling. Over time, consumers had come to think of

Oil of Olay as old-fashioned, and no longer relevant.

It had come to be derisively called “Oil of Old Lady,”

which was not an entirely unfair characterization, as

its customer base was growing older every year.

Younger women were shifting to sexier brands with

more to offer.

In short, Oil of Olay had a strategic problem that many

companies struggle with: a stagnant brand, aging

customers, uncompetitive products, strong

competition, and momentum in the wrong direction.

So why was Oil of Olay able to turn things around so

spectacularly where so many others fail?

“The people that came in to fix Oil of Olay weren’t

harder working, more dedicated, bolder, or luckier

than everyone else,” write Lafley & Martin. “But they

had a particular way of thinking about the choices

they faced. 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 strategy

that underpins it, is what made the difference.”

First and foremost, the turnaround team decided that

Oil of Olay would become a category winner. Then

the team set out to turn that promise into a plan.

Their first major decision was to re-name the product.

Out went the “Oil of,” and the brand was re-christened

“Olay.” They then proceeded to ask themselves the

five strategic questions, and then boldly re-oriented

the brand according to the answers that emerged. By

the time the team was done, Olay had become a

runaway success for P&G. Following the 2000 re-

launch, Olay experienced double-digit sales and profit

growth every year for the next decade. Today, it’s a

$2.5 billion brand for P&G with extremely high profit

margins and a loyal consumer base.

That’s the power of strategy, folks. Here’s how they

did it:

1. What is Our Winning Aspiration?

On the very first day, the Olay turnaround team

started by asking themselves: “What is our winning

aspiration?” This question set the framework for all of

the subsequent choices they made.

“Above all else, a company must aspire to win,” writes

Lafley and Marin. “If it doesn’t seek to win, it is

wasting the time of its people and the investments of

its capital providers.”

To be practical, the abstract concept of “winning”

should be translated into defined, quantifiable

aspirations. These are statements about the ideal

future which can readily be measured.

For the revitalized Olay, P&G’s winning aspirations

were defined as “market share leadership in North

America, $1 billion in sales, and a global share that

puts the brand among the market leaders.”

P&G is not the only Fortune 500 company that takes

its winning aspirations seriously. Such lofty

aspirations are at the core of most successful

enterprises.

Consider Nike’s winning aspiration: “To bring

inspiration and innovation to every athlete in the

world.” Or, McDonald’s: “Be our customers’ favorite

place and way to eat.”

“Note the tenor of these two aspirations,” stress Lafley

& Martin. “Nike and McDonald’s don’t just aspire to

serve customers; they want to win them. And that is

the single most crucial dimension of a company’s

aspiration: a company must play to win.”

To play merely to participate is self-defeating, say

Lafley & Martin. It is a recipe for mediocrity. Winning

is what matters; and it is the ultimate criterion of a

successful strategy. “Too many companies

eventually die a death of modest, or non-existent,

aspirations” warn the authors.

Developing a winning aspiration begins and ends with

a focus on the customer. But far too many companies

lose sight of this. Many companies, if you ask them

what business they’re in, will tell you what their

product line is, or will detail their many great service

offerings. A handheld phone manufacturer, for

example, might say that he is in the business of

making smartphones. He likely would not say that he

is in the business of “connecting people and enabling

communication any place, any time.” But that is the

business he is actually in; and a smartphone is just

one way to accomplish that.

The biggest danger of having a product lens, as

opposed to a customer lens, is that it focuses you on

the wrong things. The most powerful aspirations will

always have the consumer at the heart of them. In

P&G’s home-care business for instance, the winning

aspiration is not to have the most powerful cleanser.

It’s to reinvent cleaning experiences, taking the hard

work out of household chores. It’s a winning

aspiration that led to market-changing products like

the Swiffer and Mr. Clean Magic Eraser.

2. Where will We Play?

“Where to play” represents the set of choices that

narrow the competitive field. It’s about deciding

where your company will compete: in which markets,

with which customers, in which channels, in which

product categories, and at which vertical stage or

stages of your industry.

Where-to-play choices occur across a number of

domains, notably these:

1. Geography. In what countries or regions will you

seek to compete?

2. Product type. What kinds of products and

services will you offer?

3. Consumer segment. What groups of consumers

will you target? In which price tier? Meeting

which consumer needs?

4. Distribution channel. How will you reach your

customers? What channels will you use?

5. Vertical stage of production. In what stages of

production will you engage? Where along the

value chain? How broadly or narrowly?

Every business in every industry must confront these

“where-to-play” choices, no matter whether they’re a

start-up, a small business, a national company, or

even a huge multinational.

The answers, of course, will differ greatly from firm to

firm. Needless to say, most small businesses tend to

have narrower where-to-play choices than larger

companies do. This comes largely as a function of

capacity and scale. But even the largest, wealthiest

companies must make choices and trade-offs in order

to compete in some places, with some products, for

some customers. “A choice to serve everyone,

everywhere is a losing choice,” warn the authors.

Back at P&G, the Olay turnaround team’s “where-to-

play” choices started with understanding the

consumer: Who is she? What does she want and

need? To win with their target market segment of

middle-aged women, P&G invested heavily in

carefully analyzing the consumers’ needs and wants

through careful observation, including home visits.

Only through a concerted effort to truly understand

these women – and the way in which P&G could best

serve those needs – was it possible to breathe fresh

new life into the Olay brand. As P&G’s current CEO

Bob McDonald explains, “We don’t give lip service to

consumer understanding. We dig deep”.

3. How will We Win?

Just as “where-to-play” selects the playing field; “how-

to-win” defines the choices for winning in the chosen

field. It’s the secret recipe for success in the chosen

segments, categories, geographies, and so on.

These two sets of choices should flow from, and

reinforce, one another.

To show how this can play out, Lafley & Martin

compare and contrast two different American

restaurant chains: Olive Garden and the Mario Batali

group of restaurants. Both chains specialize in Italian-

American food, and both are successful across

multiple geographic locations. But they represent very

different where-to-play choices.

Olive Garden is a mid-priced, casual dining chain with

considerably more scale than Mario Batali. At last

check, Olive Garden had more than seven hundred

restaurants across the United States and around the

world. Because of its massive scale and reach, Olive

Garden’s how-to-win choices largely revolve around

meeting the needs of “average” diners, and it focuses

on achieving reliable, consistent outcomes. This

makes sense considering that Olive Garden hires

thousands of employees each year to reproduce

millions of meals to suit a wide array of tastes.

Mario Batali on the other hand, competes at the very

high end of the fine-dining space. The much smaller

chain has locations in just a few select places,

including New York City, Las Vegas, Los Angeles,

and Singapore. Generally speaking, Mario Batali

wins by designing innovative and exciting recipes; by

sourcing the very best of ingredients; and by

delivering excellent, authentic and customized

service. It helps too that Batali himself is a minor

celebrity through his frequent Food Network

appearances.

As mentioned above, in great strategies, the where-

to-play and how-to-win choices fit together seamlessly

to make the company stronger. Given their where-to-

play choices, it would not make sense for Olive

Garden to try to win by trying to trade on the celebrity

status of its head chefs, nor for Batali to drop his

prices and start offering middle-of-the-road food.

To determine how to win, an organization must decide

what its competitive advantage is; 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.

At this point, you may be asking yourself: “What

competitive advantage(s) does my company have?”

If your answer was: “We offer the most affordable

products in our category,” then you may want to

pause here and reflect on the following. According to

Lafley & Martin, all successful companies must make

efforts to control costs, so there’s nothing wrong with

being competitive in that regard. But, in their view,

having lower costs than some, but not all, of your

competitors, can enable your firm to stick around and

compete for a while. But it won’t be a winning

strategy over the long-term. Only the one true low-

cost player in any industry can win with an ultra-low-

cost strategy. The less risky alternative to an ultra-

low-cost strategy is product or service differentiation.

In any successful differentiation strategy, your

company would offer value-added products or

services that are perceived to be distinctively more

valuable by customers than competitive offerings.

And you’re able to do so with approximately the same

cost structure that competitors use. You needn’t be

the cheapest, so long as your customers perceive

they’re getting value.

The more a product is differentiated along a

dimension consumers care about, the higher price

premium it can demand. So, Starbucks can charge

four dollars for a fancy cappuccino drink, which has

very little to do with their actual input costs. Or, to

use another example, after P&G had successfully

differentiated their product offerings in the eyes of

their target consumers, the new “Olay Total Effects”

cream, was sold for $18.99, instead of $7.99 (which is

roughly what the old Oil of Olay sold for in most

American retail outlets). Even at $18.99, when

surveyed, most Olay customers still felt like they were

saving a bundle, because comparable products from

Clinique and Estee Lauder would retail for $25 - $30,

or more. And in the highly competitive skin care

market, there tends to be a belief amongst most

women shoppers that “you get what you pay for.”

4. What are Our Core Capabilities?

It’s critical to understand what core capabilities must

be in place to win, and to assess whether or not those

attributes are currently resident within your firm. If

not, you’ll need to build them.

At P&G, a company with more than 125,000

employees world-wide, the range of capabilities is

broad and diverse. But only a few capabilities are

absolutely fundamental to winning. For example, the

company came to realize that, while it was not bad

when it came to manufacturing products, it wasn’t

particularly good at it either. So manufacturing is no

longer considered to be a P&G core competency. As

another example, in the case of Olay, the turnaround

team chose to leverage two core strengths:

1. Deep consumer understanding. This is doing the

work necessary to truly know your end users.

The Olay team’s goal was to uncover the

unarticulated needs of consumers, to know

consumers better than their competitors, and to

see opportunities before they are obvious to

others.

2. Innovation. Innovation is P&G’s lifeblood. P&G

seeks to translate the deep understanding of

consumer needs into new and continuously

improved products. Innovation efforts were

applied to the Olay cream itself (better

formulations led to more effective treatment for

wrinkles), to the packaging, and to the way the

brand interacted with consumers.

“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 can consider capabilities in

light of those choices. Only in this way can you see

what you should start doing, keep doing, and stop

doing in order to win.”

By identifying the core capabilities you need to

achieve and sustain competitive advantage, your firm

can apply its limited resources, attention and time to

the things that matter most. There may well be work

to do to bolster and grow those capabilities, including

training and development, bringing in fresh talent,

building supporting systems, and even reorganizing

the company around the capabilities. The process of

creating systems that support the specific capabilities

of the organization will be examined in the final

strategic question, which follows below.

5. What Management Systems and Measures do

We Need?

The last question in the five-step strategic choice

cascade is often the most neglected, even though it’s

where the rubber actually hits the road.

Far too often, senior management teams formulate

strategy and then broadcast key themes to the rest of

the company, expecting quick and definitive action.

But even if you set a great winning aspiration,

determine where to play and how to win, and define

the capabilities required, your brilliant new strategic

plan can still fail if you don’t have appropriate

management systems that foster, communicate and

measure progress of the strategy.

Systematic measurement is also critical. What gets

measured gets done. Constant measurement

provides both focus and feedback for the

organization. Focus comes from an awareness that

outcomes will be examined, and success or failure

noted. This creates a personal incentive to perform

well. Feedback comes from the fact that

measurement allows the comparison of expected

outcomes with actuals, which gives you insights into

what is working and what is not.

Good Strategy Doesn’t Last Forever

A final point to remember is that strategies aren’t

carved in stone; even good ones.

Once you’ve developed an effective strategy for your

business, and have watched it succeed for a period of

time, the last thing you should do is rest on your

laurels. No matter how good your strategy may be, it

won’t be effective forever.

Consider Wal-Mart, for example. Wal-Mart’s winning

strategies, which include second-to-none logistics,

have led to unparalleled success in the consumer

retail space. But, not all that long after having being

almost universally declared “the winner who took all,”

Wal-Mart is now experiencing the rise of Target on

one front (with its slightly higher-quality, and trendier

clothing offerings), and Dollar Stores on another, with

their more aggressive pricing. Now, Wal-Mart is

being forced to fundamentally re-think its value-

proposition.

And then there’s Apple. With its innovation-based

strategies and clever consumer marketing, Apple

once stood on a pedestal far above other smart-

phone competitors, and ranked as the world’s most

valuable company. But that’s starting to change.

Apple is now competing hard with Android. And so

far at least, Android is winning. Similarly, Google is in

a life-and-death struggle with Facebook – another

once-dominant company. And of course, Google and

Apple now compete with each other. The fact that

one-time Goliaths are now falling to modern-day

David’s does not come as a surprise to Lafley and

Martin. Based on their experience, they know that

there simply is no one perfect strategy that will last for

all time. Sooner or later your competitors will come up

with an even better one. That’s why building up – and

maintaining – strategic thinking capability within your

organization is so vital.

Conclusion

As we’ve seen, the essence of strategy development

is making choices. Not mundane choices like what

kind of packaging you should use for your new

product line, or how to improve your corporate Web

site. No, we’re talking about gut-wrenching,

existential choices, like what lines of business to be

in, and which not to be in; where to play in the

businesses you choose; how you will win where you

play; what capabilities and competencies you will turn

to core strengths; and how to calibrate your internal

management systems to translate these choices into

successes in the marketplace. And it all starts with a

simple – but crucial – aspiration: having the will to

win.

With their straightforward, five-step approach to

strategy development, Lafley and Martin have a way

of making this all sound pretty easy. But anyone

who’s ever run a business knows that formulating a

strategy entails a high degree of risk, and there’s no

guarantee you’ll get it right.

To be sure, not all strategies are winning strategies.

But if you ask Lafley and Martin, they’ll tell you that

operating in a fast-changing, intensely competitive

marketplace without any strategy to guide you is far

riskier. “A leader’s job is to lead,” say Lafley and

Martin, “and a great place to start leading is in

strategy development for your business.” Just

remember: Play to win.