Business strategy is something that eludes most people. But having the right strategy is often the difference between failure and success. Given the high rate of failure for small businesses, strategy is something that simply must be understood. And a new book just arrived in stores that delivers the one thing every entrepreneur needs when it comes to strategy: simplicity.
Roger L. Martin, one the world's foremost authorities on strategy and dean of the progressive Rotman School of Management at the University of Toronto, has teamed with one of the top CEOs of all time, A.G. Lafley of Proctor & Gamble, to publish a must-read book Playing to Win: How Strategy Really Works.
What is Strategy?
Strategy means different things to different people, and most think about strategy in rather ineffective ways. Some define strategy as a vision, some as a plan. Others define it as optimizing the status quo, or perhaps following best practices. Still others deny that strategy is possible, especially in times of great and rapid change.
But, the authors argue, strategy is really about choices, and they define strategy simply as "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."
"It is only through making and acting on choices that you can win," they write. "Yes, clear, tough choices force your hand and confine you to a path. But they also free you to focus on what matters. What matters is winning. Great organizations—whether companies, not-for-profits, political organizations, agencies, what have you—choose to win rather than simply play."
At the heart of strategy lie two key choices:
1. Where to play?
2. How to win?
"These two choices," write Martin and Lafley, "are tightly bound up with one another, form the very heart of strategy and are the two most critical questions in strategy formulation."
Where to Play
Once you are clear on the goals, aspirations and purpose of your enterprise—the value you bring, why you exist and the problem you solve for the world—you must choose a playing field that allows you to achieve those aims.
Answering the "where to play" question helps narrow the competitive field and focuses on where your company will compete. It encompasses markets, customers and consumers, channels, product categories and vertical stages of your chosen industry.
"This set of questions is vital," the authors write. "No company can be all things to all people and still win."
Highlighting the practical application of this approach is terrific first-person storytelling by Lafley. He describes the three critical where-to-play choices P&G had to make at the corporate level: First, grow in and from the core businesses, focusing on core consumer segments, channels, customers, geographies, brands and product technologies. Second, extend leadership in laundry and home care, and build to market leadership in the more demographically advantaged and structurally attractive beauty and personal-care categories. Third, expand to leadership in demographically advantaged emerging markets, prioritizing markets by their strategic importance to P&G.
The third choice was so important for P&G that by 2011, 35 percent of the company's total sales came from the developing world.
How to Win
While answering the "Where to play" question selects the playing field, the "How to win" question defines the choices for winning on that field.
"It is the recipe for success," the authors write. "The how-to-win choice is intimately tied to the where-to-play choice. Remember, it is not how to win generally, but how to win within the chosen where-to-play domains."
To determine how to win, you must decide what will enable your company to create unique value and sustainably deliver that value to customers in a way that is distinct from the firm’s competitors.
For example, for the Olay brand of P&G, the how-to-win choices were to "formulate genuinely better skin-care products that could actually fight the signs of aging, to create a powerful marketing campaign that clearly articulated the brand promise (“Fight the Seven Signs of Aging”), and to establish a "masstige channel." In other words, working with mass retailers to compete directly with prestige brands. As the authors tell it, the masstige choice "was a decision to win in the channels P&G knew best, required significant changes in product formulation, package design, branding, and pricing to reframe the value proposition for retailers and consumers."
Playing To Win makes it clear that strategy need not be the opaque, complex mystery many business professionals think it is. In fact, after reading Playing To Win, I was able to capture my own company's winning strategy on a single page.
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