When I started a recent role, my exec team peers were working on the three-year strategy using a framework outlined in Playing to Win. I have been really impressed by the work and the outputs, so I read the book. Here are my notes.
The most valuable idea in Playing to Win is the process it outlines for how to make strategic choices. Creating a strategy often requires difficult trade-offs, and the “What would have to be true” process is an excellent way to take personal feelings out of the debate, and work together to a good outcome.
It also has useful advice on how to think about core capabilities and what management activity is needed to support the strategy. A strategy is not just one and done. You need to execute and continuously iterate, and the Playing to Win framework takes you beyond creation of the strategy and into execution and iteration.
It is natural to want to keep options open for as long as possible. But it is only through making and acting on choices that you can win. “Yes, clear, tough choices force your hand and confine you to a path. But they also free you to focus on what matters.” And what matters is winning.
A strategy consists of choices of where to play, why playing there wins, and how you will arrange your organisation to support that strategy. There will be activities outlined, but they will be internally coherent (as Richard Rumelt says in Good strategy, bad strategy.) Collectively, these actions will achieve your goal.
It’s different from a plan both because of the necessity of the internal coherence, and also because the outcome is uncertain. A strategy may make you feel nervous because you can make the bets, but you cannot control the outcome. However, it’s only by having a strategy, rather than a plan, that will enable you to win.
Roger Martin has a short video (10 mins) that explains these points.
Don’t stop after definining the winning aspiration and where to play: all five questions must be answered if you are to create a viable, actionable and sustainable strategy.
The answers should fit on a single page.
“Define the purpose of your enterprise, its guiding mission and aspiration, in strategic terms”. What does winning look like for this organisation?
It’s very important to make winning a priority because winning is hard and requires tough choices. You won’t wander into it. And “a too-modest aspiration is far more dangerous than a too-lofty one. Too many companies evenutally die a death of modest aspirations.”
Craft aspirations that will be meaningful and powerful to your staff and to your customers. “It isn’t about finding the perfect language or the consensus view, but is about connecting to a deeper idea of what the organisation exists to do.” A good rule of thumb is to start with people, i.e. consumers and customers, rather than money.
Simplicity in comms is important because the simpler the message the more likely it will be understood and the better able you will be to marshall resources of the whole company.
Having the customer always in mind helps you think about how to meet their needs rather than focusing internally on how to make your existing product better. And it’s not just about serving customers, it’s about winning with them. You don’t play to participate.
Also think about your competitors – who are you winning against? – and not just the usual suspects. If you are focusing on the customer when you think about the winning aspiration (for example, not just the best cleaning product but rethinking the cleaning experience) then you might find competitors are smaller or in different niches than you imagine.
Who really is your best competitor and what can you learn from them?
Geography, product type, consumer segment, distribution channel, etc. The authors give the example of focusing on North American market, so pulling back from a worldwide approach, which allowed them to really focus.
Choosing where to play also means where not to play, which can be a harder decision if you already are in some markets.
Think about competitors when thinking about where to play. Choosing a playing field that is the same as a strong competitor might be a bad choice; but it might not be if you have a distinct advantage over them.
“Winning means providing a better consumer and customer value equation than your competitors do, and providing it on a sustainable basis.”
They should be suited to the specific context of the firm and difficult for competitors to copy.
They say all strategies either take an approach of cost-leadership or differentiation. Either your costs are lower than your competitors so you can sell lower or reinvest the margin, or your product is differentiated in some way that your customers value and will pay more for. (Michael Porter’s generic strategies model also includes a third approach: focused, which is offering a specialised service in a niche market.)
“Life inside a cost leader looks very different from life inside a differentiator. In a cost leader, managers are forever looking to better understand the drivers of costs and are modifying their operations accordingly. In a differentiator, managers are forever attempting to deepen their holistic understanding of customers to learn how to serve them more distinctively.”
Strategy is about shortening your odds. Nothing is guaranteed, but having a good strategy make it more likely you will win.
They describe a very recognisable scenario of creating a strategy: pulling together data, compromising to a strategy, making sure it’s actionable so no creative thinking, arguing for it, etc.
Instead, reframe it. “What would have to be true for this to be the correct decision?” This creates room for inquiry into ideas rather than advocacy of positions. It encourages broader consideration of more options and reduces defensiveness, as it’s not about choosing one idea over another.
It is the following steps:
It’s not arguing about what is true, it’s about working out what would have to be true for the group to commit to that strategic direction.
Any reservations about a strategic position are valid and are taken into account, but not as criticisms, rather as conditions that would have to be met. E.g. not “our customers would never buy that” but “we would need to be confident that customers would buy that” – the latter is a condition that has to be true.
Of the conditions for success of each potential strategy, which are the conditions least likely to be true? The ones you are sceptical about are the ones you devise strategic tests for.
A test might be surveying 1,000 customers, crunching loads of numbers, speaking to one key supplier, analysing competitor data, or other work. The main thing is that the test is valid, and for this, the person who is most sceptical of this condition is a useful judge. For example, one person feels that “we are confident that our customers would buy that” is really unlikely. What would a valid test be that could convince this person?
Test the least likely ones first. If the tests fail, you’ve saved time by not doing everything. If they pass, move on to the next least likely.
Make sure you elimiate any nice-to-have conditions. Every condition has to be fully binding – if it weren’t true, you wouldn’t pursue that strategic option.
Rather than a fraught offsite, battling out ideas at the end of the process, following this framework makes the choices “simple, and even anticlimactic”. The team only needs to review the test results and come to the conclusion they dictate. This accords with my experience using this process.
They reference Michael Porter again. It’s essential that a company has core capabilities that both fit with each other (i.e. don’t conflict) and reinforce one another (i.e. make each other stronger than they would have been alone).
A company’s strategic position is made up of the activities the company does. Companies can be good at lots of things, but there are a smaller number of activities that together create distinctiveness.
Instead of starting with what you are good at and attempting to build a strategy from there, you need to determine where to play and how to win, and then consider your capabilities in light of these choices. “A company needs to invest disproportionately in building the core capabiltites that together produce competitive advantage.”
Be honest about the state of your capabilities. You may find you need to invest in strengthening some weaker capabilities. You also need to determine if your capabilities are defensible against competitive action; if not, you need to revisit your where to play and how to win choices so that you can find a set of strategic choices and an activity system that are difficult to replicate.
In the example the authors give in the book, at an offsite they initially asked leaders to come up with the core strengths of the company, but they created a list of more than a hundred. The next day, they set three constraining criteria:
This resulted in five core capabilities, and they could then create an action plan for each to broaden and deepen competitive advantage.
It’s not enough just to define the strategy and broadcast it. You also need management structures to support work on it, structures to support core capabilities and measures to ensure it’s working.
The authors go into detail on a transformation in the company. The starting point was that “strategic” discussions were about defending a position to leadership, and VPs felt judged by execs on whether they had all details of the strategy worked out. It was all about walking people through a long PowerPoint deck, and making sure you had all the answers.
Instead they moved to a process where no slides were allowed, the topics of discussion were agreed in advance and the focus was on the strategy: where are you going to play and how are you going to win?
Leaders did not have to have the strategy locked down, they just had to be able to engage in a productive discussion about real strategic issues. They also explicitly adopted a specific mindset for discussions; “assertive enquiry”, i.e. “I have a view worth hearing but I may be missing something.”
They had three objectives with this change:
Over time, the leaders realised this was a safe environment to have their strategies challeged, and learn, and the company saw improved strategic discourse and correspondingly “better choice-making, more willingness to make hard calls, and eventually better business results”.
They have a great example of Pampers, that was the most absorbent nappy on the market and that was the metric they were optimising for, and congratulating themselves on being the best.
But actually, other factors, like how the baby looks in the nappy, and the ease of putting it on the child, were much more important to the customer than they’d realised, so they changed their internal metrics.
The authors identify one of my main issues with strategy. There are many tools available, e.g. SWOT, VRIN etc, but unless you have a process around them you can end up with an unfocused mass of data and analysis.
For me that was what led to me writing my talk, Analysing, Deciding Doing: How to develop and execute an effective strategy and writing a blog post about pulling models together.
The way the authors group the models together, they call the logic flow framework.
You need to ask the following 4 questions:
These might include:
But even if you have these signs you shouldn’t rest because no strategy lasts forever and all companies need to evolve. “Ideally, companies should see strategy as a process rather than a result – adapting existing choices before business and financial results (which are always lagging indicators) start to turn down.”
This is why it’s valuable to build up strategy muscles in the organisation. “Creating a truly robust strategy takes the capabilities, knowledge, and experience of a diverse team”, who are all committed to winning as a team.
There is a lot of quite boring and frequently sexist detail about P&G products (e.g. “every mom using Huggies, Luvs or Pampers preferred the shaped diaper”; lots of talk about skin-care products being focused on making women feel beautiful). It could have been a lot shorter.
It also can be offputtingly consumerist; for example, after talking about how “baby diapers are one of the most expensive items… in a parent’s shopping basket every week” they then say “The market is big and growing steadily in emerging markets where there is a huge potential to serve babies who will begin life using cloth or no diapers at all”, i.e. sell an expensive and environmentally unfriendly product to people who don’t actually need it.
However, the principles all still hold even if your company has a higher level purpose; if your goal is to improve the world, you still need a winning strategy to achieve it.
Even though I didn’t love the delivery of the message, the message itself is very valuable and the ‘What would have to be true’ method is extremely effective. It’s not the only method to get to a good strategy; but it is a good one, and clarifies the work needed, how do do the work, and helps you get to a good, agreed outcome.
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