Among the most intriguing of Roger Martin’s wide ranging work is his long-term collaboration with Procter & Gamble CEO AG Lafley. Lafley and Martin are the co-authors of Playing to Win, How Strategy Really Works. When we spoke in 2013 on the book’s publication, we began by asking Roger Martin about the big idea behind the book:
The big idea is you can make strategy simple, fun and effective. I don’t think many people would say their strategy process, the job of putting together a strategy for their company, is any one of those three things. AG and I have a belief that you can make strategy very simple, it can be enjoyable to do, and very effective, and so we wrote a book about what we did together to do that at Procter and Gamble.
Not many executives really have a definition of strategy that’s helpful to them. And so they do lots of analysis, put together very thick documents that sit on shelves, quite famously, and it’s because they haven’t made a few key choices. What we distilled it down to, in our practice, is five key choices. If you make those choices you’ll have a strategy. If you haven’t made those choices your strategy is probably not worth having.
So how did the collaboration with AG Lafley come about?
When he took over as CEO of Procter, in June of 2000, he phoned me and said, we’ve got a lot of challenges and things we need to do, and I’d known him for about ten years prior to that, working on various projects at Procter, and he asked me would I work with him as sort of a counsellor and adviser on strategy. So we worked together for the entire time he was CEO and chair of Procter, and worked on instilling in P&G a discipline about strategy that he had always believed needed to be there. So we worked together, learned together, and thought we should share the results of that collaboration.
We think that the stories that we can tell about Procter, they’re not just a consultant going in from the outside and interviewing some people; we actually did it, and did it together, in a real environment. So we think it has an authenticity to it that is maybe unique.
Tell us about the five questions and how they fit together.
The most important thing about the five questions is that they have to be answered together, in a way that reinforces one another. So each of the five questions actually isn’t all that hard to answer on its own, it’s a little bit harder to answer them in a way that fits together. But the first question is: what is your winning aspiration? So, what are you trying to accomplish with your strategy? If you don’t have that sense of an objective then it is very hard to have a useful strategy.
Now, many companies will have highfalutin aspirations, but those are not then linked to the key choices, which we call the heart of strategy – so that’s questions two and three, where to play, and how to win. So, given your aspirations, where do you want to play – whatever market space you’re looking at – and then, once you’ve chosen that, how do you want to win where you’ve chosen to play? Then the fourth choice is what capabilities do I need to have, to build, to maintain, to win in the place I’ve chosen to play, so that I can achieve my aspirations? And then finally, the last of the five questions is, what management systems do I have to have in place so that I have the capabilities built and maintained, so that I can win where I’ve chosen to play, and meet my aspirations?
So it’s those five questions that a company needs to answer to have a strategy. The good news is there’s no reason why you can’t describe that in five pages or less, so you don’t need a thick deck of slides. Five pages will do it. In fact, you should be able to summarize it on one page. But the key is that the great strategies are ones where those five things fit together and reinforce one another.
Can you give us an example of that?
We talk about the example of Olay, and the transformation it went through from Oil of Olay, a slow-growing, low price product with an aging demographic. So that’s the brand that we looked at, starting as AG took over the beauty category in the late 90s, but then continuing through his presidency. And we looked at that and said, what are our aspirations for the skincare category?
Well, it turns out that in beauty skincare is the biggest and most profitable category – a $50 billion business worldwide. Procter really wanted to get bigger in beauty. It already had shampoos and conditioners and a little fragrance business, but it wanted to make that very big. So rather than make it a little sideline where we had this $750 million brand, which was low price and not very important, the aspiration was to make skincare a centrepiece of a beauty strategy, by having a leading brand in skincare.
But then we had a look and asked the question, where were we currently playing? Well, where we were playing was with a product targeted at aging women, and our demographic was aging. We were in the wrinkle-prevention, wrinkle cover up category. And our product was sold for about $3.99 for one little bottle of pink fluid. So we said, well, is there another place to play that would open up opportunities for us?
We came to the conclusion that there was a demographic that was younger, women aged 35 to 49, who were observing the first signs of aging, and were interested in something that helped them with signs of aging, not just wrinkles, but drier skin, spots, blemishes and the like – what we came to call the seven signs of aging. So we said if we chose our market as being for these very skin- involved women, who are a younger demographic, then we would be going dead at the heart of the category.
And then we said, well, how can we win with these women? What we realized is that we had to dramatically raise the quality proposition of the product, to reposition it as a substitute for what they paid really big bucks for in the department store channel. To do that we had to work with our retail partners to create a kind of a section in the store that made it feel more like the department store channel, but was in the store that the buyer was in on a regular basis, and also didn’t have the pressure of the salesperson at the department store trying to sell you more and more stuff.
And so we had to build capabilities – everything from better packaging, to better active ingredients. We had to build all sorts of relationships with the beauty editors in the magazines, to persuade them to take our product seriously, and we ended up launching Olay Total Effects. We also dropped the “Oil of” prefix and made it Olay. Olay Total Effects, at 18.99, which is a stunningly high price point. We moved from Oil of Olay at 3.99, to Olay Total Effects at 18.99, but it was positioned in a different place. So it was a different where, and a very different how to win. Some additional capabilities were built behind that, and it ended up growing at 10-15 percent rate for over a decade, and is now by far the biggest skincare brand in the world, and probably, it’s hard to tell exactly, but probably one of the most profitable.
So it’s a $2.5 billion and growing business now (2013), all because we set an aspiration, picked a different where, figured out exactly how you had to win, built the capabilities, and the management systems around that. And we believe that’s doable in any business, as long as you’re willing to address those questions and really have an aspiration for winning, rather than just playing. Before, we were just playing, and now we’re winning.
It’s not a linear process, is it? It’s very much an iterative process, with one part informing the rest, reinforcing the others.
Yes. That’s an important point. There are so many companies that I’ve observed make their strategy process very linear, and one of the expressions of that is starting out with a long and involved and often painful wordsmithing exercise about what’s our vision and mission.
The reason that that takes so long, often, and there are so many fights, is it’s really hard to tell what your aspirations should be until you know a little bit more about the where to play and how to win. So you might set your aspiration as something that you cannot find a where to play and how to win that meet it. But if you’ve already locked and loaded on it, and had this whole exercise where we’ve now got the new vision and we’ve got the new aspiration, it’s hard to then say, oh-oh, we’ve got to go back. So what we say, when we’re doing strategy is, set an initial aspiration, then see about a where to play, how to win. If you can’t find a where to play, how to win that’s consistent with that, maybe go back and revisit it. You can try to create an initial where to play, how to win, then ask, can we really build the capabilities to win in that way? Oh, maybe not quite. Okay, so we’re going to have to tweak it a little bit.
So you’re right. It’s this iterative process where the key is to frame it that way, to not have everybody say, oh no this is terrible we’ve now got to go back and revisit. That’s a good part of strategy. That’s a great part of strategy. It’s what makes strategy powerful.
Are we talking about prototyping strategy?
AG and I are both really interested in the world of design, and it borrows some from that. You prototype your strategy decision, and then you look back and say, based on what’s happened when we’ve exposed the prototype to people, we say, oh, you know, that’s sort of right, but not quite. And you have that attitude towards strategy, so it doesn’t feel like failure, it feels like getting it better and better and better.
Another of the messages of the book is that strategy isn’t just for people who are up in the boardroom; that everybody should be doing strategy. So, whether you’re a brand manager or in charge of a business unit, you should be doing your own strategy. But also that strategy needs to be done in the context of what the company’s trying to do, in the context of the corporate strategy. That’s the nesting concept you describe – all the sub-strategies should fit together seamlessly?
Absolutely. The strategies should fit with each other at every level in a corporation. So at Procter and Gamble they have to make strategy decisions about where to play, how to win at the corporate level, at the beauty care level, at the skincare level, at the individual brand level. I encourage the people I work with, whatever level they’re at, to ask the question, what is your aspiration for the part of this company that you are in charge of? Even if it’s just one little department, what’s the aspiration? What is your where to play, how to win choice?
I would even go so far as to say every single person in an organization would be wise to have a where to play, how to win as an employee. Job descriptions aren’t so specific as put your left foot in front of your right foot. They sort of say, well, here’s your job. And within that you have a lot of choices – where exactly am I going to focus my time? How am I going to do that in a way that creates all sorts of value?
Really, the only thing you have to think about in this nesting concept is your where to play, how to win had better reinforce and make more powerful the where to play, how to win choices of the unit above you, and the unit above that and the unit above that. It’s a view that holds that it is unhelpful to think that the CEO makes all the strategy choices because he’s way above you, high up in the organization, and you’re down below, running a business, and you just execute it. No. In our view where ever you are in the organization you have to make strategy choices too. If everybody felt that they have to make strategy choices I think corporations would work a lot better than saying we make the choices up above, and you people down there execute. It’s not the way the world actually works, and it’s not a helpful kind of conception of the corporation.
Where are we in the overall strategy debate? What’s changed since Michael Porter’s Five Forces?
One thing that’s now a core theme is getting strategy to be effective. So it’s one thing for academics to admonish companies to do strategy my way, or some way, or whatever, and then companies not doing strategy, and not finding strategy particularly helpful.
So there’s one huge theme of making sure strategy is doable by companies; that they can address strategy questions and come to answers.
Then there are these theoretical kinds of debates. A big one has to do with competitive advantage. I think a lot of the debate is not all that helpful. It is obvious that competitive advantage exists in the world. It is also obvious that competitive advantage doesn’t last forever. Nothing lasts forever. And if you’re trying to say that there is no such thing as competitive advantage, think of all the high performing, super-normally profitable companies, who’ve maintained that for years and years and years. It’s hard to say that’s not competitive advantage. So the question, to me, becomes, is there a thinking process that can help managers make decisions that produce advantage, to create high amounts of value for customers that enables you to make an attractive return, and opens up other possibilities to keep on renewing that? That’s the fundamental question I ask. My view is, yes, there’s a process of thinking that’s more likely to get you answers. There’s an intelligent process for identifying where to play, how to win, and if we make choices of that sort we will position ourselves in a way that gives us the opportunity to keep modifying that and enhancing it ahead of other people, so that we do have an advantage over a sustained period of time. It’s not the same advantage, right; it actually could be different sorts of advantages over time. So if you look over a 50-year period, it may actually be a whole bunch of different sorts of advantages. But it’s because we have a practice of asking a set of questions that keeps us ahead of the game, rather than simply reacting to changes.
The world isn’t static. Strategy isn’t static, but that doesn’t mean there isn’t a way of thinking about the fundamental questions in a way that keeps you ahead of the competition.
This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.