“The essence of strategy is choosing what not to do.” – Michael Porter
This week and next, we will discuss a topic that does not get too much attention. Importance of getting the strategy right for success. Whether as an individual or as an organization (of any size), strategy is key to long-term sustainable differentiation and success. There are a bunch of different frameworks on this topic. For today’s discussion, let us take a closer look at “Playing to Win” by AG Lafley (ex-CEO of P&G) and Professor Roger Martin (who was a close advisor to Lafley). We will find this to be a very versatile framework. But first things first.
What Is Strategy?
strategy is 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. – Playing To Win
Making choices that let us focus our energies towards a specific goal is the heart of strategy. And by definition, when we make choices, it is essential to say no to several decisions, which is not always easy.
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. What matters is winning. Great organizations—whether companies, not-for-profits, political organizations, agencies, what have you—choose to win rather than simply play.
Playing to Win
In the book, the authors clearly show that when the focus is not winning, but to “also play,” the endeavor is bound to fail. The key to strategy is hence “Playing to Win.” And it consists of answers to five crucial, inter-related questions highlighted in the image below:
Let us try looking at these five questions using two different types of case-studies – one related to a personal choice and one related to a startup we all know.
- Startup: Uber – referring to its initial pitch-deck as a Black Car aggregator from 2008
- Personal: Going to a business school for an MBA
A winning aspiration
It usually is closely tied to the vision. Be it personal or as a startup, it will be useful to have a clearly articulated vision. In the case of Uber, it was “Convenience of a NYC cab + experience of a professional chauffeur ⇒ Netjets of car services.”
Where to play
The next important question is the boundary of where you want to win. In the case of Uber Black cars, they clearly defined this as “Professionals in American cities – specific focus on SF and NYC.”
How to win
To determine how to win, an organization must decide 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. Michael Porter called it competitive advantage—the specific way a firm utilizes its advantages to create superior value for a consumer or a customer and in turn, superior returns for the firm.
The where-to-play and how-to-win choices should reinforce one another. In the case of Uber, they had thought of the following “Key Differentiators” to create unique values for how-to-win.
With the first three questions, the heart of the strategy is in place. We have defined the winning aspiration and figured out where-to-play and how-to-win. The next two questions help answer the capabilities and systems that are needed to execute the winning strategy. You could have the best strategies, but it will bear no fruit without answering the next two questions.
“Capabilities are the map of activities and competencies that critically underpin specific where-to-play and how-to-win choices.”
In the case of Uber, we can glean from the initial pitch deck that they had to develop the following core capabilities:
- Build supply of high-quality drivers with Black cars
- Develop “Geo aware auto-dispatch” technology engine
- Consumer mobile app with the best end-user experience
- Cashless billing system
Most decisions in this bucket will be “Who not How” decisions as discussed earlier.
These are the systems that foster, support, and measure the strategy. At the corporate level, management systems included strategy dialogues, innovation-program reviews, brand-equity reviews, budget and operating plan discussions, and talent assessment development reviews.
At a startup like Uber, the systems could have been driven by a system such as Objectives and Key Results, combined with effective management and board reviews.
Now let us see how we can apply this to a personal goal.
It is vital to go through all five questions and implement them thoroughly for the best results on your strategy. It is tempting not to do the last two questions, but without the core-capabilities and the management systems, the best strategies are highly unlikely to succeed. Similarly, there are a few other things to watch out for, which we will cover in the next section.
Top-3 Gotchas from the startup world:
- The Board does not focus on Strategy: Helping the CEO think through strategic choices is essential for a good board. It is the CEO’s job to extract the most value out of your Board, and so it is crucial to set the agenda of your Board meetings to give enough time for strategic decisions in addition to operational reviews.
- No strategic planning process in place: Most startups have a budgeting process, and many have Goal setting (OKRs, etc.) to line up with the budget, but it’s essential to have a good strategic planning process. Here is the head of Strategy at Flipkart talking about the role of ‘Head of Strategy’ and the strategic planning process at Flipkart.
- Not thinking beyond one-two years: This is related to the previous point. Most startups think year-to-year and don’t plan what the startup should look like beyond that time frame. But, unless you have at least a broad vision of where the startup is going three to five years out, you cannot identify what bottlenecks you have and build needed capabilities to achieve that vision. You need not have precision on where you are going 3-5 years out but at least a directional idea of your “Playing to win” strategy.
A quick 10-minute video where AG Lafley talks about “Playing to Win” and some case studies from P&G.
Any discussion on strategy would be remiss if we did not take a look at one of the most influential concepts in this space “The Five Competitive Forces that Shape Strategy” by Prof. Michael Porter. A framework that was originally published in 1979 and has stood the test of time and a great place to start for any founder who wants to map out her startup’s playing field from a strategic lens perspective. It was a pleasure to watch this 13-minute video in which Prof. Porter himself talks about the five forces and its relevance over time.
Leaving you with a couple of questions to ponder. Do you have a personal or professional goal that is dear to you? Do you have a well thought out “Playing to Win” Strategy for that goal? Have you done the “Five Forces” analysis for your space?
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