Huge fan of this book. Did a tear-down of the first half of this book here; this covers the 2nd half. As a quick recap, A.G. Lafley (ex-CEO of P&G) and Roger Martin (ex-Monitor, ex-Dean of Rotman School of Management) explained that strategy is a set of choices about winning. BOOM.
- Know who you are serving (read: customers) and what winning looks like
- Dig deep and nurture what you are uniquely good at (read: core competencies)
- Create a set of activities which give you a sustainable competitive advantage (read: long-term profitability)
There is a diagram from Playing to Win (affiliate link) that the authors describe as a choice cascade. Many different choices, decisions, trade-offs to make. Once you’ve define your winning aspiration, where to play, and how to win, then it’s about 4) capabilities and 5) systems (last half of the book).
Play to your strengths
Such a fan of this point, on so many levels.
- Customer: It’s hubris to try and serve all customers. There’s no such thing as an average customer. They have different needs and usually, there’s enough room in the market for multiple ‘winners’. Segment. Target. Position. Find customers who will love your work.
- Competitor: Everyone is a trying to get your profits. Yes, rivals try to win your customers. Yes, suppliers raise prices on you. Customers shop around and ask for more free services. Yes, Amazon is entering your industry. Everyone is trying to grab your profits here.
- Company: Who are you now? What kind of company do you want to be? What makes you unique?
This makes tons of sense, right? Play our own game. “You do you.” Let’s not kid ourselves, this is difficult for two big reasons:
- FOMO. The default setting for most companies is to think: “Oh, the economy is not great, customers are getting pickier, new competitors keep lowballing my prices, costs are going up. . . so I’ll do what everyone else is doing, and just grind it out.” Totally understandable. FOMO is real.
- Time. Strategy takes time. It’s not 1 silver bullet – like a illustrious brand, efficient factory, or savant engineer. Nope, most everyone’s got something similar. It requires a unique combination of awesomeness that is working together and hard for others to copycat (think: economic moat).
When articulating core capabilities, you need to distinguish between generic strengths and critical, mutual reinforcing activities. A company needs to invest disproportionately in building core capabilities that together produce a competitive advantage. . . The activity system should be feasible, distinctive, and defensible. – A.G. Lafley & Roger Martin
Have a strategic dialogue, not a presentation
Roger Martin wrote a fairly provocative article in HBR called The Big Lie of Strategic Planning. Nice ring to that, right? My write up here. Thesis is simple and rings pretty true: Too often the annual strategic planning process is a choreographed parade of analyses, research reports, budgets, and forecasts which sensibly validate the non-decisions and corporate inertia already in place. (oops, I said that outloud, huh?). As Bain mentions in the Founder’s Mentality, many incumbents fund a little bit of $$ across a lot of ideas, and never really “back a bet.” It’s a lot of hedging, optionality, and waffling.
Instead, we need fewer people (Think: BU heads + VP of strategy + CEO, CFO) who are empowered to make decisions. The agenda should be limited to the bigger questions that matter. There should be real discussion and raw debate. Trade-offs should be decided.
The goal is to come out with a better strategy than you came in with.
The kind of dialogue we wanted to foster is called a sort of inquiry. Built on the work of organizational learning theorist Chris Argyris of Harvard business school, this approach blends the explicit expression of your own thinking advocacy with a sincere exploration of the thinking of others inquiry. In other words, it means clearly articulating your own ideas and sharing the data and reasoning behind them, while genuinely inquiring to the thoughts and reasonings of your peer.
Marc Andresseen coined a similar expression that I use all the time “strong opinions, loosely held.” Same idea. We should have conviction on our ideas because we’ve done the research and difficult thinking. However, we’re not so close minded that we reject new ideas and can’t be convinced by the data.
Taking a group of individual higher achievers and asking them to work together to craft strategy is no simple matter. Since your strategic choice is a judgment call in which nobody can prove that a particular strategy is right or the best in the advance there is a fundamental challenge to overcoming organizational decisions on strategy. – Lafley and Martin
Be comfortable being uncomfortable
One source of frustration for all strategy students (and executives) is the difficulty of knowing if you’re right. “In the end, building a strategy isn’t about achieving perfection; it’s about shortening the odds.” No one needs reminding that in 2020, 100% of strategy departments were wrong. Being flexible, adaptive, and human is the secret.
Don’t expect either the channel or the end consumers to tell you what constitutes value; that’s your job to find out.
BOOM. It’s the strategists job to determine what constitutes value. . . time to get to work.
Ask good questions
Confession: yes, I teach strategy frameworks. These are useful heuristics to break down problems. Useful. Yes. Industry analysis, value chain, SWOT, PESTEL, 4P, 3C, Value/growth matrix, STP, cost structure analysis, game theory, blue ocean, disruptive innovation, founder’s mentality, should I go on?
Naw. It’s more important to ask good questions:
- What is our winning ambition? What does success look like?
- How should we define our industry, competitors, and value chain?
- Are we driving a higher willingness to pay with our target customers (read: do they love us?)
- Are we “winning” in this category? How do we know? What’s our confidence level?
- What are we NOT seeing? Are there opportunities to meet customers “unmet” needs?
Measure what matters
Avoid analysis paralysis. Too many MBA types (myself included) over-research. Yes, research is useful, but no, it’s not THE answer. It’s better to reverse-engineer the problem, thinking through the hypotheses, and being smart = lazy. What would need to be true for XYZ to happen? Stay focused. What is the “one thing” that is most critical in this analysis?
Two great managerial accounting adages: “Measure what matters” and “You get what you measure.”
- Drive accountability closest to the source of the decision (think: Gemba)
- Track decisions at all levels (activity, business unit, corporate)
- Create systems to track leading and lagging indicators (think: don’t drive looking only in the rear view mirror)
What other strategic planning tips do you have?
Lots more details in the book, but haven’t we heard this from Peter Drucker, Andy Grove, Jack Welch, Ram Charan. . .yes, yes, yes, yes.