P&G’s statement of purpose, at the time, read as follows: “We will provide products and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.

In great strategies, the where-to-play and how-to-win choices fit together to make the

company stronger.

To be successful, how-to-win choices should be suited to the specific context of the firm in question and highly difficult for competitors to copy. P&G’s competitive advantages are its ability to understand its core consumers and to create differentiated brands. It wins by relentlessly building its brands and through innovative product technology. It leverages global scale and strong partnerships with suppliers and channel customers to deliver strong retail distribution and consumer value in its chosen markets. If P&G played to its strengths and invested in them, it could sustain competitive advantage through a unique go-to-market model.

It is tempting to believe that strategy in general, and where-to-play and how-to-win choices in particular, are needed only for outward-facing functions—those folks who interact with external consumers and competitors. But every line of business and function

should have a strategy—one that aligns with the strategy of the company overall and decides where to play and how to win specifically for its context. At P&G, corporate functions are all tasked with crafting their own strategies in this way. Joan Lewis, global consumer market knowledge officer, explains: “Where to play and how to win has been a very important framework for us. Organizations are often good at one or the other without realizing that they’re two different sets of decisions. At one point, we weren’t as disciplined about our where-to-play choices. It was everywhere anybody needed consumer insight or anywhere we thought it could add value. Just like a business dilutes its focus and in turn its growth potential when you try to do too many things at a time or do things that are further away from your core strengths, we were relatively diluted in the nature of the impact we could have.

With capabilities, again, winning is an essential criterion. Companies can be good at a lot of things. But there are a smaller number of activities that together create distinctiveness, underpinning specific where-to-play and how-to-win choices. P&G certainly needs to be good at manufacturing, but not distinctively good at it to win. On the other hand, P&G does need to be distinctively good at understanding consumers, at innovation, and at branding its products. When articulating core capabilities, you need to distinguish between generic strengths and critical, mutually reinforcing activities. A company needs to invest disproportionately in building the core capabilities that together produce competitive

advantage.