Strategy as Winning – A.G. Lafley:

By the time of my election to CEO in 2000, most of P&G’s businesses were missing their goals, many by a wide margin. The company was overinvested and overextended. It was not winning with those who mattered most—consumers and customers. When I visited all our top retailers in my first thirty days on the job, I found that P&G was their biggest supplier but nowhere near their best supplier. Consumers were abandoning P&G, as evidenced by declining trial rates and market share on most of our leading brands. I was

determined to get P&G’s strategy right. To me, right meant that P&G would focus on

achievable ways to win with the consumers who mattered the most and against the very

best competition. It meant leaders would make real strategic choices (identifying what they would do and not do, where they would play and not play, and how specifically they would create competitive advantage to win). And it meant that leaders at all levels of the company would become capable strategists as well as capable operators. I was going to teach strategy until P&G was excellent at it. I wanted my team to understand that strategy is disciplined thinking that requires tough choices and is all about winning. Grow or grow faster is not a strategy. Build market share is not a strategy. Ten percent or greater earnings-per-share growth is not a strategy. Beat XYZ competitor is not a strategy. A strategy is a coordinated and integrated set of where-to-play, how-to-win, core capability, and management system choices that uniquely meet a consumer’s needs, thereby creating competitive advantage and superior value for a business. Strategy is a way to win—and nothing less.

Deep consumer understanding is at the heart of the strategy discussion. To be effective, strategy must be rooted in a desire to meet user needs in a way that creates value for both the company and the consumer.

As current CEO Bob McDonald explains, “We don’t give lip service to consumer

understanding. We dig deep. We immerse ourselves in people’s day-to-day lives. We work hard to find the tensions that we can help resolve. From those tensions come insights that lead to big ideas.” Those big ideas can be the basis of a powerful where-to-play choice.

While all companies make efforts to control costs, there is only one low- cost player in any industry—the competitor with the very lowest costs. Having lower costs than some but not all competitors can enable a firm to stick around and compete for a while. But it won’t win. Only the true low-cost player can win with a low-cost strategy.

At P&G, it boiled down to three themes that would enable the company to win, in the places and ways it had chosen, regardless of the details of individual differences between businesses:

• Make the consumer the boss.

• Win the consumer value equation.

• Win the two most important moments of truth.” (Lafley and Martin, “Playing to Win”,

p.141)

“The first dictum, that the consumer is boss, was a reorientation to the company’s aspiration—to improve the lives of consumers. We wanted everyone focused on the end consumer in all aspects of the business: in innovation, branding, go-to-market strategies, investment choices, and so on. We wanted to be clear about just who the most important stakeholder is and always should be. Not shareholders. Not employees. Not retail customers. But rather the end user: the people who buy and use P&G products. The second crucial theme was to win the consumer value equation. This quickly and unambiguously defined the way that P&G would win: by opening up a bigger gap between

the value it offers to consumers and the cost of delivering that value than competitors’ gaps. This meant providing unique value to consumers (through brand differentiation and innovative products). And it meant maintaining a cost position that would let P&G offer that value to the consumer at an attractive price and still make a healthy profit. This edict turned everyone’s attention toward the where-to-play and how-to-win choices that create sustainable competitive advantage through differentiation.