In sum, there were three critical where-to-play choices for P&G at the corporate level:

• Grow in and from the core businesses, focusing on core consumer segments, channels, customers, geographies, brands, and product technologies.

• Extend leadership in laundry and home care, and build to market leadership in the more demographically advantaged and structurally attractive beauty and personal- care categories.

• Expand to leadership in demographically advantaged emerging markets, prioritizing markets by their strategic importance to P&G.

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.

CHAPTER FOUR: How to Win

“With the development of these new film-wrap technologies, P&G was faced with a series of choices about where to play and how to win. The challenge was to find a way to win, rather than just compete, with these new technologies. Finding the answer meant taking a new and creative approach to what winning could mean and how P&G could win in a

different way. The how-to-win choice had to be made thoughtfully with an understanding of the full playing field. The result was a first-of-its-kind partnership between P&G and Clorox—a partnership that made both companies stronger and created a billion-dollar, category-leading brand. Where to play is half of the one-two punch at the heart of strategy. The second is how to win. Winning means providing a better consumer and customer value equation than your competitors do, and providing it on a sustainable basis. As Mike Porter first articulated more than three decades ago, there are just two generic ways of doing so: cost leadership and differentiation (for more on the microeconomic foundations of these two strategies, see appendix B).

As discussed earlier, the five capabilities core to P&G’s where-to-play and how-to-win choices are consumer understanding, brand building, innovation, go-to-market ability, and global scale. The notion of bringing these capabilities to bear on the Gillette business was top of mind. From the first meeting post-acquisition, Bergh set out to incorporate P&G’s strategy framework into the Gillette DNA, working to articulate Gillette’s choice cascade.

Once the where-to-play and how-to-win choices were clear, the team could turn its attention to the capabilities required to deliver on those choices.

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.