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

company stronger.

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.

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.

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.

It is essential that all of the systems have at least some capabilities and activities that line up with the core capabilities of the organization.