For Olay, the how-to-win choices were to formulate genuinely better skin-care products that could actually fight the signs of aging, to create a powerful marketing campaign that clearly articulated the brand promise (“Fight the Seven Signs of Aging”), and to establish a masstige channel, working with mass retailers to compete directly with prestige brands. The masstige choice, which was a decision to win in the channels P&G knew best, required significant changes in product formulation, package design, branding, and pricing to reframe the value proposition for retailers and consumers.

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.

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.

The horizontal axis determines which entity will capture the industry value—suppliers, producers, or buyers. If the suppliers are larger and more powerful than the producers, the suppliers will appropriate more of the value (think Microsoft and Intel in the PC business). If, on the other hand, the buyers are large and powerful, they will get a greater portion of the

value (think Walmart versus the many small manufacturers whose products fill their shelves). The degree to which there is fierce rivalry affects which group captures value too. If rivalry between competitors is high, the dynamic will facilitate the appropriation of value by suppliers or buyers. A low degree of rivalry will protect profitability for the producers. At P&G, the analysis of segment attractiveness was occasionally a decisive factor in setting the strategy. For Bounty, geographic segmentation, paired with an understanding of consumer preferences, demonstrated that the paper- towel business was only structurally attractive for P&G in North America, due to massive overcapacity and low willingness to pay in the rest of the world. The industry featured high rivalry, high buyer power, and plenty of substitutes. When assessing segment attractiveness for Crest, P&G came to realize that the health segment was not only the largest, but also the most structurally attractive.

Health claims need to be backed by clinical trials, and few companies—really only P&G and Colgate-Palmolive—have the resources and experience to play that game on an ongoing basis. This kind of analysis—crunching the numbers on the size and appeal of different segments—is crucial to determining the range of attractive where-to-play choices.

Armed with a map of the playing field and an analysis of the structural attractiveness of the individual segments, the strategist can move to the second major category in this framework: an analysis of customer value. Regardless of whether a firm wishes to be a cost leader or a differentiator, it needs to understand precisely what customers (its own and its competitors’ customers) value. This means understanding underlying needs, like recognizing, with Gain, that a sizable group of consumers cared deeply about the sensory experience of doing laundry, valuing the scent of the detergent in the box, in the wash, and in the drawer or closet. Only once this need was understood was it possible to position and differentiate Gain along this dimension.