First, spot the similarities. Over time, the strategies of incumbents tend to converge. A useful exercise is to overlay the business models of companies in the same industry and then look for areas of overlap. Wherever you see competitors doing the same thing, ask yourself, “What’s the shared assumption behind this policy or practice?” and then, “What would happen if we challenged that belief?” For centuries, innkeepers assumed you had to own rooms to offer guests a bed for the night. Airbnb inverted this belief and now has more than six million listings across the world.

Second, focus on what hasn’t changed. What aspects of your strategy have remained stagnant for years or decades? Over time, legacy practices, like wallpaper, become invisible. Your job is to question whether those 12 13 taken-for-granted practices still make sense. For example, though it endured a lot of pushback from traditional carmakers, Tesla challenged the long-held practice of selling cars through independent dealers. The company’s sleek stores, often located in luxury shopping venues, offer customers a hassle-free buying process. Tesla understands that the best orthodoxies to challenge are those that degrade the customer experience.

Third, go to extremes. Pick some parameter of performance—price, choice, availability, speed—and ask what would happen if we aimed for a 10X improvement? Fifty years ago, a retired physician, Dr. Govindappa Venkataswamy, launched an epic quest to eradicate unnecessary blindness in India. Millions of his compatriots had cataracts but couldn’t afford corrective surgery. How, Dr. V. wondered, could he reduce the cost of surgery by 90 percent or more? For inspiration, he looked at the fast-food industry. “If McDonald’s can sell millions of burgers,” he thought, “why can’t [we] sell millions of sight-restoring operations?” Today, Dr. V.’s network of specialty hospitals, the Aravind Eye Care System, performs half a million cataract surgeries annually.

Inevitably, the significance of each dimension of the where-to-play choice will vary by context. Each dimension must be considered thoughtfully and will hold different weight in different situations. A start-up might focus first on the products or services to be offered. A stagnating giant might focus on customers—looking for a deeper understanding of needs

and new ways to approach segmentation—to narrow and refine an overly broad where-to-

play choice.

The new, blank-sheet-of-paper approach required a different way of thinking about innovation capability. Traditionally, in diapers and elsewhere, the emphasis had been on cutting-edge technology. Here, the R&D teams had a different challenge—to address the specific, differentiated needs of consumers in emerging markets within specific cost parameters. It was a different way of thinking about and using the core innovation capability—but one on which the R&D teams were able to deliver. The result was market leadership in China in a rapidly growing category.

Industry segments are distinctive subsets of the larger industry along lines such as geography, product or service type, channel, customer or consumer needs, and so on. Mapping industry segments is rarely straightforward; it takes work, reflection, and, often, the willingness to explore beyond the current or obvious segments to segments that do not currently exist. In many cases, the accepted, traditional industry maps are imperfect. Like the old maps of a flat world that showed edges you could sail off, industry maps have limitations; only by exploring the edges of those maps can you see things differently.

The company introduced Crest Pro-Health, Crest Vivid White, and a set of sensory Crest Expressions offerings, with flavors like cinnamon and vanilla. It took a decade, but Crest was able to reframe the business from toothpaste to oral care, to understand consumer preferences and unmet needs, and to broaden the product line in light of a richer

understanding of industry segments.” (Lafley and Martin, “Playing to Win”, p.163) “Attractiveness:

Once you have articulated existing and new segments, you must understand the structural attractiveness of the different segments. Other things being equal, a firm would want to play in segments that have higher profit potential based on their structural characteristics. To understand structural attractiveness, we can turn to Mike Porter’s seminal five-forces analysis and ask about the bargaining power of suppliers, the bargaining power of buyers, the degree of rivalry, the threat of new entrants, and the threat of substitutes (figure 7-2).

Porter’s framework is a very useful aid to understanding the profit potential of markets and segments.