The Heart of Strategy:

Where to play is about understanding the possible playing fields and choosing between them. It is about selecting regions, customers, products, channels, and stages of production that fit well together—that are mutually reinforcing and that marry well with real consumer needs. Rather than attempt to serve everyone or simply buy a new playing field or accept your current choices as inevitable, find a strong set of where-to-play choices.”

(Lafley and Martin, “Playing to Win”, p.72) “WHERE-TO-PLAY DOS AND DON’TS:

• Do choose where you will play and where you will not play. Explicitly choose and prioritize choices across all relevant where dimensions (i.e., geographies, industry segments, consumers, customers, products, etc.).

• Do think long and hard before dismissing an entire industry as structurally unattractive; look for attractive segments in which you can compete and win.

• Don’t embark on a strategy without specific where choices. If everything is a priority, nothing is. There is no point in trying to capture all segments. You can’t. Don’t try.

• Do look for places to play that will enable you to attack from unexpected directions, along the lines of least resistance. Don’t attack walled cities or take on your strongest competitors head-to-head if you can help it.

• Don’t start wars on multiple fronts at once. Plan for your competitors’ reactions to your initial choices, and think multiple steps ahead. No single choice needs to last forever, but it should last long enough to confer the advantage you seek.

• Do be honest about the allure of white space. It is tempting to be the first mover into unoccupied white space. Unfortunately, there is only one true first mover (as there is only one low-cost player), and all too often, the imagined white space is already occupied by a formidable competitor you just don’t see or understand.

HOW-TO-WIN DOS AND DON’TS:

• Do work to create new how-to-win choices where none currently exist. Just because there isn’t an obvious how-to-win choice given your current structure doesn’t mean it is impossible to create one (and worth it, if the prize is big enough).

• But don’t kid yourself either. If, after lots of searching, you can’t create a credible

how-to-win choice, find a new playing field or get out of the game.

• Do consider how to win in concert with where to play. The choices should be mutually reinforcing, creating a strong strategic core for the company.

• Don’t assume that the dynamics of an industry are set and immutable. The choices of the players within those industries may be creating the dynamics. Industry dynamics might be changeable.

• Don’t reserve questions of where to play and how to win for only customer-facing functions. Internal and support functions can and should be making these choices too.

• Do set the rules of the game and play the game better if you’re winning. Change the rules of the game if you’re not.

CHAPTER SEVEN: Think Through Strategy

“As you begin articulating your strategic choice cascade, the obvious place to start is at the top. We’ve argued that it is essential to define a winning aspiration up front, and it does make sense to begin thinking about strategy by defining the purpose of your enterprise; without having an initial definition of winning, it is difficult to assess the value of any subsequent choice. You need a winning aspiration against which you can weigh differentchoices. But remember that strategy is an iterative process, and you’ll need to return to refine your winning aspiration in the context of the subsequent choices. So, rather than dwell on crafting the perfect definition of winning, sketch a prototype, with the understanding that you will return to it later with the rest of the cascade in mind. Then consider the real work of strategy as beginning with where to play and how to win—the very heart of strategy. These are the choices that actually define what you will do, and where

you will do it, so as to generate competitive advantage.” (Lafley and Martin, “Playing to

Win”, p.159-160)

“Ultimately, there are four dimensions you need to think about to choose where to play

and how to win:

• The industry. What is the structure of your industry and the attractiveness of its segments?

• Customers. What do your channel and end customers value?

• Relative position. How does your company fare, and how could it fare, relative to the competition?

• Competition. What will your competition do in reaction to your chosen course of action? These four dimensions can be understood through a framework we call the strategy logic

flow, which poses seven questions across the four dimensions.

This is the fourth and final element of the logic flow. The question to address is this: is there some competitive response that could undermine or trump the where-to-play and how-to-win choices?

Inevitably, this is guesswork to some degree; you can’t know for sure what a competitor will or won’t do in the face of your actions. But forming a thoughtful hypothesis is important. It is far better to ask what your competitors will likely do before you proceed than to simply wait and see what happens. Only strategies that provide a sustainable advantage—or a significant lead in developing future advantages—are worth investing in. You don’t want to design and build a strategy that a competitor can copy in a heartbeat, or one that will prove ineffective against a simple defensive maneuver on a competitor’s part.

A strategy that only works if competitors continue to do exactly what they are already doing

is a dangerous strategy indeed.

To make good choices, you need to make sense of the complexity of your environment. The strategy logic flow can point you to the key areas of analysis necessary to generate sustainable competitive advantage. First, look to understand the industry in which you play (or will play), its distinct segments and their relative attractiveness. Without this step, it is all too easy to assume that your map of the world is the only possible map, that the world is unchanging, and that no better possibilities exist. Next, turn to customers. What do channel and end consumers truly want, need, and value—and how do those needs fit with your current or potential offerings? To answer this question, you will have to dig deep— engaging in joint value creation with channel partners and seeking a new understanding of end consumers. After customers, the lens turns inward: what are your capabilities and costs relative to the competition? Can you be a differentiator or a cost leader? If not, you will need to rethink your choices. Finally, consider competition; what will your competitors do in the face of your actions? Throughout the thinking process, be open to recasting previous analyses in light of what you learn in a subsequent box. The basic direction of the process is from left to right, but it also has interdependencies that require a more flexible path through it.