Playing to Win. Roger L. Martin
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others. We wanted to shift from a pure invention mind-set to one of strategic innovation; the goal was innovation that drove the core. Core consumers were a theme too; we pushed businesses to focus on the consumer who matters most, targeting the most attractive consumer segments. Core was the first and most fundamental where-to-play choice—to focus on core brands, geographies, channels, technologies, and consumers as a platform for growth.
The second where-to-play choice was to extend P&G’s core into demographically advantaged and structurally more attractive categories. For example, the core was to move from fabric into home care, from hair care into hair color and styling, and more broadly into beauty, health, and personal care.
The third where-to-play choice—to expand into emerging markets—was driven by demographics and economics. The majority of babies would be born, and households formed, in emerging markets. Economic growth in these markets will be as much as four times as high as in the OECD (Organisation for Economic Co-operation and Development) developed markets. The question was how many markets P&G could take on and in what priority order. The company started with China, Mexico, and Russia, building capability and reach over time to include Brazil, India, and others. As Chip Bergh, former group president for global grooming and now CEO of Levi Strauss & Co., notes, “In 2000, about 20 percent of P&G’s total sales were in emerging markets compared to Unilever and Colgate, which were already up near 40 percent. We were a company of premium-priced products, always going after product superiority. We tended to play, as a company, in the premium tiers in almost all categories.”6 To compete in the developing world, Bergh says, a change in orientation was required: “We needed to begin broadening our portfolio and developing competitive propositions, including cost structures that would allow us to reach deeper into these emerging markets. There are a billion consumers in India, and we were reaching the top 10 percent of them.”
Emerging markets would be an important where-to-play choice, but not all emerging markets all at once. China and Russia represented unique opportunities, as their markets opened to all comers at the same time. P&G had focused on these countries first and established strong, strategic leading positions in both markets. Now, the company thought hard about which emerging markets to target next, and with which products and categories. Baby care in Asia, for instance, made great sense—since, for the foreseeable future, most of the world’s babies would be born in Asia. Laundry and beauty also made sense in emerging markets, for reasons of brand equity, scale, and consumer preference. So, P&G sought to make inroads in Asia, in those three categories, and it did. By 2011, 35 percent of total sales came from the developing world.
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.
In chapter 3, we’ll return to the question of where to play, exploring the different ways to define your playing field and the lessons that can be learned from brands like Bounty and Tide.
How to Win
Where to play selects the playing field; how to win defines the choices for winning on that field. It is the recipe for success in the chosen segments, categories, channels, geographies, and so on. The how-to-win choice is intimately tied to the where-to-play choice. Remember, it is not how to win generally, but how to win within the chosen where-to-play domains.
The where-to-play and how-to-win choices should flow from and reinforce one another. Think of the contrast between two kinds of restaurant empires—say, Olive Garden versus Mario Batali. Both specialize in Italian food, and both are successful across multiple locations. But they represent very different where-to-play choices.
Olive Garden is a midpriced, casual dining chain with considerable scale—more than seven hundred restaurants around the world. As a result, its how-to-win choices relate to meeting the needs of average diners and focus on achieving reliable, consistent outcomes when hiring thousands of employees to reproduce millions of meals that will suit a wide array of tastes. Mario Batali, on the other hand, competes at the very high end of the fine-dining space and does so in just a few places—New York, Las Vegas, Los Angeles, and Singapore. He wins by designing innovative and exciting recipes; sourcing the very best of ingredients; delivering superlative, customized service; and sharing his cachet with his foodie patrons—cachet generated by Batali’s Food Network celebrity and friendships with the likes of actress Gwyneth Paltrow.
In great strategies, the where-to-play and how-to-win choices fit together to make the company stronger. Given their where-to-play choices, it would not make sense for Olive Garden to try to win by increasing the celebrity status of its head chef, nor for Batali to even contemplate making each location look just like the others. But if Batali wanted to seriously expand to a lower-priced, casual dining range, as Wolfgang Puck has done, Batali would need to expand his how-to-win choices to fit the new, broader where-to-play choice. If he failed to do so, he would likely fail to engage the new market. Where-to-play and how-to-win choices must be considered together, because no how-to-win is perfect, or even appropriate, for all where-to-play choices.
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.
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.
Corporately, P&G chose to compete from the core; to extend into home, beauty, health, and personal care; and to expand into emerging markets. The how-to-win choices needed to work optimally with these where-to-play choices. 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.
P&G’s where-to-play and how-to-win-choices aren’t appropriate for every context. The key to making the right choices for your business is that they must be doable and decisive for you. If you are a small entrepreneurial firm facing much larger competitors, making a how-to-win choice on the basis of scale would not make much sense. But simply because you are small doesn’t mean winning through scale is impossible. Don’t dismiss the possibility that you can change the context to fit your choices. Bob Young, cofounder of Red Hat, Inc., knew precisely where he wanted his company to play: he wanted to serve corporate customers with open-source enterprise software. In his view, the how-to-win in that context required scale—Young saw that corporate customers were much more likely to buy from a market leader, especially a dominant market leader. At the time, the Linux market was highly fragmented, with no such clear leader. Young had to change the game—by literally giving his software away via free download—to achieve dominant market share and become credible to corporate information technology (IT) departments. In that case, Young decided where to play and how to win, and then built the rest of