Strategy. It’s one of the most misused words in business. What does it mean? How should it be used? How can you benefit from having a well-considered one?
Over the Christmas break, I reread AG Lafley and Roger Martin’s book Playing to Win: How Strategy Really Works. Published in 2013, it sets out five key questions that should be answered as part of a business’s winning strategy. AG Lafley was the CEO of American FMCG giant Proctor & Gamble (P&G) for over ten years and Roger Martin was the Dean of the Rotman School of Management at the University of Toronto for many years. They believe that all businesses, regardless of their industry or size, can benefit from having clarity around these five questions.
Lafley and Martin’s book builds on Michael Porter’s classic What is Strategy? piece published by Harvard Business Review in 1996. In this article, Porter asserts that an organisation’s strategy revolves around its choice to perform activities differently than its rivals. These activities should be compatible with one another and create a reinforcing chain. Good strategy should provide an organisation with sustained competitive advantage.
As we turn to the five key questions, it’s helpful to bear Porter’s concepts in mind.
Q1: What is your winning aspiration?
While many businesses have aspirations, they are found in their mission and vision statements, which are often abstract and provide little context for setting strategy. Successful businesses desire to win in specific places through specific methods. In the 2000s, P&G’s aspiration was “delivering market-leading, value-creating brands in every category and industry in which P&G chose to compete”.
Winning aspirations will differ for various businesses and departments within businesses. One of the startups I’m involved in has an aspiration to “comprehensively secure organisations of all sizes with enterprise-grade technology in the cloud”. A finance team may have an aspiration to “provide the most detailed analytics in the industry to various team leaders within the business”.
Businesses and departments must prepare for winning by having strong aspirations.
Q2: Where will you play?
Businesses can play in many segments and geographic markets. By clearly defining where you’ll play, resources can be focussed on meeting the needs of your target. Where you’ll play can be defined narrowly or broadly whether by demography, geography, organisation size, feature or particular levels of the tech stack.
Many successful startups have initially won by playing on a small field before winning an adjacent field. In the early days, it may make sense to experiment by playing on several small fields to work out which type of field yields the most success.
Q3: How will you win?
Once you’ve decided your preferred field, it’s time to work out how you’ll win there. Is it because no one is on that field? Or, if there are incumbents, how will you play that field better?
The choice of where to play and how to win are interrelated. Ideally, one will flow from the other and be reinforcing. If a startup decides to provide lightweight developer software tools to small, distributed teams, it needs to create products and promote them in ways that specifically fit the needs of this market. This result is strong product-market fit, which reinforces the startup’s activities.
A good strategy will provide clarity around product decisions. By focusing on the needs of small, distributed teams, the startup doesn’t need to add functionality required by large or non-distributed teams. Instead, their product roadmap should be judged against the ability to look after small, distributed developer teams by providing lightweight tools.
Lafley and Martin say that being clear about how to win involves seeking and growing sources of competitive advantage. The classic strategic positions remain: low-cost strategy, where profit is driven by having a lower cost structure than competitors; or differentiation strategy, where profit is driven by a price premium because customers believe their products or services to be more valuable than competitors.
Q4: What capabilities must be in place?
Mapping the key activities that allow the business to win where they play is next. These don’t have to be capabilities that already exist but the clearer that these desired capabilities are identified, the easier it’ll be to build them over time.
For the startup providing lightweight developer software tools it may be:
- Deep customer understanding: knowing how small, distributed teams work better than anyone else
- Agility: creating and rolling out functionality quickly
- Distribution: developing channels to market through product evangelists
Q5: What management systems are required?
The final question concerns the systems that build, support and measure a strategy. This is a critical element of success. Businesses need a structure through which strategy can be created, reviewed and communicated. Measurements are required to assess the success of a strategy so changes can be made, where necessary.
The five questions act as a cascade, with the answers to the first setting the context for the second and so on. The cascade isn’t linear but iterative. As the answers for lower questions emerge, the answers for higher ones may need to change.
By having clarity about all these questions, startups can focus on key activities and say no to distractions.
Can you answer these five questions for your startup?