By A.G. Lagley and Roger L. Martin
Best Line #1: What matters is winning. Great organizations choose to win rather than simply play.
Best Line #2: Ideally, companies should see strategy as a process rather than a result—adapting existing choices before business and financial results start to turn down.
Business strategy is a rich topic that people either love or barely tolerate. I can’t begin to know why some people find it boring. Even when it fails as a predictor of success, it’s still a great lens for inspecting what happens. Similar to systems thinking, it can create deep understanding.
Our authors in the book Playing To Win undoubtedly feel the same and so they’ve written the best book to introduce anyone to the topic and hopefully win their appreciation. As a humble supporter of the cause, I’ve offered four articles on the topic this week, all derived from fabulous insights provided in the book. Today’s review will add a bit more insight and hopefully persuade thousands, nay millions, to rush to their nearest bookstore to grab a copy. It’s worth it!
This week’s posts:
The Strategy Choice Cascade
As introduced in Wednesday’s post, any great strategy is developed through a series of interdependent choices. Much like a chess player must think five or six moves ahead, so too must any of us seeking to start a new endeavor. Business or otherwise. This cascade is highlighted below and the author’s treatment of the core questions is worth the price of the book. The way they provide Proctor and Gamble as a case study, demonstrating how the concepts are applied, is highly valuable.
Thursday’s post focused largely on where to play and how to win, using Michael Porter’s Five Forces as a framework. That takes us through the first three questions but there is a great deal to understand about the last two, regarding capabilities and management systems. I can’t give this the full treatment that our authors provide, especially with the insights into Proctor and Gamble’s methods, but some illumination can still help.
The Dangers of Not Deploying A Strengths-Based Strategy
Powerful and sustainable competitive advantage is unlikely to arise from any one capability but rather from a set of capabilities that both fit with one another (i.e. that don’t conflict with one another) and actually reinforce one another (i.e., that make each other stronger than they would be alone).
Dan McGlaughlin is a courageous, smart person who should be applauded for his failed strategy. In 2009, at the age of 30, he struck inspiration. He wanted to be a professional golfer despite the fact he had never played golf. With the rise of the 10,000 hour rule and the terrific benefits discovered through methods of deliberate practice, Dan made a brave shift in his life and chased that dream.
Through a grueling schedule and constant play, Dan made incredible progress. By the time he reached the 5,000 hour mark, he had achieved a level of skill that less than 6% of all golfers acquire. Unfortunately, somewhere around the 6,000 hour mark, his body showed its limitations. Strained by the unrelenting torque of so many drives, chips, and puts, his back effectively “gave out”. He was sidelined for several months and could never resume the schedule he had developed. Soon, his skill plateaued just as his body had. The PGA tour was then a dream too distant for him to reach.
There are many fascinating lessons from Dan’s brave journey, many of which are uplifting. But in terms of understanding the strategy, as defined by our authors, there was one capability that simply could not hold up to the pressure. For all the strength of Dan’s approach, his body was still 30 years old at the time he started. To pack that much time and practice into a physical activity of that much intensity is simply beyond our capability. Dan’s age, as much as it pains me to say it as a thirty-something, was an unavoidable weakness.
I can’t say that Dan could have avoided that if he’d used the strategy cascade model. And I’m glad he didn’t because we would have lost this incredible story. All the same, one lesson it clarifies is that we must have a hard assessment of our capabilities as we develop our strategies.
Playing To Your Strengths
To do so, our authors recommend a technique known as the Activity System. This is another concept we can credit to Michael Porter’s work. This tool represents a business’s competitive advantage by displaying all the core capabilities of the firm, the things that they do best as expressed by the actual activity. So it’s isn’t as simply as “we’re good at customer service” but rather, in the example below from Southwest Airlines, it’s the core competencies of frequent, reliable departures, very low ticket prices, and limited passenger amenities. These capabilities are displayed in large gray nodes.What, exactly, makes those core capabilities possible? That’s the stuff of the supporting capabilities, the subordinate smaller nodes/activities. To simplify, this map effectively shows the ways that Southwest are able to provide their unique value. For anyone who has flown Southwest, this looks familiar. A lot of this reflects our experience as consumers and explains why, for example, there are no seat assignments since it helps them limit passenger service and thus keep very low ticket rices.
This particular activity map is a bit old but, if you compared it to another airline of the time, like Virgin or Delta, you’d find that their activities/capabilities were very different. That differentiation, plus the low-cost leadership Southwest provided, are what made a winning strategy. But what I love most of all about this tool is that it consolidates and clarifies all the many moving parts within a large organization so that everyone can see how these things work together. Each node probably represents a whole division within the corporation. Seeing how they fit together, outside a silly organizational chart, is quite meaningful. But I’ll save that sidebar for another day.
Doable, Unique, Defendable
If one is so brave and curious as to develop an activity map for your strategy (I highly recommend it), the most important aspect of the work is to assess the map for its level of feasibility, distinctiveness, and defensibility. Feasible is simply a measure of how doable those activities are. By the Southwest Airlines example, a core capability involves “short haul, point-to-point routes between midsize cities and secondary airports”. That’s fine but if your current airline routes are long-haul hub-and-spoke networks then this is not exactly feasible.
Distinctiveness is my personal favorite. This gets to the aspects of differentiation. Even as a low cost leader, you must have something that is distinct. More than just price and certainly more than just technology. To borrow a line from the co-author A.G. Lafley:
Technical superiority alone is not sustainable.
Why? Well, it’s not exactly the most distinct thing. People don’t buy an iPhone solely for its technical superiority. That superiority can be disputed and can be easily overcome. So what leads to iPhone to succeed is the distinctiveness of its broader software and services. Nothing can mimic that; nothing can be the same.
This leads to the third component, defensibility. Again, no one can make another iPhone the way Apple can. They maximize these strengths to create as high a degree of user convenience as possible. As better writers than me have explained, you can always win by investing in user convenience since it is an ever-evolving, boundless area of possibility that people are willing to pay for.
So it isn’t enough to have a strategy based on your strengths and what you can do. You have to find ways for your strengths-based abilities to be distinct, valuable, and inimitable.
A fine example of this is found in the meditation app space. For years, the services provided by Calm and Headspace have been the most popular and successful meditation apps available on mobile devices. But over the course of several years, Sam Harris has developed a unique perspective on the practice through his book “Waking Up”, his podcast “The Waking Up Podcast”, and his unique blend of neuroscience, philosophy, and rationality. Not only did these things attract a very large audience, it led to a natural extension of a new meditation app that has become an immediate success. If you drew an activity map for this new service, you would find many feasible, distinct, and defensible elements to his offering that the incumbents (Calm and Headspace) cannot possibly undermine.
One might not think of competitive dynamics in mindfulness apps but it certainly exists.
One can also think of this in terms of the Master of One concept championed in the best book on self-improvement. Whatever you can bring to the table, as a person, is a unique blend of skills and perspectives that no one can duplicate. So long as you continue to build on that foundation and become genuinely remarkable, you can create a category for yourself that no one else can occupy.
Systems For The Strategy
This is the point in the article where I must indulge in my despise for strategic plan documents. Because I really do despise these documents. So permit me a moment to tee off on the topic.
Strategic planning documents do a terrible disservice to people. Such documents, like business plans, give a false sense that the work of “strategizing” is complete. Look! We have a color-coded binder to show for it! Great work, everyone. Time for lunch.
There is no power in these plans other than the power of delusion. We delude ourselves into thinking we have a strategy when we really just have a collection of papers. The strategy only manifests in the thinking and the day-to-day practice. We’re often unaware of what that day-to-day practice really is and the delusion is worst when we think our strategic plan document says what it should be. Even though it isn’t.
The documented strategy is really just a document. Not long after every such plan is developed, it is placed on a shelf and has a very curious way of staying on that shelf for four years or so until someone realizes that they need another one. Because the last one didn’t work. So begins the self-perpetuating cycle of writing strategic plan documents that everyone either ignores or, worse, barely manages while yawning through the regular six-month-review session.
But I digress.
What makes this the best book for formulating a business strategy is the fact that it not only delivers a great introductory framework but also advocates a great system for implementation. There are a lot of tools for implementing a strategy, aligning a business, executing a vision. One of the most durable forms is the OGSM. A fine article on the merits of the OGSM is provided in this article and so, for our sakes, I’ll cover the basics:
OGSM is an acronym for objectives, goals, strategy, and measures. At Proctor and Gamble, this tool was used as a one-page summary document with these critical bits of information all easily viewed. As a precursor to dashboards and HUDs, it is a great way to hardwire the most critical, strategically-relevant information for anyone to keep their focus.
At P&G, there were specific embellishments made to make the one-page document really shine as a strategic device. As written in the book:
We enforced a practice by which the strategy section had to contain a clear and explicit expression o where to play and how to win, choices that connected in compelling ways with the aspirations of the business and the measures of success indicated in the final section of the OGSM. The goal was to create in the OGSM a simple, clear expression of a strategy, a living document everyone in the business knew and understood.
The bold-letter emphasis is mine. Largely because of how cranked up I get about these giant binders/plans that are neither living, nor known, nor understood. Better to have the one-pager a’la Proctor and Gamble. Anyway, an example from the book on what an OGSM looks like is provided below. This comes by way of a slideshare provided by Anthony Flores, CAPM. A link is in the caption.
The amateur graphic designer in me salivates when I see these sort of things. I can already visualize a beautiful infographic style with all the cool charts and colors. That’s the direction such tools are heading and it’s so very engaging. But even as a plain table you see here, the effect is the same. Without a clear, concise method for accurately conveying the strategy, no one will adhere to it. As stated by the authors,
In any organization, the choices from the top must be precisely and evocatively stated so that they are easily understood. Only when choices are clear and simple can they be acted upon.
The OGSM tool embodies the full cascade of choices that embody a proper strategy. So while some good oration skills help any executive get engagement on the direction you want to take, the OGSM is an even better, more comprehensive-yet-concise way of keeping that strategy alive. I think this tool, or any regularly-refreshed tool that is as lean and clear, is the best signal that a business really knows what it’s trying to do.
Conclusion: Advocacy versus Assertive Inquiry
The authors explain that P&G used this tool for regular strategy meeting. And while this is a fine practice, the key distinction for what made these meetings productive was the mindset that it instilled. Ordinarily, such strategy meetings are a time for advocacy. Members from various divisions flaunt their vanity metrics and say that they’re doing things right and others aren’t. Debates ensue and everyone fights to “win” the meeting with whatever their pet solution/idea might be.
This is the stuff of advocacy and it kills most long-term efforts to be a strategic, coordinated business since team members devolve every decision into debates. Our authors do a great job of acknowledging this common failure point. They venture into a study on team learning, a’la Peter Senge’s The Fifth Discipline and Chris Argyris’s fantastic foundational work that inspired them both.
Here is where the final points about Playing to Win have the most immediate benefit. Developing a strategy is hard. So the Strategic Choice Cascade is here to help. Meanwhile, sticking to the strategy is hard, too. So the OGSM tool is here to make implementation easier or, at least, more focused and aligned. But if strategy work always leads to departmental infighting or “corporate theater at its finest” (as one of P&G’s managers quipped) or, even worse, apathetic passive-aggressive dodging, then the business still loses.
So without stealing the thunder of the authors work (since we’ll cover a lot of this in a future review of The Fifth Discipline), strategy requires a team to learn how to clearly articulate their ideas on strategic tactics while “genuinely inquiring into the thoughts and reasoning of your peers.”
Why? Because strategy is ultimately just a disciplined means of carrying a business conversation. If that conversation cannot be a learning conversation of the sort we reviewed last week, the strategic mindset fades and the plans, OGSMs, and all other such stuff goes by the wayside.
The inability of a team to rally around known threats, make necessary pivots, and maintain a strong strategic position is probably caused the most by the inability to talk productively in the way our authors, Peter Senge, and the great Chris Argyris prescribes. It’s the core element behind Sony’s inability to coordinate and seize the chance to build the first great mP3 player. It’s the reason Kodak was unable to pivot on its digital camera. And why Sears Roebuck is what it is today. These businesses had decent strategies and certainly had the resources and abilities to thrive amidst disruption. But the prevailing culture and the inability to stay open to what was happening around them, through the use of assertive inquiry, was their downfall. Who knows? It could happen to Proctor and Gamble someday, too. They recognize this and have strived to avoid the pitfalls of advocacy when the tides shift and the strategy demands them to shift with it.
But such is the art of strategy amidst the science, processes, and engineering that it also entails. There isn’t any topic more rich and fascinating in the working world. Our authors show us why with this fantastic book. It’s the best place to begin the study of the topic and the best way to begin a business. Or any other endeavor.
Highly recommended. Here’s a link to the book on Amazon.
Mental Models and Principles
- The Strategic Choice Cascade model. Start with winning aspiration, then where to play, then how to win, then capabilities, then management systems.
- Strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.
- Strategy is not a vision.
- Strategy is not a plan.
- Benchmarking is a recipe for mediocrity.
- What matters is winning. Great organizations choose to win rather than simply play.
- Where to play and how to win are mutually reinforced ideas
- Technical superiority alone is not sustainable
- The strategic moat concept – a distinct, defensible position that is as inimitable as it is valuable.
- The Activity System Method for mapping core capabilities.
- Strategy creation and review often devolves into “corporate theater at its best”.
- The one-page OGSM tool. A method for hardwiring the focus on clear, concise information, including Objectives, Goals, Strategy (where to play and how to win), and Measures.
- Norms for Dialogue: Advocacy versus Assertive Inquiry.
- Only when strategic choices and clear and simple can they acted upon.
- Strategy Logic Flow – a structured method of thought experiment to test a strategy
- Competitive Analysis – game analysis to determine the expected competitive response from other firms as a reaction to your where-to-play and how-to-win choices.
- “Articulating options provides a gut check.”
- Barriers to Choice – a testing method to determine what worries the team most about the potential strategy; used to tease out “what must be true” for the strategy to be effective.
- Reverse-Engineering: a concept related to Gary Klein’s premortem that involves seven steps to test a strategic idea:
- Frame the choice
- Generate strategic possibilities
- Specify conditions (what most hold true for the idea to be strategically sound)
- Identify barriers to choice (what do you feel least confident to be true?)
- Design valid tests
- Conduct tests