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How Strategy Really Works

• The book is about strategy, choice, strategic thinking, and practices.
• It uses Procter & Gamble (P&G) as the main example - the approach can be powerfully used in all manner of industries and all sizes of organizations.
• A.G. Lafley and Roger L. Martin developed a robust framework around their strategic approach.
• Michael Porter, Peter Drucker, and Chris Argyris were seminal influences who shaped their thinking and work
• The book's purpose is to illustrate the strategy concepts and tools through P&G brand, category, sector, function, and company examples.
• The lessons intend to become clear for any organization, regardless of whether all companies look like P&G.

What is Strategy?

• Strategy is about making specific choices to win in the marketplace.
• Strategy requires explicit choices, it is about doing some things and not others.
• It is building a business around those choices.
• Strategy is an integrated set of choices that uniquely positions the firm in its industry, creating sustainable advantage and superior value relative to the competition.
• Five essential choices: a winning aspiration, where to play, how to win, core capabilities, and management systems, together makes up the strategic choice cascade.
• Strategy requires clear and hard thinking, real creativity, courage, and personal leadership.

Ineffective Approaches to Strategy

• Some define strategy as a vision but vision statements don't include choices about what businesses to be in and not to be in.
• There is no focus on sustainable competitive advantage or the building blocks of value creation.
• Others define strategy a plan but a plan does not imply that the things it will do add up to sustainable competitive advantage.
• Some deny that long-term strategy is possible and believe a firm should respond to threats and opportunities as they emerge.
• It is possible in tumultuous change, it can be a competitive advantage and a source of significant value creation
• Optimizing current practices, does not address the very real possibility that the firm could be exhausting its assets and resources by optimizing the wrong activities.
• It's not strategy to define strategy as following best practices and benchmarking against competition, it is recipe for mediocrity.

Strategy is Choice

Olay's Strategic Problem

• In the late 1990s Procter & Gamble (P&G) needed to win in skin care as quarter of total beauty industry
• Skin care can engender intense consumer loyalty and skill transfer for other beauty categories.
• Oil of Olay was struggling, seen as old-fashioned, customer base was growing older every year.

P&G's choices to reimagine Oil of Olay

• Maintain status quo / launch more relevant alternative under a different brand.
• Buy an established skin-care leader.
• Extend one of its leading beauty brands into skin care.
• Revive Oil of Olay to compete in a new segment.
• Ultimately settled on reviving Olay due to brand's potential.
• Invested in the SK-II Japanese skin-care line in 1991.
• Invested in Cover Girl as its leading cosmetics brand.
• Invested in Head & Shoulders as its leading shampoo brand.
• Invested in Herbal Essences as its hair-care brand aimed at a yonger demographic.
• Eventually, the team worked to understand its consumers and its competition.
• Olay was competing for women concerned with fighting wrinkles, targeting the new point of growth, women in their midthirties.
• Traditional beauty industry took the lead creating department store brands, P&G scientists soucing and developing compounds to outperform its own competitors.
• Product showed that besides wrinkles, consumers had other needs (dry skin,age spots, and uneven skin tone)
• The name Olay needed to convince skin-care-savvy women that the new Olay products better than higher-priced competitors.
• The ads highlighted Olay and the way to "fight the seven signs of aging," consulting outside experts to test work the company was doing.
• The packaging needed to represent an aspiration, a design that a consumer could pump creams with
• They tested the products to determine what the pricing strategy for Olay Total Effects should be
• $12.99 had good purchase intent but reached mass shoppers only
• $18.99 was well received by shoppers spending 30 dollars+ on Clinique

Ultimate results for Olay

• Olay took lead and became priced at $18.99 for launch of Olay Total Effects.
• Team deepened capabilities on an ingredient, active ingredient
• Procter and Gamble (P&G)'s skincare grew 2-4% annually prior, with double digit sales after 2000.
• Became a $2.5 billion brand with extremely high margins.

Olay able to succeed spectacularly where so many fail?

• They way they thought about the choices made was different.
• Clear and defined approach to strategy and gave individual managers tools effectively make choices, what underpinned everything made a difference.
• What is your winning aspiration?
• Where will you play?
• How will you win?
• What capabilities mus be in place?
• What mangement systems are required?
• Choices can be understood as a cascade, choices at the top of the cascade setting the context, with choices at the botton set the contraints

Winning Aspirations

• The first question sets the frame for all the others and is what is the company
• Defines direction to win and the level of the market share
• To define what and how enable Olay see larger purpose, Clarity directed ideal by brand,category,sector, and company -Winning was delivering most valuable value created, To create sustainable competitive advantage, financial return.
• Aspirations be refined over time, align consistently, defines provider of context, it in all cases within from the company

Where to Play

• Represents set of choices that Narrow Competitive field
• Understand what enable company
• Compete by Markets, Customers and Consumers, and the list vertical stages of industry
• A firm can compete in multiple demographic segments and geographies, myriad services and categories,

How To Win

• Defines the choices of playing field, Recipe for segments, and the channels with intimately choice ties
• What to create for unique value, sustainable delivery to way make a firm's competitors for a customer
• Formulate skin-care power, brand, and promise of best practices to know best P&G a
• Core, home, care, win-win and to do in the rights in the world to do in the know of everything for every for you

Core Capabilities

• Support of all the heart and soul by support, set choice of the quality is the process of P&G by create choices
• Deep consmer understanding-to understand their users and consumers than all for the others
• Innovation-P&G seeks help by and work for consumers by applied support models -Brand Building long and best strength that is P&G and improve and train P&G to what to build market team efficiently -To market the cost and global scale better to find the customers

Managment Systems

• The final way that helps people to the strategy, measures
• To support help human, resource pool better and systems, marketing with new mix created for next innovation step, systems to speak credibility to dermatology editors, it is in the design shop