This is the fifth in a series on Lafley & Martin’s great strategy book “Playing to Win”. We are working through the list of iterative strategic questions that businesses should ask and answer to create competitive advantage. In the last post, we looked at “Where to play?” Now we look at an interconnected question “How to win?”
There are only two ways to look at this. Either a firm pursues a cost advantage or a product differentiation advantage.
Finding ways to lower production and/or distribution costs means taking a close look at internal processes. It also means standardization and sacrifice of non-conforming customers. Achieving a cost advantage over competitors does not mean selling at a lower price. To the contrary, the greater profit may be re-invested to produce other advantages.
Pursuing a product differentiation strategy has a very different focus. Winning with this approach means seeing more clearly customers are willing to pay more for. It also means a commitment to brand, customer loyalty and innovation.
In a rare case, a firm may pursue both at the same time. With a lower cost structure, a firm may invest in ways to differentiate its product. But in all cases, the “how t win” choices depend on the specific nature of the market where the firm has chosen to compete. In other words, the how to win depends on the where to play. The two choices should be considered together.
Next we will move to a different dimension — building capacity or playing to your strengths. Stay tuned!