What Do We Do Well? What Must We Do Better?
Since competitive strategy is essentially about being different, a company’s differentiated position is enabled by activities designed to deliver that differentiation— in brand, in product and in service to customers.
Identifying which activities really distinguish your company’s offering, and then choosing to create capability and competence in those specific activities can be an important source of value for your customers, as well as a sustainable competitive advantage for you.
If you are delivering pizza — on time, precisely as ordered and still piping hot — these are things that matter to most customers. These are the things that result in satisfaction and repeat orders.
For every business’s “how to win” differentiation strategy, the first core capability to focus on is knowing who your customer is and what she or he wants. Many P&Gers used to smile (and some would even laugh) when I would say: “Find out what she wants and make sure you give it to her—every time.”
The “she” would vary by brand, product or service.
Each would have a narrowly and more specifically defined “target consumer.” Finding out what she really needs and wants was a never-ending commitment to deliver a better customer value and a more desirable customer experience. The best businesses could identify unarticulated needs and wants — the needs and wants that customers couldn’t even describe and, in some cases, didn’t even know they had.
If you break down the end-to-end execution of delivering your product or service from start to finish, which activities are most important? Which activities deliver the differentiation your customer values most? Which activities really distinguish you from other competitors?
In most cases, there will only be two or three, no more than four or five, critical differentiating activities.
Once they’re identified, the challenge is to build capability and real core competency in every single one of those activities — to the point where your managers and employees can consistently deliver and execute on them in a way that distinguishes your product and makes it stand out from all of the competition.
To summarize: Sort through your activities. Choose capabilities to turn into core strengths that differentiate and distinguish your business from its competition.
A.G.’s perspective: Core capabilities
At P&G, we spent a significant amount of energy, effort, and time sorting through long lists of potential core capabilities offered by the business units and functions for consideration as core company strengths. We underwent a comprehensive and spirited dialogue and business strategy process that revolved around two success criteria:
The capability had to be important, potentially decisive in the majority of P&G businesses around the world, and
P&G either had to already have or realistically believe we could build competitive advantage in that capability
We chose five core company strengths that served us well for over a decade:
Understanding customers
Creating and building brands
Innovation
Strategic partnership
Leveraging global scale and scope
Those five capabilities drove the specific activities we chose to invest significant human and financial resources in. They became key enablers of sustainable competitive advantage in the industries and categories of business we chose to compete in, as well as key contributors to superior value creation for customers, employees, share owners, strategic partners and all other important stakeholders.
About the author
A.G. Lafley is the former CEO of Procter and Gamble, who worked for decades in and with large public companies. Over the last 15 years, he has turned more of his attention, energy, and time to small businesses and nonprofit organizations. He currently serves on the boards of Omeza, Snapchat, Tulco, Hamilton College, and as the founding CEO of the Sarasota Bay Park Conservancy. A.G. is the author of two best-selling books, The Game Changer about innovation and Playing to Win about strategy, as well as numerous articles on leadership, management, and business strategy for Harvard Business Review.