Business leaders have a big problem. As A.G. Lafley and Roger Martin write in Playing To Win : “Far too few companies have a clear, choiceful and compelling winning strategy in place.”
Worse, executives who do come up with a successful approach often become trapped. To quote from another business book, Strategic Transformation: “What was previously a source of strength becomes the opposite – the invisible bars of a prison from which it is very hard to escape.”
Assessing the options can be “overwhelming, even paralyzing,” Mr. Lafley and Mr. Martin write. A surfeit of guides to the topic risks adding to the indecision. But these two, quite different, new books are an excellent starting point.
Playing To Win is the fruit of the partnership between Mr. Lafley, the much-acclaimed chief executive officer of Procter & Gamble until 2009, and his consultant Roger Martin, now dean of Toronto’s Rotman School of Management, whom Mr. Lafley describes as his “strategy alter ego.” It promises to show readers the blueprint that made P&G so successful under Mr. Lafley.
Strategic Transformation’s authors – a trio of management professors from Solvay Brussels School, Lancaster University School and Ceibs – inevitably take a more academic tack. Innately suspicious of journalistic analyses that attribute strategy success to the influence of individual leaders, they take a database of long-lived British companies and focus on three: Tesco PLC, the retailer, Cadbury Schweppes PLC, the confectionery and beverage group, and Smith & Nephew, the medical devices company. They not only performed well over a 20-year period, but did so while changing strategy and top management. The authors then set out to find eyewitnesses to the process, interviewing ex-managers and mining corporate archives for clues about how they did it and why they succeeded better than three of their counterparts in similar industries.
The research is a refined version of the “pairing” studies used by Jim Collins and Jerry Porras in the bestselling Built to Last (and by Mr. Collins and co-authors in subsequent books), which the professors politely acknowledge. Strategic Transformation is drier than any of Mr. Collins’s work. There are no “Big Hairy Audacious Goals” here.
But it would be a profound mistake to assume good planning is all that is needed. “There simply is no one perfect strategy that will last for all time,” write Mr. Lafley and Mr. Martin. “That’s why building up strategic thinking capability … is so vital.”
But it is Mr. Lafley and Mr. Martin who have produced a manual for strategy practitioners, while Strategic Transformation’s authors Manuel Hensmans, Gerry Johnson and George Yip provide most of the colourful insights into the messy business of strategy-making.
The professors’ exhaustive interviews yield, for instance, the tale of how Jack Cohen, legendary founder of Tesco, once literally crossed swords with his son-in-law Leslie Porter – who headed the increasingly important non-food division – when the pair “grabbed the Wilkinson swords that decorated the boardroom wall and clashed like duellists.”
Former insiders at Smith & Nephew describe decision-making in the 1960s and 1970s as “management by argument,” “managing by fear,” and “being as rude as you can to each other.”
These depictions ring truer to corporate life than the somewhat sterile accounts of P&G strategy sessions in Playing To Win where managers strove to come up with a “margin-boosting differentiation on [dental] floss.” At one point, the authors even describe how a once-skeptical senior scientist at newly merged Gillette recognized the wisdom of doing on-the-ground P&G-style consumer research – a revelation that caused him to get teary.
You do not, though, have to be emotionally invested in the outcome of “diaper wars” to understand the critical steps the chief executive officer and his adviser used to map out their strategic path. They lay them out with clarity, backed up with diagrams showing the cascade of choices available to companies, including the questions “Where to play?” and “How to win?”
Strategic Transformation shows how. Its authors point to four “traditions” that are common to durable “strategic transformers” – continuity, anticipation, mobility and contestation (a culture of criticism) – and that help these companies exploit the “happy accidents” that befall all businesses.
A considered view of future strategy, an understanding of the competitive environment and an ability to manage operational efficiency – as also advocated by Mr. Lafley and Mr. Martin – are “necessary but not sufficient” ingredients for long-term success, the professors write. To avoid strategic drift, something else needs to be added.
All three of their chosen success stories managed to reinvent winning historical models by fostering alternative management coalitions. These younger managers were able to shake up senior leaders before the latter became entrenched. The successful companies’ managers “encouraged, and even celebrated” constructive tension and diversity of thinking. Although Cadbury Schweppes was later broken up and the confectioner sold to Kraft, in its heyday, the group nurtured a younger generation who championed new thinking.
The professors contrast this with Unilever NV, the Anglo-Dutch consumer products group, which was for decades dominated by a “special committee” that applied an overrigid approach to succession planning. Cadbury found its new chief executive officers internally, while Unilever eventually had to go outside – to Paul Polman (who coincidentally had worked under Mr. Lafley at P&G) – to kick-start its transformation in 2009.
Mr. Lafley and Mr. Martin do not ignore these lessons. They make clear that open-mindedness and skepticism are essential to any strategy discussion. But there is little in their book about P&G’s long history, awareness of which is a prerequisite for successful strategic transformation. Where Playing To Win is the book a budding strategist would read to prepare for a planning meeting, Strategic Transformation is the chief executive officer’s in-depth guide to how to sustain and refresh strategy over time.
Both books have one other clear lesson: Beware size and dominance. Mr. Lafley and Mr. Martin point out that the “winner-take-all” strategies of Toyota Corp., Dell Inc. and Microsoft Corp. have all been subject to attack; even Apple Inc. and Google Inc.’s current scale and success provide no permanent protection. P&G itself has faltered.
As Strategic Transformation’s authors suggest, underdog status helps sharpen a company’s strategic edge. Once those companies themselves become dominant, they ask, “is their management doomed to lose sight of the benefits their legacy has brought them?” Too often, history suggests, the answer is yes.
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