Business Standard

The winning plan

To aspire merely to participate is self-defeating. Winning is the only criterion of a successful business strategy, says a new book

Strategist Team 

Aspirations are the guiding purpose of an enterprise. Think of the Starbucks mission statement: “To inspire and nurture the human spirit — one person, one cup, and one neighborhood at a time.” Or Nike’s: “To bring inspiration and innovation to every athlete* in the world.” (The additional note, indicated by the asterisk, reads: “*If you have a body, you’re an athlete.”) And McDonald’s: “Be our customers’ favorite place and way to eat.” Each is a statement of what the company seeks to be and a reflection of its reason to exist. But a lofty mission isn’t a strategy. It is merely a starting point.

The first box in the strategic choice cascade — what is our winning aspiration? — defines the purpose of your enterprise, its guiding mission and aspiration, in strategic terms. What does winning look like for this organization? What, specifically, is its strategic aspiration? These answers are the foundation of your discussion of strategy; they set the context for all the strategic choices that follow.

There are many ways the higher-order aspiration of a company can be expressed. As a rule of thumb, though, start with people (consumers and customers) rather than money (stock price).

Peter Drucker argued that the purpose of an organization is to create a customer, and it’s still true today. Consider the mission statements noted above. Starbucks, Nike, and McDonald’s, each massively successful in its own way, frame their ambitions around their customers. And note the tenor of those aspirations: Nike wants to serve every athlete (not just some of them); McDonald’s wants to be its customers’ favorite place to eat (not just a convenient choice for families on the go). Each company doesn’t just want to serve customers; it wants to win with them. And that is the single most crucial dimension of a company’s aspiration: a company must play to win. To play merely to participate is self-defeating. It is a recipe for mediocrity. Winning is what matters — and it is the ultimate criterion of a successful strategy. Once the aspiration to win is set, the rest of the strategic questions relate directly to finding ways to deliver the win.

Why is it so important to make winning an explicit aspiration? Winning is worthwhile; a significant proportion (and often a disproportionate share) of industry value creation accrues to the industry leader. But winning is also hard. It takes hard choices, dedicated effort, and substantial investment. Lots of companies try to win and still can’t do it. So imagine, then, the likelihood of winning without explicitly setting out to do so. When a company sets out to participate, rather than win, it will inevitably fail to make the tough choices and the significant investments that would make winning even a remote possibility.

A too-modest aspiration is far more dangerous than a too-lofty one. Too many companies eventually die a death of modest aspirations.

Playing to Play
Consider one of the costliest strategic gambles of the last century: General Motors’ decision to launch Saturn. The context is important, of course. In the 1950s, at the end of legendary chairman Alfred P. Sloan’s tenure, GM had more employees than did any other company in the world and owned more than half of the US automotive market. It was the biggest of the Big Three and, for a time, the greatest and most powerful company on earth. But Sloan retired. Tastes changed, partly in response to the oil shocks of the 1970s. An incursion of cheaper, fuel-efficient imports began to make GM’s lineup look old-fashioned and unaffordable.

By the 1980s, GM’s core US brands — including Oldsmobile, Chevy, and Buick — were in decline. Younger car buyers were turning to Toyota, Honda, and Nissan, choosing these automakers’ smaller and more economical models. Costs were a growing concern too; as GM’s unionized workforce aged, generous retiree benefits contributed to higher and higher legacy costs — and those costs were passed on to car buyers. Meanwhile, relations with the United Auto Workers were poor and not getting any better, as GM restructured operations, closed plants, shifted resources, and laid off tens of thousands of workers.

In 1990, at a strategic crossroads, GM made a bold choice. It launched a new brand to compete in the small-car market. Saturn — “a different kind of company, a different kind of car”— would be GM’s first new brand in almost seventy years, and it marked the first time GM would use a subsidiary, rather than a division, to make and sell cars. The goal, per then chairman Roger Smith, was to “sell a car at the lower end of the market and still make money.” In short, Saturn was GM’s answer to the Japanese imports that threatened to dominate the small-car market; it was a defensive strategy, a way of playing in the small-car segment, designed to protect what remained of the ground GM was losing.

GM set up a separate Saturn head office. It negotiated a simplified, flexible deal with the United Auto Workers for Saturn’s Spring Hill plant, guaranteeing workers greater control and profit sharing in exchange for lower base wages. Saturn also took a remarkably different approach to customer service, beginning with a no-haggle, one-price policy at all its dealerships. At Saturn, “customers received personal attention usually found only in luxury showrooms ... As a matter of policy, employees would drop what they were doing and cheer in the showroom when a customer received the keys to a new Saturn.” Launched with much fanfare, Saturn looked to be GM’s silver bullet — the innovative strategic initiative that would finally turn things around.

As it turns out, Saturn did not turn things around. Some twenty years and, by analyst estimates, $20 billion in losses later, Saturn is gone. The division was shuttered and all of its dealerships closed by the end of 2010. GM, emerging from Chapter 11 bankruptcy, is now a shadow of its former self, and its US market share is less than 20 percent. Launching Saturn didn’t cause GM’s bankruptcy, but it didn’t help much, either. Saturn vehicles, though they garnered loyalty from owners, never reached the critical mass needed to sustain a full lineup of cars or a national dealer network.



Reprinted by permission of Harvard Business Review Press. Excerpted from Copyright 2013 and All rights reserved.

PLAYING TO WIN: HOW STRATEGY REALLY WORKS
AUTHOR: AG Lafley, Roger L Martin
PUBLISHER: Harvard Business Review Press
Price: Rs 995
ISBN: 9781422187395.

First Published: Sun, February 24 2013. 21:27 IST
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