How to Win
With the playing field for your business or nonprofit selected, the next strategic choice is how to win on that playing field.
Where to play and how to win are the heart of a successful business strategy. And the choices of where to play and how to win should be complementary, closely coordinated, and mutually reinforcing.
Conceptually, there are really only two how to win strategies: one based on the lowest price and lowest cost structure, and the other based on a meaningful dimension of differentiation for customers that creates sustainable advantage versus competitors.
There can, by definition, be only one low-cost producer or provider. The lower cost how to win strategy is simple and straightforward: Create a lower cost structure; sustain the cost advantage; exploit the cost advantage in a combination of lower prices and/or better profit margins. Cost advantage can be a sustainable competitive advantage for a small business because it gives that business pricing, margin, and profitability flexibility.
The alternative how to win strategy, available to everyone else, is differentiation. In a successful differentiation strategy, a company offers products or services that are perceived to be distinctly more valuable to customers than competitive offerings. Across a wide range of how to win differentiation strategies, different product and service offerings have different pricing and different consumer value equations. Each brand, product, or service offers a specific value proposition to appeal to a specific group of customers. Customer purchase, usage, and loyalty emerge when and where there is a match between what is distinctively offered and what the customer personally values.
Inside a cost leader, managers and employees are always looking to better understand cost drivers and to make continual improvements in operations to extend or at least maintain cost advantage in their business. Inside a differentiator, managers and employees are striving to understand customers and to learn how to satisfy and delight them with their differentiated brand, product, or service offering.
Finding your niche
While there is only one sustainable cost advantage/lowest price business strategy, there is a virtually unlimited number of differentiation strategies—the only limits being the needs and wants of customers and the imagination and execution of you and your team.
The differentiation strategy with perhaps the highest success rate, although not necessarily the easiest to conceptualize, design, and operate, is what Michael Porter called the focused niche strategy.
The focused niche differentiation strategy requires a very narrow approach: a precise definition of your product or service offering to very few select customers with very particular needs and wants.
The keys to a successful focused niche strategy are twofold: a very narrow and precise customer target, and a very precise product and/or service offering.
Independent workers and small business organizations can create and build very successful, sustainable businesses with very few customers—sometimes just a single customer—whom they can serve better than anyone else. And the value they create for a few customers can create significant value for the business.
This very narrow customer focus, and correspondingly narrow product and service focus, can be hard to duplicate and therefore very sustainable. Strategically-focused family office and personal service businesses are just two examples.
In my experience, some nonprofits would benefit from a much narrower focus. Certain major charitable organizations focus by definition on a single cause—American Cancer Society, American Heart Association, Feeding America, Habitat for Humanity. But too many nonprofits and family foundations are much less focused and spread their resources or grants like peanut butter across a wide range of causes. As a result, they sacrifice impact. Not enough funding is directed to a cause to make a meaningful difference. And too many dollars are wasted on the administration of grant requests and solicitations or the allocation and distribution of available funds.
Differentiation is the how to win strategy that most businesses (small, medium, and large), most nonprofits, and most independent workers necessarily follow. But without disciplined focus and considered choice, the differentiation strategy can run the risk of blurring or even losing focus and doing whatever management, the board or a board member, or any other stakeholder wants at any given time. And that’s almost always a prescription for less-than-optimal performance.
A.G.’s perspective: Sniffing out a niche
Originally introduced as a stain-fighting detergent in 1969, Gain was almost out of business in the 1980s. In fact, then-brand manager John Lilly sent a memo to then P&G CEO John Smale recommending the brand and product be discontinued. Smale hand-wrote across the top of the memo: “One more try, please.”
Lilly left for a new assignment, and that “one more try” was left for me and John’s successor, a young, first-time brand manager, Eleni Senegos.
Fortunately, Eleni and her team began at the beginning—with the consumer. Who had unmet needs, we asked, and what specifically did they want? After sifting and sorting through several rounds of consumer research, the team uncovered a passionate group of consumers who cared a lot about the sensory laundry experience—from the scent of the product in the box or bottle, to the scent during the washing process, to the scent of clean clothes coming out of the washer, out of the dryer, or off the line.
Scent was the all-important proof of clean for these consumers. At the time, there was not another brand or product positioned for these scent seekers. Gain decided its brand and product could fill that niche.
The team set about retooling and repositioning the product, the package, the brand promise, the advertising, and the marketing and sales.
The product was the first to employ encapsulated fragrance technology that enabled high levels of scent delivery throughout the entire process, even into the closet or drawer and until the next wear.
The types and characters of fragrances selected from P&G’s broad and deep fragrance palette appealed strongly to scent seekers. (P&G is one of the largest fragrance companies in the world.)
The packaging was totally transformed to be bright, impressionistic, and in your face—all about fragrance and sensory appeal.
The advertising won awards for creativity and effectiveness, appealing to the scent-seeker target.
Gain transformed from a tiny brand with several million dollars in sales in the mid-1980s into a leading brand with several billion dollars in sales in 2020—one of the most successful focused niche brands in P&G history.
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.