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Roger Martin is one of the world’s leading experts on strategy and the author of Playing to Win, one of the most beloved books on strategy. He’s written extensively for the Harvard Business Review; consulted for dozens of Fortune 500 companies, including P&G, Lego, and Ford; and written 11 other books. In our conversation, we discuss:

• The five key questions you need to answer to develop an effective strategy

• Why most companies get strategy wrong

• How to avoid “playing to play” instead of playing to win

• Real-world strategy examples from Procter & Gamble, Southwest Airlines, Lego, and Figma

• How to think about differentiation vs. low cost

• Shortcomings of current strategy education

• Much more

Listen now on Apple, Spotify, and YouTube.

Find the transcript at: https://www.lennysnewsletter.com/p/the-ultimate-guide-to-strategy-roger-martin

Some takeaways:

1. Strategy is an integrated set of choices that compels a desired customer action.

2. Great strategists aren’t born; they’re made through practice. Even if you see yourself as more operational than strategic, remember that strategy is a skill that anyone can develop over time. Just like any skill, it improves with practice.

3. To win in business, you must be either a low-cost provider or differentiated. If you’re neither, competitors can “bully” you and take market share. Two questions can help you figure out whether you’re winning in these ways. First, could you match competitor price decreases and remain more profitable than them? If not, you’re not a low-cost provider. Second, could customers essentially flip a coin between you and a competitor? If so, you’re not differentiated enough.

4. Use the Strategy Choice Cascade to define and implement effective business strategies. This framework consists of five essential questions:

   1. What is our winning aspiration? Clarify what you aim to achieve with your strategy. This guides all subsequent decisions and actions toward a clear objective.

   2. Where will we play? Select specific markets, segments, or niches where you will compete. Focus is crucial; trying to be everywhere can dilute effectiveness.

   3. How will we win? Determine your competitive advantage. You must either offer customers superior value or operate at a lower cost than competitors in your chosen areas.

   4. What capabilities must be in place to win? Identify and build capabilities that are critical for executing your chosen strategy effectively. These should be distinctive strengths that set you apart from competitors.

   5. What management systems are required to ensure the capabilities are in place? Put in place supportive systems and processes to sustain your capabilities over time. This ensures that your strategy remains viable and adaptive to changing market conditions.

Where to find Roger Martin:

• X: https://x.com/RogerLMartin

• LinkedIn: https://www.linkedin.com/in/roger-martin-9916911a9/

• Website: https://rogerlmartin.com/

In this episode, we cover:

(00:00) Roger’s background 

(02:27) The importance of strategy

(07:03) Challenges in developing strategy

(08:30) Critique of modern strategy education

(17:40) Defining strategy and the choice cascade

(23:20) Playing to win vs. playing to play

(24:57) Examples of strategic success

(31:04) Exploring differentiation and moats

(40:23) Applying strategy to real-world scenarios

(43:39) Customer-centric strategy

(44:06) Defining the market and product

(45:31) Value chain and distribution

(50:34) Cost leadership vs. differentiation

(53:16) Capabilities and management systems

(57:37) Competitive advantage and market positioning

(01:06:10) Adapting to market changes

(01:14:32) Practical strategy tips

(01:18:44) Final thoughts on strategy

Referenced:

• Nearly 10% of S&P 500 CEOs are alumni of Procter & Gamble: https://www.bizjournals.com/cincinnati/news/2023/02/06/10-of-s-p-500-ceos-pg.html

• FigJam: https://www.figma.com/figjam/

• Figma: https://www.figma.com/

• What Is Resource-Based Theory?: https://www.igi-global.com/dictionary/the-impact-of-technological-governance-and-political-capabilities-on-firms-performances-under-economic-turbulence/67915

• Michael Porter on LinkedIn: https://www.linkedin.com/in/professorporter/

• Competitive Strategy: Techniques for Analyzing Industries and Competitors: https://www.amazon.com/Competitive-Strategy-Techniques-Industries-Competitors/dp/0684841487

• VRIO Framework Explained: https://strategicmanagementinsight.com/tools/vrio/

• Business strategy with Hamilton Helmer (author of 7 Powers): https://www.lennysnewsletter.com/p/business-strategy-with-hamilton-helmer

• Good Strategy, Bad Strategy | Richard Rumelt: https://www.lennysnewsletter.com/p/good-strategy-bad-strategy-richard

• 7 Powers: The Foundations of Business Strategy: https://www.amazon.com/7-Powers-Foundations-Business-Strategy/dp/0998116319

• Boston Consulting Group: https://www.bcg.com/

• Bruce Henderson: https://en.wikipedia.org/wiki/Bruce_Henderson

• Lego: https://www.lego.com

• Vanguard: https://investor.vanguard.com/

• Southwest Airlines: https://www.southwest.com/

• How Amazon Managed to Dethrone Walmart: https://www.nytimes.com/interactive/2021/08/20/technology/how-amazon-beat-walmart.html

• GM Lost a 10-Year Battle with Tesla, Pulling the Plug on a Long Line of EVs: https://www.forbes.com/sites/brookecrothers/2023/07/09/gm-killed-its-electric-cars-and-lost-a-10-year-battle-with-tesla/

• Westlaw: https://www.westlawinternational.com/

• What Is an Economic Moat? Why Warren Buffett Says It Matters for Investors: https://finance.yahoo.com/news/economic-moat-why-warren-buffett-160046125.html

• Salomon Brothers: https://en.wikipedia.org/wiki/Salomon_Brothers

• US Airways: https://en.wikipedia.org/wiki/US_Airways

• Four Seasons: https://www.fourseasons.com/

• Michael Dell on LinkedIn: https://www.linkedin.com/in/mdell/

• Bill Gates on LinkedIn: https://www.linkedin.com/in/williamhgates/

• Mandarin Oriental: https://www.mandarinoriental.com/en/

• Continental Lite: https://en.wikipedia.org/wiki/Continental_Lite

• Ted (airline): https://en.wikipedia.org/wiki/Ted_(airline)

• Case Study: Oil of Olay: https://www.studocu.com/es/document/universidad-de-murcia/estrategia-de-marketing/case-study-old-of-olay/95079369

• AG Lafley on LinkedIn: https://www.linkedin.com/in/ag-lafley-2381b3201/

• Jack Bogle: https://en.wikipedia.org/wiki/John_C._Bogle

• Seven Ways Windows 95 Changed the World: https://www.forbes.com/sites/ianmorris/2015/08/24/windows-95-changed-the-world/

• Where to Start with Strategy? Focus on Betterment: https://rogermartin.medium.com/where-to-start-with-strategy-bae40506304c

• Brick by brick: The man who rebuilt the house of Lego shares his leadership secrets: https://www.washingtonpost.com/news/on-leadership/wp/2016/12/08/brick-by-brick-the-man-who-rebuilt-the-house-of-lego-shares-his-leadership-secrets/

• A New Way to Think: Your Guide to Superior Management Effectiveness: https://www.amazon.com/New-Way-Think-Management-Effectiveness/dp/164782351X/

• Playing to Win: How Strategy Really Works: https://www.amazon.com/Playing-Win-Strategy-Really-Works/dp/142218739X

• The Design of Business: Why Design Thinking Is the Next Competitive Advantage: https://www.amazon.com/Design-Business-Thinking-Competitive-Advantage/dp/1422177807

• The Opposable Mind: How Successful Leaders Win Through Integrative Thinking: https://www.amazon.com/Opposable-Mind-Successful-Integrative-Thinking/dp/1422118924

• When More Is Not Better: Overcoming America’s Obsession with Economic Efficiency: https://www.amazon.com/When-More-Not-Better-Overcoming/dp/1647820065

Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

Lenny may be an investor in the companies discussed.