I am starting a series of posts on A.G Lafley and Roger Martin’s Playing to Win. It’s a delightful book on strategy AND it’s not what you might typically think about when the words “business strategy” are mentioned.
For many of you, the words “business strategy” will produce one of two responses.
One: you will want to fall asleep, close this tab in your browser, block my facebook updates.
Two: you think about businessmen and women in a room figuring out how they can make more money, often at the expense of you, the customer.
So what is different about Lafley and Martin’s approach? The winning is strongly linked to delivering superior value to your customers…i.e. you win when your customer wins.
Peter Drucker said, “the purpose of a business is to create a customer.” Contrast this with what is taught in every Economics 101 class, “the purpose of a business is to maximize profit.”
What Lafley and Martin show us (in this book and Martin’s articles) is that the way to maximize profit (the Econ 101 definition) is to maximize customer satisfaction. The ideas are related, but those that put the profit maximization ahead of making the customers happy will not win in the long run.
I think Johnson and Johnson’s credo is a great example of this idea. I’ve include the entire credo below. (highlight is mine). LINK TO PDF
Notice the order in the credo:
- Suppliers and Distributors
The shareholders are listed LAST! Does J&J care about their shareholders? Absolutely, but they ensure that the shareholders win by taking care of 1-4 on the list above. “When we operate according to these principles, the stockholders should realize a fair return.”
I’l end this with a few questions, what do you think would motivate your employee base (or yourself)? A: Solving an important problem for your customer, somehow making their lives better, etc. or B: Improving returns for shareholders?
For me (and for 99.999% of the world) it’s A. I get excited about discovering and meeting our customers needs. I want to help ensure that they are delighted.
What should we be teaching students in economics? The purpose of the firm is to maximize profits? or should it be that the purpose of the firm is to maximize customer value? Which one would attract the best and the brightest into business? Again, I believe we could dramatically change the experience of most business school students by focusing on improving the lives of customers.
For the next few blog posts, I’ll dive further into some of the ideas discussed in Playing to Win. Now that you see that strategy can have a higher purpose, please come along for the ride.