Introduction
In the fast-paced world of business, success often hinges on making the right strategic decisions. A. G. Lafley's book "Playing to Win" offers valuable insights into the art of strategy, using real-world examples to illustrate how companies can transform their fortunes through smart, deliberate choices. At the heart of this book lies the captivating story of Olay's remarkable turnaround, serving as a testament to the power of strategic thinking in revitalizing a struggling brand.
The Olay Story: A Tale of Decline and Resurgence
The Fall from Grace
In the late 1990s, Olay, once a beloved skincare brand, found itself in dire straits. Annual sales had dipped below $800 million, and the brand had earned the unflattering nickname "Oil of Old Lady." This moniker perfectly encapsulated Olay's image problem – it was seen as outdated and irrelevant. The brand's signature pink cream, packaged in unremarkable plastic bottles and priced at a mere $3.99, had lost its appeal to consumers.
Procter & Gamble's Dilemma
For Procter & Gamble (P&G), Olay's parent company, this decline posed a significant challenge. P&G's ambition to dominate the beauty sector required strong flagship brands in both skincare and haircare. With Olay faltering, their skincare segment had become a weak link. The company faced a critical decision: should they maintain Olay as it was, launch a new brand, acquire an existing one, extend their makeup brand Cover Girl into skincare, or breathe new life into Olay by repositioning it?
The Path to Reinvention
P&G chose to reinvent Olay. This decision set in motion a series of strategic moves that would transform the brand:
- Rebranding: The word "Oil" was dropped from the name, signaling a fresh start.
- Business Model Overhaul: The entire approach to the market was reimagined.
- New Packaging: The brand's visual identity was updated to reflect its new positioning.
- Value Proposition Shift: Olay's core offering and target market were redefined.
A Clear Vision
The reinvention came with ambitious goals:
- Achieve market leadership in North America
- Boost sales to $1 billion
- Establish a global presence
- Create a new market segment between mass and prestige brands, dubbed "masstige"
Targeting a New Demographic
Olay's focus shifted to women aged 35 and above who were beginning to notice their first wrinkles. These were consumers willing to pay more for quality and likely to remain loyal once their trust was earned.
Product Innovation
In 1999, Olay launched Total Effects, a groundbreaking product that promised to combat multiple signs of aging, not just wrinkles. This product embodied the brand's new approach – combining advanced ingredients with consumer insights.
Strategic Pricing
The new Olay products were priced at $18.99, a significant jump from the previous $3.99. This pricing strategy, coupled with improved branding and packaging, repositioned Olay as a premium mass-market brand.
Building New Capabilities
To support its transformation, Olay:
- Collaborated with innovators to develop cutting-edge ingredients
- Partnered with designers to create appealing packaging
- Worked with advertisers to craft a compelling brand message
The Remarkable Results
The post-2000 results were astounding. Olay enjoyed a decade of double-digit growth, evolving into a $2.5 billion brand with impressive profit margins. The brand had successfully transformed from a struggling entity into a powerhouse in the skincare industry.
The Power of Strategy: Five Key Questions
Olay's turnaround highlights the crucial role of a well-defined strategy in business success. But what exactly constitutes a strategy? At its core, strategy involves making choices that will help achieve a goal. To develop a solid strategy, five key questions need to be addressed:
1. What's My Winning Aspiration?
This question is about envisioning the future success of your project or business. It's like painting a picture of where you want to be, setting the direction for all your strategic decisions.
2. Where Will I Play?
This involves choosing your battlegrounds. It's about identifying specific segments, categories, or geographical areas where you want to compete and succeed.
3. How Will I Win?
Once you've chosen where to play, you need to determine how you'll outperform the competition in those areas. This is your game plan for success.
4. What Capabilities Must Be in Place?
This question focuses on identifying the skills, resources, and activities necessary to execute your strategy effectively.
5. What Management Systems Are Required?
This final question ensures that everyone in the organization, from top to bottom, is aligned with the strategy and working towards the same goals.
The Interconnected Nature of Strategic Choices
It's important to understand that these strategic choices don't exist in isolation. They form a cascading waterfall, with each decision influencing and being influenced by the others. For brands like Olay, these choices need to align seamlessly with broader decisions made at the category and company levels.
The strategic decisions made for Olay had to dovetail with P&G's overall capabilities and objectives. This coherence is crucial, as choices at one level can significantly impact choices at another.
Strategy as an Iterative Process
Strategy isn't a one-time, linear process. It's fluid and iterative, with insights constantly flowing between various choices, refining and reshaping them. While it might be tempting to search for the perfect strategy, it's important to recognize that there's no one-size-fits-all approach. The business landscape is diverse, and what works for one company may not work for another.
The key is to make choices that are distinct and align with your unique narrative and strengths. Strategy is about making informed, deliberate decisions to navigate an uncertain future – a future where your aspirations can become reality.
Lessons from Olay's Transformation
Olay's journey from near-obsolescence to market leadership offers several valuable lessons:
Embrace Change: Don't be afraid to radically reinvent your brand if the current approach isn't working.
Understand Your Target Market: Olay's success came from identifying and focusing on a specific demographic with particular needs and preferences.
Innovate Thoughtfully: The launch of Total Effects showed how combining scientific innovation with consumer insights can create a winning product.
Price Strategically: Olay's dramatic price increase was a key part of its repositioning strategy, signaling higher quality and value.
Build the Right Capabilities: Success often requires developing new skills and partnerships.
Align with Broader Strategy: Olay's transformation was successful because it aligned with P&G's overall goals and capabilities.
Be Patient: Olay's turnaround didn't happen overnight. It took years of consistent effort and strategic decision-making.
The Broader Implications of Strategic Thinking
While the Olay story is compelling, the principles of strategic thinking outlined in "Playing to Win" have broader applications. Whether you're running a small startup or managing a department in a large corporation, the five key questions of strategy can help guide your decision-making and increase your chances of success.
By clearly defining your aspirations, choosing where to compete, determining how to win, building necessary capabilities, and aligning your management systems, you create a roadmap for success. This approach forces you to make clear choices and focus your resources where they can have the most impact.
Final Thoughts
"Playing to Win" offers a practical framework for developing and implementing effective strategies. Through the lens of Olay's transformation, we see how answering key strategic questions can guide a brand from decline to dominance. The book emphasizes that strategy is not about finding a universal solution, but about making deliberate choices that fit your unique situation and goals.
The story of Olay serves as an inspiration, showing that with the right strategy, even a struggling brand can reinvent itself and achieve remarkable success. It underscores the importance of being willing to make bold moves, understanding your market deeply, and aligning all aspects of your business with your strategic choices.
In today's rapidly changing business environment, the ability to craft and execute effective strategies is more crucial than ever. By embracing the principles outlined in "Playing to Win," businesses of all sizes can position themselves to not just compete, but to truly win in their chosen markets.
Remember, strategy is not a one-time exercise but an ongoing process of making choices, learning from results, and adapting to new circumstances. By continually refining your strategy based on these five key questions, you can navigate the complexities of the business world and chart a course towards lasting success and innovation.
In essence, "Playing to Win" provides a roadmap for turning strategic thinking into tangible business results. Whether you're facing a crisis like Olay was or simply looking to strengthen your market position, the lessons from this book can help you make the strategic choices that will drive your business forward.