Roger Martin on Strategy, WTP & HTW

Roger Martin discusses strategy with Jann Schwarz at the B2B Institute.

Roger Martin on Strategy, WTP & HTW
Photo by Michele Feola / Unsplash

Roger Martin is arguably the most important management thinker of the modern era. He's the co-author of Playing To Win, a Professor Emeritus at the Rotman School of Management, and a practitioner with more than 30 year's experience working with companies like Proctor & Gamble.

He recently sat with Jann Schwarz at the B2B Institute to share his ideas and insights about Strategy and in turn marketing.

The conversation is a masterclass. Unfortunately, there aren't any closed captions on the video, so I created a lightly edited transcription of Roger and Jann's conversation. Watch the video below or read on.

Any errors or omissions are mine. Send corrections in a DM to me on LinkedIn.

Roger, welcome to the B2B Institute.

Thanks so much for having me.

Strategy in a business context gets used a lot as a term, but what does it actually mean, and why does it matter?

Well, my definition of it is an integrated set of choices that positions you on the chosen field of play in a way that makes you the best, that allows you to win.

So it's choices and those choices are important because for a company your choices end up being what you are, how you appear to the customers and competitors on the field of play that you decide. So those choices are absolutely critical to your success. And that's why I think strategy is as important as it is.

And is a strategy to same thing as a plan? People seem to confuse the two.

People do people confuse the two. I think of plans (and most of the plans that I read) as a list of activities, actions that you're going to take. But often they don't add up to a strategy because they don't specify how are you going to position yourself to win in a particular place. They just are often a list of things to do. Often the list it's quite sensible. Like, it seems like a sensible set of things to do, but it doesn't add up to winning.

So, they're compliments. They're not necessarily substitutes, right? You need a plan and you need a strategy, but they're not the same thing.

I think of them that way actually, as great compliments. So, you create a strategy, you say, "these are the choices we're going to make, and now here's the set of things we've got to do to bring those choices alive." So, they're both helpful.

The problem is planning is most often a substitute for strategy. Most companies think they have a clear strategy because they've done a big, long plan. But it doesn't provide the results that they were hoping for.

So, having that planning process, does that mean you have a strategy? It seems like people think a strategy is a PowerPoint deck and that makes it a strategy, but you disagree, right?

Yeah, I do. Again, most planning processes do not produce a strategy. That's one of the sad things about business is that you don't get the set of choices that will put you on top with plans and that's why I think strategy is in many ways the lost art.

You famously said that there's two key questions that any strategy needs to answer. What are those two questions?

They are Where to Play, and How to Win (WTP/HTW). So, the WTP says, "here's the field on which I am going to compete; our company will compete on that field." Not other places, that field. HTW, it's the choice for saying, "how will I be better than anybody else on that field of play?" And if you do not make those choices, you are selling yourself short.

If you're not clear on where you're going to play, you're going to end up playing in a lot of places. And if you don't attempt to win somebody else will. And when they figure out how to win, it's going to make your life miserable (in that space).

In other words, a lot of companies are playing to play, but they're not playing to win. And that's a problem, correct?

That is the number one problem in business. Companies that play to play. Now they may say they may have all sorts of flowery statements about how we're going to be great. Awesome. All the things they're going to do. But when you look at their actual choices, they are consistent with playing. Just being a participant in the market.

You know, bad things will happen to you faster than not when you play to play because somebody else will play to win. When they start playing to win and serving their customers better or at a lower cost, then your customers will say, "Why am I giving my business to this company that's clearly just existing. It just playing when this other company is winning."

That becomes a downward spiral as you start losing customers to another company. It will typically make that other company stronger while it makes you weaker. That's why proactively saying, "Here are the choices we are going to make to win" is an absolute necessity in modern business.

Winning means winning against someone, right? If you don't know who you're winning against you can't win.

That's right. Does that mean you should obsess about and try and be like your competitors? No. But you better know who they are. They may not be all always traditional competitors, they may be the proverbial two kids in a garage who would come in and try to disrupt your business. But you better know who is trying to get the customers that are in the space you've chosen to play in, because you need to be better equipped to get those customers and keep those customers and make money serving those customers than anybody else.

Now you have advised quite a few CEOs and famous companies on their strategy, and you've been doing this for quite a few decades. What keeps you going? What is so fascinating about strategy?

The best strategy situation is when by your actions of focusing on a certain place cause competitors to try and serve other customers in different ways and they succeed too. The worst situation is when everybody tries to do the same thing in the same way.

So, I'll give two examples: the mutual fund industry. If you say "mutual fund," the two companies that immediately come to mind are Vanguard and Fidelity. I love the competition between Vanguard and Fidelity. Jack Bogle, Vanguard founder, famously said (paraphrasing): Investment management doesn't make you money. 99% out of a hundred times it'll lose money for the fund managers after the fees. So, we're going to offer index mutual funds and index ETFs. When that emerged, that's a choice. At Fidelity, Ned Johnson up in Boston is saying (paraphrasing): no, no, no, investment managers are incredibly important. We tailor the mutual funds based on these genius investment managers and portfolio managers. And that's how we're going to play.

That's fantastic. That's better for the world I would argue. If a customer likes what Jack Bogle is saying they'll go with Vanguard. If they like what Ned Johnson and now Abigail Johnson are saying, they'll go with Fidelity. Both companies prosper, their employees prosper. Customers get this choice of different offerings, and the world is a better place.

I'm excited about strategy because it will deploy resources in a way that makes everybody better off if done well.

I contrast that with one of my least favorite industries, the U.S. airline industry. It's hard to tell the difference between the main carriers, (for example) United, American, and Delta. What that creates is this destructive competition where nobody is distinct and different enough. Customers just say, "well, we'll just fly the cheapest." Then you get this race to the bottom. It's bad for employees. It's bad for shareholders. It's bad for the world.

I'm excited about strategy because I believe that companies that make strategy choices are making the world a better place.

Fundamentally strategy is a creative act if it's done well.

Absolutely. This is again one of the challenges of strategy. Strategy has been considered as much more of an analytical exercise. Go crunch all the numbers and the strategy will reveal itself to you because you've crunched the numbers. It's not. It's about imagining a world that could be.

If Jack Bogle did analysis of the index mutual fund segment and how big that segment was when he founded Vanguard, the answer would have been zero. There was no such thing. His act of strategy was to create something wonderful that lots of people benefit from.

But that takes imagining a future that does not now exist and then saying, "what choices can we make to make that future a reality and then go and do all the hard work to do that."

But as long as you think of strategy as an analytical exercise, where you crunch the past data, you'll just end up believing that the only thing to do is what's being done now that'll create the kind of convergence on one model that ends up creating destructive competition. That makes everybody unhappy. Customers get unhappy, employees are unhappy, shareholders are unhappy.

I think this is a good time to bring in the topic of marketing. A lot of our audience are marketers. What is the role of marketing in strategy? How should we think about that in the right way?

Well, I probably have an outlier view on this, but I honestly think that marketing and strategy have converged.

Business strategy came from military strategy. In military strategy you have to figure out what capabilities you have that would enable you to beat your competitor. There wasn't a lot of thought about customers in military strategy. It was just assumed that your country would like your military strategy to repel aggressors. You just assumed it. You didn't do a consumer analysis to ask that question. So, it started from capabilities of the company and competitors.

Marketing started with customers, and asked the question, "what do customers want, how could we serve them better and our capabilities? Can we serve them in that way?"

But of course, in business strategy you had to start thinking about the customers. So, if you came from this sort of strategy background you had to start thinking about the customers. If you just came from a marketing background, you had to start thinking about competition. "How are we going to do that vis-a-vis competition?" And so, I would argue over the last 30 or 40 years, that strategy has grown as a discipline and that there's been a convergence between strategy done well and marketing done well.

I gave you my definition of strategy upfront. How different is that from the definition of marketing? Figuring out where we're going to compete, how are we going to have the best offering for the customer? So, I think they've converged. I find it hard to find any obvious distinction between strategy done well and marketing done well.

I love the vision and the provocation of it, but let's be honest, when you look at how companies are set up there's a lot of silos and there's a lot of duplication of effort. There's a marketing team, a strategy team, a sales team. In many companies they don't do an amazing job of working together. What's your recommendation of how to overcome that organizational challenge?

Well, get them working together more. So, I think you're right, because in the back of their mind they understand that there's a sort of a convergence and they kind of are overlapping and so I often find that they crawl to the edges.

Strategy says, "Well, we're going to do M&A and business development and running the planning process and the like, rather than doing the strategy." The marketing people are saying, "We'll do the very classic marketing aspect, we will do the customer research and we'll do the advertising plan, and the like." They almost, to stay apart, make each of them less useful than they could otherwise be.

My advice is to try and converge in the middle as much as possible. If you're the CEO, it would be to encourage them to be in the same room working together.

My favorite model, and it's maybe no surprise (because I've been working with the firm for 30 plus years), is Procter and Gamble. Great company. Where's their strategy department? Answer. It doesn't exist. A great Dow Jones 30 company, huge market cap, an iconic marketing company that has no strategy department.

But their marketeers are taught strategy, consistently, so that they become these integrated marketing strategy people. That's my favorite model.

So, Roger, a lot of companies are not as marketing-first as P&G. It's not that difficult to justify why P&G should have a very strategic marketing department and a lot of senior attention paid to that. But at a lot of other companies, kind of the opposite is true, marketing is seen more as a sales support function, it's not seen as very strategic. What advice do you have on how to change that?

First, I agree entirely with your diagnosis and that is what I would emphasize with any CEO, is you have got to make WTP/HTW. Don't let your planning people get you away from that because if a CEO starts leaning into saying, "oh, well, why are we playing here, not here? Why these customers and not those customers?" they're starting to ask marketing questions.

They're strategy questions and marketing questions, and if they aren't thinking in their how to win about, "How do we get those customers who we've chosen to try and win with to understand our product, internalize what we're trying to give them in that product?" Well then, they're not asking the right questions either. Those are marketing questions.

So that's what I'd say to the CEO, you've got to start asking those questions and demanding those questions of each business unit that you have. That'll start driving demand for more what is traditionally called marketing?

If I were a marketing person in that kind of company, I would literally hang out with the strategy people. I would just figure out how to be useful to the strategy people, to earn my way into the dialogues with the strategy people, because you need to make them better. If the strategy people are putting you over the corner and saying, "Well, after we're done with all the decision-making you write some head copy that's consistent,"—and that that often does happen—then they're under-utilizing marketing. You need to help them. Just be useful.

Talking to the strategy people, I would just say, "Those people over there are integral to the where to play, how to win choices." You don't have to say, "Oh, you do it for us," but go work with them. I'd have slightly different answers for each, but it all ends up with the end result being something that's more integrated rather than something that is siloed apart.

So, Roger you provocatively said marketing and strategy are wanting the same thing, but what about sales? Because the relationship between marketing and sales is often a difficult one. Salespeople want marketers just help them sell more right here right now. But at the same time, the proper role of a marketing department is to build demand for the future to build memory structures, to build mental availability, to build the brand. So how do you reconcile that tension?

There is a tension, (but) I'm not sure why there needs to be. I think there is such synergy between marketing done right and sales done right. The job of marketing is to help make the WTP/HTW choices that result in the company saying, "This is what we want our brand to stand for, for these people, these customers." And sales’ job should just flow directly from that, which is to enhance the mental availability of the brand and instill confidence in buyers that they should be buying this brand. I don't think there has to be some kind of big schism or a conflict between the two.

Let's talk more about brand. What's your definition of what a brand is and why it matters in a strategy context, and why the CEO and the CFO should care a lot about brand.

To me, above all other things branding is confidence. Your brand should build the confidence that the person who's on the buying end, that customer says, that will deliver for me.

For example, reminding them on television of a promise. You make a promise and if you make that promise enough and deliver on that promise enough, you have a brand. If you don't make a promise then you're never going to have a brand because customers are going to say, "Well, what is this promising to do for me?" If you make promises and don't deliver on those promises, you don't have a brand either, or at least your brand is, "Oh, those are the liars and hypocrites that I do not want to deal with." But you've got to tell them that. People don't necessarily discover that promise if you aren't willing to tell them.

They say, "Build a better mouse trap, the world will beat a path to your door." It's just not true. People need to know you exist.

That’s the concept of mental availability, Byron Sharp's work. People need to know you exist, and companies often take that for granted.

You promise and then you deliver on it. But if you don't keep telling them they will forget.

That's why advertising is such an essential component of winning strategies in many cases.

But intelligent advertising. Maybe I shouldn't be mean about this, but … JCPenny. I don't know if you've noticed, but they're now on TV after not having been on TV for a long, long time. Because guess what? It's the holiday buying season coming up and somehow they imagine that by suddenly showing up after being dark for at least a year that people are going to say, "Oh right, absolutely, I should go shop at JCPenny."

And what's the promise? If you look at the ad copy, the promise says, “J, C, P.” Oh, that would be Joy, Comfort, and Peace. So, JCPenny out of the blue after being dark for a long time is now spending gobs and gobs of money saying our promise is “Joy, Comfort, and Peace.” How exactly are they going to deliver on that promise? That is not strategic. That is not consistent with reinforcing a promise about how we're going to win.

The brand when done well, it's a financial asset that you invest in continuously over time, right?

Absolutely. Craig Barnett and A.G. Lafley and I came up with and talked about is Cumulative Advantage. You have advantage cumulatively over time by continuing to make a promise, communicate that promise, deliver on that promise, communicate it some more, deliver on it some more. If you do that over years and years, then people have this high mental availability.

Tide’s been around for a mere 75 years—all of those people who'd say, oh, there's no lasting competitive advantage anymore—seventy-five years. For all those 75 years they've been making a promise, advertising that promise, delivering on that promise. So now buying it is literally habit, kind of not conscious thought. You do not have all sorts of buyers walking down the laundry aisle, saying, "Hmm, what should I buy this week?" No, it's that orange one, dump it in the car cart. That cycle, make a promise—Tide gets your wash whiter—deliver on that promise. Make it, deliver it. That that is branding.

If you're not making a promise with your branding, you are wasting money.

And that applies B2C as well as B2B, right?

Yeah, I don't see any difference honestly. I mean, there are some differences in the structure of B2B and B2C, I understand that. But on this front, no, the great B2B brands have made promises, and delivered on those promises.

FedEx. "When it absolutely, positively, has to be there." I just love that. I love that as your copy, because it's so explicitly a promise. In a world where, when they came into existence, when it absolutely positively had to be there you had no clue whether it would right. So, you had to send it three weeks in advance with some useless carrier that little screwed up so you can send it again. Then FedEx shows up and says, "Here's our promise: When it absolutely positively has to be there the next day we will get it there."

It became a verb, right? "I'll FedEx you something," that's in many ways the highest compliment of mental availability when it's so present in our minds that we use it as a generic term for what it's trying to do for the product.

You and I exchanged some choice words on LinkedIn on the topic of ROI. About the ROI of advertising, what is the ROI of marketing? You were quite strong in your language about whether or not you think that's a good idea?

It's just a classic timing mismatch, right? So, there is a clear ROI for advertising and branding expenditures in general. It just doesn't show up in this fiscal year.

That's the insanity of the people who say, "Well, that advertising campaign you want to run you, what's the ROI on that?" No, that ROI will show up over 20 years. That's why companies like Proctor and Gamble have such an advantage. They made those (advertising investments) 20 years ago that are paying off today. So, they can be confident the one they're making now will pay off 20 years from now. You can determine ROI of advertising if you're intelligent about it, but you can't do it in the way that most people want you to do it.

Somebody says to me, "Oh, what's the, what's the ROI of that." It's code for, I don't want you to do it and I'm going to decide a criteria that makes sure that you don't pass the criteria. I don't want to impugn them entirely, they're trying to be fiscally responsible.

Again, remember, think JCPenny. If your advertising is stupid then it will have a bad ROI and that CFO who's saying, "Do we really want to spend this couple of hundred million on this?" have got a point.

For me, you get a better-quality conversation if you can say, "Here's our Where to Play, these are the consumers that we're going after, here's how we intend to win, here's how our brand is intended to help make that win, here's the logic behind the brand, here's how we're going to position ourselves, and in order for us to have the mental availability we need, and to put forward into the market the promise we need, we need to spend this much on advertising." I think most intelligent CFOs at that point will say, "Okay, I get that."

But if you're instead saying, "We have to make a splash. We need to really make a splash and we'd like to invest $200 million in this advertising campaign because that'll make a real splash." The CFO should say, "Are you out of your mind. You want me to put $200 million in the middle of the floor, pour gasoline on it, and light a match to it?" And they’re right.

The reality is a lot of C-suite people, they have a very strong bias in favor of being quote unquote "data driven" and that sounds really good, but there's a downside to that. Is that right?

That there is a downside to that. You undoubtedly took a statistics course, and in statistics course the core thing you're taught is how to decide whether something is true or not, to make an inference from data, to be able to say, yes, this is or is not true.

If you're collecting data, what era is all that data from? The past, right? Like the day that you analyze whatever data you have, all of the data is in the past. There is no data about the future. So your sample is only representative if the future is identical to the past.

In how many things in business, in your lifetime, have you observed where the future is identical to the past?

Certainly not in the last 10 years.

So those people who are saying, I need data to make all my decisions are believing that the future is identical to the past. That's a total error.

Virtually all business decisions made on data are flawed decisions. Does that mean you should ignore all that? No. Your data should inform your judgment. This is what the great A.G. Lafley of P&G said, "The only thing data can ever be as an aid to my judgment." And he loved data. He was swimming in data. But that's what he said, "That all it can ever be is an aid to my judgment."

What you've got to do is think about inventing the future and making judgements about that future, and there's only so far data can or will take you.

So Roger, you are telling us that being too data-driven can actually be a problem. You have an interesting piece of advice to the CEO’s that you serve. You say they should take an art appreciation class, wine appreciation, cooking class.

All of those are good. Often the context is the CEO will be saying, "Hey, there's this high potential executive who is on a succession stream, but he or she just seems so focused on the numbers and the data. What do I do to make this person a broadly more successful executive so they could be my successor?" That's how it often comes up, and I do surprise them by saying, "Send them to Cordon Bleu school, or sommelier studies, art appreciation." They're like, "Why?" It's because it's a completely different skillset.

Most of the people who CEOs are telling me about have exercised one muscle and that's the manipulation of quantities. If you think about your education, we learned all sorts of quantitative manipulation techniques. Started with addition, subtraction, multiplication, division, algebra, calculus, fluid dynamics, electrical resistance. All those things are ways to take quantities, numbers, manipulate them to come up with something great.

There's another kind of skill that that is important. That's the appreciation of qualities. What the appreciation of quality is, is the ability to make finer and finer distinctions and the qualitative elements of things.

If somebody was only good at manipulation of quantities and they went to the Met, and maybe they had an abstract impressionist show on, and the person who is good at quantitative manipulation would say, "I saw 78 pieces that totaled 2,500 square feet of painting, and 70% of them had blue in them." Nothing that they say is of any interest of anyone.

A person who has an appreciation for abstract expressionism would be able to say, "Well, that was interesting, that curation of that was different than what I've ever seen before. They went in a thematic way rather than a linear way," and would come out of it and say, "And this is what I learned about the abstract expressionists movement." That is appreciation of subtle differences in things that can't be quantified. But that doesn't mean they can't be understood. They can only be appreciated.

For lots and lots of things that a CEO needs to do, the source of the decision is going to be appreciation of qualities. "What do I think consumers actually care about and why? What do I think it takes to keep my people motivated." Those are qualitative questions. That's why I say what that person needs is to practice their ability to make those finer qualitative judgements.

Because business is about people, and it's not a science. People's behavior is often unknowable. You can't come at it straight with just analytics. You have to kind of intuit what it might be, and you have to have more of a probabilistic mindset than just a deterministic mindset.

Absolutely. There are scientific things, how blood flows through veins and arteries. There are scientific principles too that you can't change. But then the whole way humans behave has all of these qualitative dimensions, and you're right, not deterministic. Probabilistic.

Great CEO's will see somebody in a meeting kind of nod in a certain way and say, "Ooh, I'm going to say that means X." Where were the numbers in that? They aren't. But if you can't do that you won't be a good CEO. Flat out, you cannot be a great CEO by only having quantitative, manipulation skills.

What specific advice do you have for people who are in their early stages or the mid stages of their careers for using the Playing to Win strategy framework? Like applying that to their own career, how would you do that?

In the modern world of business, in most white collar work, the job description is kind of a catchall thing. I often say, "If I actually audit you, if I wanted to run an audit of your work and keep track of everything you did, and then compared to your official job description, I would probably have to fire you for non-compliance."

There'll be a bunch of things in that job description that you actually don't do because you figured out there's other things within that job description that are much more valuable for the company.

So that's a Where to Play choice. You are every day when you come to work, making a WTP choice, figuring out among all of the things you could be doing, what are the highest value things you can do? Those highest value things are a combination of the demand for them and your capability to do them particularly well. Your How to Win.

So, I would just think about your job today as an environment in which you have to make, WTP/HTW choices and winning—just like I've said before, strategy is good for everybody—if you chose a WTP within your job description that produces more value for [your employer], you win, your [employer] wins. It's a positive sum game.

Don't just sort of, kind of accept, "Oh, I guess this is my job, I guess I will kind of do this bunch of things that I'm supposed to do." Do not think about this as kind of win/lose, you’re doing it for your yourself. No. The more value you can create for your organization, the faster you will rise, and the organization will prosper.

If your HTW is to stomp on all the other people around you, right, that's a short-term, HTW. That'll catch up with you. I've seen this in spades. So, you've got to figure out how to win that involves working well with other people so that they can have Where to Plays and How to Wins.

It often means if you're working in a team, just figure out what's my own WTP that I can create the most value so that you can go over there and where you're really strong do your thing. That's being a great team player.

I would think about that always: Where am I going to dedicate the hours to create the most value?


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