Customers are seen and treated very differently. At a cost leader, nonconforming customers—that is, customers who want something special and different from what the firm currently produces—are sacrificed to ensure standardization of the product or service, all in the pursuit of cost-effectiveness. At a differentiator, customers are jealously guarde

In other words, life inside a cost leader looks very different from life inside a differentiator. In a cost leader, managers are forever looking to better understand the drivers of costs and are modifying their operations accordingly. In a differentiator, managers are forever attempting to deepen their holistic understanding of customers to learn h

While all companies make efforts to control costs, there is only one low-cost player in any industry—the competitor with the very lowest costs. Having lower costs than some but not all competitors can enable a firm to stick around and compete for a while. But it won’t win. Only the true low-cost player can win with a low-cost strategy.

Where-to-play choices occur across a number of domains, notably these: Geography. In what countries or regions will you seek to compete? Product type. What kinds of products and services will you offer? Consumer segment. What groups of consumers will you target? In which price tier? Meeting which consumer needs? Distribution channel. How will you r

Why is it so important to make winning an explicit aspiration? Winning is worthwhile; a significant proportion (and often a disproportionate share) of industry value-creation accrues to the industry leader. But winning is also hard. It takes hard choices, dedicated effort, and substantial investment. Lots of companies try to win and still can’t do

There are many ways the higher-order aspiration of a company can be expressed. As a rule of thumb, though, start with people (consumers and customers) rather than money (stock price). Peter Drucker argued that the purpose of an organization is to create a customer, and it’s still true today.

The process for exploring what would have to be true has seven specific steps, as seen in figure 8-2. It begins with framing the fundamental choice, articulating at least two different ways forward for the organization (or category, function, brand, product, etc.), on the basis of your winning aspiration. Then, the team works to brainstorm a wider

To understand the consumer value equation, you must truly get to know your consumers—to engage with them beyond the quantitative survey, through deeper, more personal forms of research—watching them shop, listening to their stories, visiting them at home to observe how they use and evaluate your products. Only through this kind of deep user underst

Two questions flow from and support the heart of strategy: (1) what capabilities must be in place to win, and (2) what management systems are required to support the strategic choices?