PTW/PI All-Stars Book Club – Chapter Eleven

What Strategy Questions are You Asking?

Welcome to Chapter Eleven of the Playing to Win/Practitioner Insights (PTW/PI) book club. In the spirit of a book club discussion, I have responded to all previous comments and will continue to do so. Of the 37 all-star pieces out of the 260 in the series, the randomizer picked as the eleventh chapter What Strategy Questions are You Asking? This one takes us back to the biggest category – practical advice on an element of either the Strategy Choice Cascade (SCC) or Strategic Choice Structuring Process (SCSP). You can find the whole PTW/PI series here.

My Reflections on This Piece

It made me happy that this piece was solidly a PTW/PI All-Star. It is more conceptual than some – and those pieces don’t all land well, so I was happy for this one to appeal to such a degree.

It also makes me happy because it is illustrative of my ‘production process.’ Because I write so much across so many topics, professors frequently ask, with wonderment, where I get my ‘research ideas.’ They often struggle to come up with the next topic for their thinking and writing work. Frankly, I don’t even try to come up with ‘research ideas.’ I just work with executives across many companies across many industries and notice things along the way. And when I notice something that both I find interesting and occurs across multiple business/industry contexts, I try to make sense of it and write about it. That produces a list of things to write about that overwhelms the time I have to write about them.

This is a perfect case in point. I didn’t come up with a theory and then check whether there was data to support it. I noticed a pattern and developed a theory that explains what I saw – and that is my ideas ‘production process.’

The article presents a dynamic view of competitive advantage. The popular metaphor for competitive advantage is of a moat. I don’t love it because a moat is static – it is always the same thing in the same place. Sure, you could dig it deeper or make it wider, but it is still largely the same thing. And I don’t think that is how competitive advantage works across time in the real world. It evolves and changes over time – sometimes a lot.

Competitive advantage is both built and altered based on investment. A company can’t build competitive advantage without investing in it. Investment, in turn, is a function of to what you pay attention. You don’t invest in things to which you do not pay attention. And you only pay attention to what you find interesting or noteworthy.

If you are asking questions about what is interesting and noteworthy in advance of when your existing and potential competitors do, you can figure out in what to invest earlier than competitors can. By the time they figure that out, you will well ahead of them. If you keep asking questions about the interesting or noteworthy elements in your market and acting on the insights before your competitors even ask the questions, you will always remain ahead.

The metaphor I use in the piece is a series of rooms separated by curtains. When you fully understand the room that you are currently in, you are allowed to pass through the curtains from your existing room to the next. By being in that next room, you gain access to insights that competitors in the previous room don’t have. Those insights enable you to formulate questions that your competitors don’t yet realize are questions, find answers to them, and invest behind them.

As long as you are alone in the room, you have an option to focus your investments on things your competitor hasn’t even thought about – and the example I use in the piece is Procter & Gamble’s Tide Pods. By being by far the strongest brand in laundry detergents, Tide had the greatest understanding of consumers of the existing product, which was liquid detergent in bottles. That deep and superior understanding led Tide to ask next-room questions about what could provide a step-change improvement in the consumer experience, which was to put detergent, bleach and fabric softener in a single ‘unidose’ pod – which competitors only began thinking about after it had been highly successfully launched by P&G.

This conception of competitive advantage highlights the importance of exploration. As I have written before in the series, exploitation and exploration are opposing forces that must be balanced for a company to remain healthy over time. In terms of the rooms metaphor, exploitation means staying in the current room and squeezing the most juice possible from that room. Exploration means striding through the curtain to the next room, asking interesting questions and innovating.

Unfortunately, in the modern world of business, capital, mainly public company capital, discourages exploration and pushes exploitation aggressively, as I have also written about in this series. Because strategy is about being distinctive, companies need to push through the curtain to the next room, despite lack of encouragement if not outright discouragement from the capital markets, to remain perpetually in a competitively advantaged position.

Reader Comments

This was a piece precisely at the halfway point – i.e. #130 – in the five years of the PTW/PI series and received over two dozen comments – a goodly number.

As with most of the All-Star pieces, the comments are mainly positive, with some particularly nice ones like: One of the best articles from you; Simply wow; This is brilliant; and Excellent article as usual. And a lovely quote: This is one article I will read once every quarter.

As usual, there were a number of interesting points and musings in comments.

One person pointed to the similarity between the thinking in this piece and John Boyd’s famous OODA lop – that is that you win by going through a thinking-doing loop faster than competitors. I buy that connection.

Another pointed out that there is a danger to jumping to the next room too hastily and potentially incurring expensive pioneering costs by being too far ahead of the market. Again, that point makes sense to me. It is a careful balance.

Yet another mused about the implications of AI for this model, in particular, will one effect of AI be that it will compress the time required in each room. My view would be maybe. I could see that AI might enhance the information dispersion relative to the existing room and thereby ready a company to more quickly get to the next room. But I am not entirely persuaded. As I have always held, AI is a mode-seeking tool, not a right-tail seeking one and moving to the next room is such a right tail activity that AI might have little impact on the speed of getting to the next room.

Given that the piece revolved around the questions that one should be asking, there was an interest in commenters on question-asking tools. One pointed to Harvard Business School articles (here and here) and a podcast that he thought might be helpful.

Two others gave advice on questions.

The first was to point out that you get better insights into the questions you should be contemplating through observation of customers rather than asking them questions. I agree and have always been a fan of ethnographic types of research rather than questionnaire-based research.

The second had an observation that I felt was thoughtful and on the mark: “I think without the ability to ask right questions, every tool (ChatGPT as an example) and every piece of data is useless. I also think that our education systems do not do a good job of training our kids to ask questions - they train them to find answers to a question that someone (teacher) asks.”

The main criticism of the article, from multiple commenters, was that the row-of-rooms model was too linear. The idea was that thinking doesn’t advance by way of a single linear row. Rather, there could well be various branches advancing in different directions. Good point. It is always the problem with an analogy and a singular picture to illustrate it. I accept the criticism and will see if a better visual that comes to mind.

Without further ado, the original article…

Chapter Eleven

I was with a Silicon Valley software company client last week talking about the nature of competitive advantage. In the discussion, I used a metaphor that he found helpful to his thinking. I decided that it warranted a post. So, I am writing my 27th Year III Playing to Win Practitioner Insights (PTW/PI) piece is on What Strategy Questions are You Asking: The Key to Competitive Advantage. You can find the previous 137 PTW/PI here.

The Popular View of Competitive Advantage

The most popular view of the nature of competitive advantage is that it is represented by a moat. The person who popularized this view is Warren Buffett who famously spoke on the subject during the 1995 Berkshire Hathaway annual meeting. He explained that his most desirable investment target was a company protected from competition from a deep and wide moat — and moreover, one that was stably impervious to breaching.

Click to continue reading the original article…