These are the five questions Lafley’s used for making major strategy decisions at P&G. In explaining why he uses this approach and why strategy is hard, Lafley explained:
In Roger Martin’s and my view, the essence of strategy is making 5 integrated — sometimes difficult — choices; so 5 choices to win. And a lot of us, a lot of human beings, don’t like to make choices, right? Choices are difficult, we want to keep our options open, choices involve taking risks, and not only risk to the business but personal risk. So I think there’s this sort of human resistance to making choices, and choices are the core of strategy.
Business Insider has a nice breakdown of what each step in the above image means and how they were used. Here, for instance, is how they explain the capabilities question:
What are my core competencies that are going to enable me to win? In order to make the above decisions work, they have to be based on and supported by the things that a company’s best at. For P&G, it was innovating quickly and understanding consumers.
Now that Lafley is back at the helm as CEO it’s interesting to take some of his more recent decisions, like the big one to divest a large number of brands, through the lens of this system.