Building A Capabilities Advantage

​Think for a moment about a successful company and what it is you admire about it. Like many, you might start by pointing to the company’s unique and awe-inspiring products or services. Or perhaps you identified an incredibly charismatic leader who has driven the company forward to success.

When you dig a little deeper, you will likely point out what the organization does well.

Take Apple, for example.

We might say that we like the way they design products, their attention to detail, how well they integrate hardware and software to simplify how to use it, their incredible brand image, or how everything just comes together for a fluid customer experience.

These things companies excel at are what enables them to be great companies.

They are called capabilities.

McKinsey defines capabilities as “anything an organization does well that drives meaningful business results.”1 This includes their skills, processes, know-how, and unique ways of using assets and resources they have developed.

Too often I find that most companies, especially startups focus on product, not capabilities, as their source advantage.

You can win with a better product in the short-run. But product-based advantage is fleeting.

Capabilities are where companies build lasting advantage.

To find your capabilities, think about the skills, processes, know-how, and unique ways of using assets and resources that will most likely help you be successful now, and in the future.

They can come from many areas: Marketing, leadership, operational, logistics, go-to-market, ecosystem development, customer intimacy, data-analytics, and many more.

Then, ask yourself, can you make that capability strategic?

To do that ask three questions:

1. Does it drive value? Capabilities are strategic when they directly contribute to the basis of competition, improve the buying criteria for the customer, or provide distinct value.

2. Can you be industry-leading? Because capabilities are tied to the basis of competition and are driving value, the company must be able to uniquely and sustainably lead the industry in that capability.

3. Is it difficult to copy? On its own, the capability should be difficult to copy, replicate, or substitute in the long run.

Leaders who think in terms of building capabilities and invest in them create multiple value creation opportunities and long-term advantage for their organization.

As an exercise, sit down with your team and discuss what can make you unique and continue to compete and identify the capabilities that you can make successful no matter what future solutions you provide.

You can learn more about building capabilities models in my book Transformative, available everywhere.

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