Building a Capabilities-Driven Company

Here is an excerpt from an article written by Paul Leinwand and Cesare Mainardi for Talent Management magazine. To check out all the resources and sign up for a free subscription to the TM and/or Chief Learning Officer magazines published by MedfiaTec, please click here.

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Top-performing organizations know what they do best and then focus on opportunities to leverage those capabilities.

Anyone who engages frequently with senior executives on topics such as strategy and how to focus their teams probably detects frustration. Based on years of work serving large organizations, the professionals at management consultancy Booz & Co. determined the frustration comes from a core place — how companies actually develop and execute strategy. In a survey of 1,800 executives on five continents in industries such as automotive, financial services and utilities, the firm set out to uncover how to parse executive frustration.

The survey data was gathered during the first quarter of 2011 and results were dubbed the Coherence Profiler. They demonstrate that executives are disappointed with the effectiveness of their companies’ growth strategies. Fifty-two percent of executives said they do not think their company’s strategy will lead to success; half said setting a clear and differentiating strategy is a significant challenge; even more — 56 percent — said ensuring day-to-day decisions are in line with strategy and allocating resources in a way that really supports strategy are their biggest challenges.

The findings suggest the root of the problem is too many companies grab too hastily for what seems like the next answer to growth. They don’t have a solid framework to decide which opportunities will lead to sustainable success. So, they end up stretched thin, trying to play in too many disparate markets. The vast majority of executives — 81 percent — said growth efforts at their company lead to waste at least some of the time, and 64 percent said they believe their companies are chasing too many conflicting opportunities to achieve growth. In the same vein, 49 percent said their company has no list of strategic priorities.

A Capabilities-Driven Strategy

The solution, based on the track records of top-performing companies, is to develop a clear idea of what the organization does best and how it creates value, and then focus on the opportunities that will best leverage those capabilities. Companies need to make hard choices about differentiation and stick to them. They need to decide how they will add value, for example as an experience provider, a customizer or a value player. And, equally important, they need to determine and invest energy and resources in the distinct set of capabilities that enable that differentiated identity. Sometimes making those kinds of choices seems limiting, but this discipline can pay off. The survey results bear this out: Executives who said their companies have very few — one to three — firm-wide strategic priorities were the most likely to say their companies have above-average profitability and revenue growth, when compared with those who reported having more firm-wide strategic priorities, or no list of priorities at all.

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To read the complete article, please click here.


Paul Leinwand is a partner in Booz & Co.’s global consumer, media and retail practice. Cesare Mainardi is managing director of Booz & Co.’s North American business. They are co-authors of The Essential Advantage: How to Win with a Capabilities-Driven Strategy.

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