What are your business’ core capabilities?
What are your Core Competencies?
My five previous blogs have shared the 5 Steps to develop a Playing to Win Strategy.
- What Strategy Is And Isn’t: Playing to Win
- PLAYING TO WIN – YOUR STRATEGY 5 CHOICES
- Strategy - What is Your Winning Aspiration?
- Strategy – Where to Play?
- Strategy – How to Win?
Last week, working with a new customer, a Dental Center in Houston Texas, we worked to discover their Core Capabilities.
Do you know yours?
Strategy is an often discussed yet seldom understood Decision. Strategy Decisions grow your revenue.
These ideas and insights are from A.G. Lafley’s Playing to Win: How Strategy Really Works.
With just a little better understanding of Strategy, your Top Line Revenue can grow significantly. This graphic from a study done with 4400 senior executives from 2010-2015 reveals at least 50% of CEO’s struggle to have a winning strategy.
If you’re revenue is not growing year to year (if it’s not keeping pace with your industry) your Strategy decision-making needs to improve.
Core Capabilities - Play to Your Strengths.
How can you play to your strengths if you don’t know what they are?
SWOT and SWT exercises help. Too frequently leadership teams perform these exercises in a vacuum. As if competition doesn’t exit. If your core capabilities are similar to your competition, how differentiating are they?
Core capabilities and competencies only matter when they support your Where to Play and How to Win. How do your capabilities perform against your competition? Take the Outthinker Assessment with your leadership team and discover!
Core Capabilities are best understood as operating as a system of reinforcing activities—a concept first articulated by Harvard Business School’s Michael Porter. Porter noted a powerful and sustainable competitive advantage is unlikely to arise from any one capability (e.g., having the best sales force in the industry or the best technology in the industry), but rather from a set of capabilities that both fit with one another (i.e., that don’t conflict with one another) and actually reinforce one another (i.e., that make each other stronger than they would be alone).
For Porter, a company’s “strategic position is contained in a set of tailored activities designed to deliver it.” He calls the visual depiction of this set of activities an activity system. Since “competitive strategy is about being different … [and] means deliberately choosing a different set of activities to deliver unique value,” an activity system must also be distinctive from the activity systems of competitors. In his landmark 1996 article “What Is Strategy?,” Porter illustrated his theory with examples from Southwest Airlines, Progressive Insurance, and The Vanguard Group. These organizations made distinctive choices and tailored an activity system to deliver on their specific choices.
Understanding Capabilities and Activity Systems
Your organization’s core capabilities are these activities, when performed at the highest level, enable your organization to bring its where-to-play and how-to-win choices to life.
In Playing to Win: How Strategy Really Works A.G. Lafley describes how in 2000, P&G’s where-to-play choices came together at an off-site meeting for business and functional leaders. Over the course of three days, with refining, redefining, and review the group came to five core capabilities for P&G:
- Understanding consumers. Really knowing the consumers, uncovering their unmet needs, and designing solutions for them better than any competitor can. In other words, making the consumer the boss in order to win the consumer value equation.
- Creating and building brands. Launching and cultivating brands with powerful consumer value equations for true longevity in the
- Innovating (in the broadest sense). R&D with the aim of advancing materials science and inventing breakthrough new products, but also taking an innovative approach to business models, external partnerships, and the way P&G does business.
- Partnering and going to market with customers and suppliers. Being the partner of choice by virtue of P&G’s willingness to work together on joint business plans and to share joint value creation.
- Leveraging global scale. Operating as one company to maximize buying power, cross-brand synergies, and development of globally replicable capabilities.
Once the capabilities were defined, the team spent the remainder of their day deciding how and where to begin investing in each capability to broaden and deepen competitive advantage. It wrote an action plan for each of the five capabilities to create competitive advantage at the corporate, category, and brand levels. These capability choices would guide P&G’s strategic choices for the next decade.
The five P&G capabilities form the basis of P&G’s company-level activity system. The activity system captures the core capabilities required to win, the relationships between them, and the activities to support them; P&G’s map supports where-to-play and how-to-win choices.
The goal is an integrated and mutually reinforcing set of capabilities to build feasible, distinctive, and defensible, where-to-play and how-to-win choices.
Growth demands Strategic Discipline.
Strategy Decisions result in top line revenue growth. Positioning Systems helps you determine your best strategy for your future growth.
Positioning Systems helps your business achieve these outcomes on the Four most Important Decisions your business faces:
We help your business achieve Execution Excellence.
Positioning Systems helps mid-sized ($5M - $250M) business Scale-UP. We align your business to focus on Your One Thing! To achieve growth, you need to evolve in today’s rapidly changing economic environment. Are you avoiding a conversation with yourself on how to can successfully grow your business? Contact firstname.lastname@example.org to Scale Up your business! Take our Four Decisions Needs Assessment to discover how your business measures against other Scaled Up companies. We’ll contact you.
Next Blog – Management Systems
We’ve explored the first four steps in developing your Playing to Win Strategy. Next blog we explore the fifth and final question: What systems are required? We’ll explore the systems, structures, and measures need to support your Strategy Decision choices.