The Most Important Competitive Capability
Overview of Competitive Capabilities
Competitive capabilities enable the most essential imperatives inherent in an organization’s business strategy (how the Enterprise can/will uniquely compete to generate customer value). Assuming the business strategy was born out of a novel interpretation of validated customer insight, a solid grasp of the competing environment’s dynamics and a ruthlessly impartial (non-quixotic) self-assessment, capabilities are a powerful tool for constructing a successful business model. They are derived through any number of methods that fundamentally contrast the strategy’s guiding policy with the organizations current capabilities in the context of an informed and sober assessment of the competitive environment that the organization intends to thrive. This process creates precision around what aspects of the competitive domain to productively focus innovation efforts for deriving new and/or improved capabilities. Of the many capabilities an organization possesses, it’s competitive distinctiveness is explained and enabled by just a few. These differentiated-capabilities are the building blocks that an organization uniquely arranges to create a leverage-able foothold for gaining a competitive position in its chosen business arena. An executable capability can be thought of as having three conceptual components:
· Purpose. A strategic imperative (or component thereof, typically an operational abstraction) that somehow must be enabled to realize a critical aspect of the business model. The purpose clarifies and reinforces (has tractability to) its relevance to the strategy’s competitive dynamics using some form of measurable success criteria.
· Blueprint. A specific approach for implementing the purpose. Describes how process, technology and organizational-enablement are architected to achieve the intent of the purpose. Alternatives are evaluated in the context of the purpose’s success criteria and weighed based on the feasibility of profitably achieving them. Critical assumptions are aggressively isolated for testing. Blueprints are also subsequently used by dev teams for creating and estimating stories.
· Measurement. An approach for instrumenting the blueprint with an insight feedback mechanism that creates validated learnings for continuous improvement and serves as an early warning mechanism that a mature capability is potentially at risk by a disruptive competitive element.
A capability’s effectiveness, like with any tool, is a function of the jobs it’s tasked with achieving and the proficiency with which it is wielded. A well elaborated purpose reveals the important nuances of the job and improves the chances for a precision tool. A well architected blueprint (informed by the purpose) will better ensures that the tool is expertly wielded. Another important aspect of capabilities, similar to any asset they (or specific implementations of capabilities) have a finite lifecycle. Although the root purpose of a capability tends to have durability, it’s blueprint for execution does not. They are born and nurtured, scaled to an exploitable advantage and then the nature of competitive reality eventually relegates them to a commodity. As a result, the pressure for creating new competitive capabilities is forever looming.
The Most Important Competitive Capability
Arguably, in this era where the half-life of business models is diminishing at an increasing rate and sustainable competitive advantage can’t survive patent protection, among the most vital capabilities an organization needs to improve its chances of long term viability seems to be a mature practice for manufacturing new transformative capabilities. Ideally, the effectiveness of the practice (how competitively formidable are the results it produces and how frequently they are produced) would also be under constant improvement. The following is a conceptual example for architecting this practice.
Explore & Discover
The purpose is to identify, test and develop new competitive capabilities. Armed with deep customer insight and competitive intelligence, these entrepreneurial teams use methods from Design Thinking and Lean Startup (for example) to discover and develop high potential possibilities. Because the process of invention has a high ratio of failures to successes, it’s important that a culture of inspired enthusiasm is sustained. Since this is an “exploration” operation working in close proximity to the core business, these teams need protection from the “exploitation” oriented processes inherent in most business (success criteria and funding specifically). For example, a venture capital governance model may be more appropriate.
Exploit & Evolve
The purpose is to scale and leverage new capabilities for competitive advantage. Continuous improvement is used to maximize and extend the capability’s leadership position. The organization’s people are well prepared to apply their own ingenuity for exploiting the advantage and provide feedback to the continuous improvement process.
Optimize & Extinguish
The purpose is to preserve a focus on innovation by freeing business resources from lower value distractions. Ideally, the majority of enterprise energy is always focused on exploiting promising assets and discovering new ones. In the same way that poor exit signage, toll booths and construction inhibit the flow of highway traffic, low value distractions inhibit high value contributions. An indicator of success for this operation is that the proportion of organizational resources not aimed at the first two objectives should be continually decreasing.
The carnage of many once-great companies that failed to realize and act upon obvious innovation opportunities litters the lengthy and congested roadway of marginal incremental improvement. The “stick with the one that brought you to the ball” approach as an exclusive strategy for growth is increasingly unlikely to sustain an organization’s financial aspirations. Conversely, an organization having customer centricity and validated learning in its dna will be much more likely to pivot and adapt its way toward increasing financial prosperity.