04/03/2014

The commandments of the Capable Company

Cesare MainardiAuthor: Cesare Mainardi, CEO of Strategy& 

Capable Companies have a powerful, almost religious, sense of identity, and they adhere to a set of firmly entrenched beliefs that distinguish them from their competitors.

1. Stay true to who you are
2. Shape what your customer needs
3. Translate the strategic into the everyday
4. Put your culture to work
5. Invest where your identity is

At first glance, these seem so obvious as to be self-evident—they’re almost cliché, they appear so regularly in company mission and values statements.  But, what my colleagues and I have discovered is that these are easy things to preach, but very hard things to practice. They sound good, but they feel wrong…as they run counter to habit and convention, and each requires active and often difficult choices.  The chart below sheds light on what I mean. 

What capable companies do differently
This simple recipe laid out in the right column distills 100 years of practical advice—the counsel we’ve provided to clients operating at both the top and bottom of their game in every industry since 1914 when Strategy&’s predecessor firm Booz & Company—and, effectively, the management consulting profession—was founded.  It also draws on the primary and secondary research we’ve conducted with dozens of companies across sectors and continents that have distinguished themselves as Capable Companies.

So, what is a Capable Company?  It’s a company that focuses its strategy around the following basic formula: 1) an inspiring expression of identity, 2) a compelling and viable customer value proposition (or ‘way to play’, as we call it); 3) a mutually reinforcing system of three to six critical capabilities, and 4) a fully aligned product and service mix.  In a Capable Company, everyone from the CEO to the summer intern understands who they are (identity), what they do (way to play), how they do it (capabilities system), and what they sell (product/service fit).  It’s therefore not surprising that Capable Companies consistently outperform their competitors in fulfilling customer needs and creating and capturing value over time…no matter the industry.

Again and again, in our client work and ongoing research, we hear the same lament: executives are overwhelmed with too many competing priorities.  In fact, less than half of the global leaders we’ve surveyed have confidence in their strategy, and two out of three admit they don't have the capabilities needed to execute it.

That’s a rather rousing vote of no confidence in the current approach to strategy setting.  And we believe it’s because the fundamental question guiding most strategy development today is wrong.  It’s not where should we go for growth…but who should we be?  What are the few things that we do incredibly well, better than anyone else—be it processes, people, systems, tools, organisation, or know-how or some combination thereof? Where’s our window of opportunity to turn the natural momentum of the market to our favour by being the best at what makes us great?

When you get the answer to that question right, you’re no longer chasing growth, you’re inviting it.  You’re a Capable Company with the right to win in the market you’ve chosen to target.

 

Cesare Mainardi is CEO of Strategy&, the newest member firm of the PwC network, and co-author of the book The Essential Advantage: How to Win with a Capabilities-Driven Strategy

 

Contact Cesare Mainardi


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