How to Win by Changing the Game

How to Win by Changing the Game
Cesare Mainardi, Paul Leinwand, and Steffen Lauster
Strategy+Business, Winter 2008

Let’s discuss how you can boost your company’s growth by building a capabilities-driven strategy.

When most corporate leaders hear about using capabilities as a strategic advantage, they tend to think internally.  They assume that building capabilities is a job for their human resources, training, or R&D departments; or they squander their efforts on a variety of initiatives that don’t fit well together and don’t address the real needs of customers.

The reality is that an effective capabilities-driven strategy is outward-looking.  It starts and ends with customers.  It involves building up a portfolio of ideas, skills, and competencies that, when put together, enable the company to attract its primary customers consistently.

In “How to Win by Changing the Game,” in the Winter 2008 Strategy+Business, the authors reveal how you can equip your company for growth in uncertain times by investing in a capabilities-driven strategy.

 

In these times of economic turmoil, it is becoming more important to dis­tinguish the companies that are managed effectively from those that have just managed to get by in good times.  Those that seem positioned to win have spent the past years building up a portfolio of capabilities as the center of their strategy.

Wal-Mart’s supply management prowess, Toyota’s mastery of the automotive production system, and Procter & Gamble’s ability to leverage innovation across product categories have all benefited from continuous improvement.  Honed and strengthened over years, these focused bundles of capabilities give their companies a “right to win.”

Of course, it can be expensive to develop ca­pabilities.  However, they become far more cost-effective when they help corporate leaders decide where to expand and where to cut back.  For example, Honda has built much of its profitable growth around expertise in small high-performance en­gines.

From motorcycles and lawn mowers, the company moved up to automobiles and light sport-utility vehicles.  Nevertheless, it has drawn the line at larger V-8 engines that lie outside its core business.  As a result of this focus, Honda has emerged as the only car com­pany to register sales gains in the U.S. in 2008.

Will a capabilities-driven strategy yield similar results for any com­pany?  That depends on many factors — and the largest is probably the coherence of the...