Capabilities-Driven Strategy + Growth

Does your strategy give you a right to win?

Executives are struggling with developing and executing strategy. At PwC’s Strategy&, we use our pioneering approach built on distinctive capabilities that enables companies to focus on their greatest strengths and create sustainable competitive advantage.

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  • Learn about the approach

    Learn about the approach

    Discover the potential of a Capabilities-Driven Strategy

    Our pioneering approach built on differentiating capabilities enables companies to focus on what they are great at and create lasting results.

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  • Learn how the approach applies to my business situation

    Learn how the approach applies to my business situation

    Explore capabilities-driven solutions

    Find out how taking a capabilities lens in all your strategic decisions will help you with your growth strategy, portfolio and mergers and acquisition strategy, operating model, functional strategy, and capability identification and building.

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  • Take the Strategy Profiler and explore other tools

    Take the Strategy Profiler and explore other tools

    Use our tools to get you started with your Capabilities-Driven Strategy.

    Take the Strategy Profiler to find out in a few minutes how well your company is positioned for success and explore the number of hands-on tools we have developed to help you better understand CDS and apply it to your business.

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  • Explore Strategy&'s ideas

    Explore Strategy&'s ideas

    Explore your company’s potential

    PwC’s Strategy& has been practicing and researching this methodology for many years and has published dozens of articles and viewpoints.

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  • See Strategy&'s client examples

    See Strategy&'s client examples

    Explore how clients have applied the Capabilities-Driven Strategy approach

    We have helped hundreds of organizations across industries and regions develop and execute a capabilities-driven strategy.

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  • Connect with experts

    Connect with experts

    Get in touch to discuss how Capabilities-Driven Strategy could apply to you

    We have hundreds of experts around the globe specializing in Capabilities-Driven Strategy. Contact an expert in your region to help you determine how a Capabilities-Driven Strategy will position your company for long-term success.

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Success stories: Winning through distinctive capabilities

 

Examples from Strategy That Works published by Harvard Business Review Press

Capabilities-Driven Strategy: Our pioneering approach

Almost every business today faces major strategic challenges. The problem is that years of chasing growth at all cost have left companies with great ambitions, but no real advantage.

True advantage is created when you understand the few things that your company can do better than anyone else. These differentiating capabilities set you apart from your competitors and provide your engine for growth.

Winning companies put strategy on its head:

  • They look inside first and figure out what they do best
  • They then develop those 3-6 capabilities until they’re best-in-class and reinforce one another in a powerful system
  • They align what they do well with the right marketplace opportunities

This capabilities-driven approach to strategy allows companies to become coherent – to have a powerful capabilities system that enables their unique value proposition and supports all of their products and service.

Our pioneering approach

Our pioneering approach

Our pioneering approach

The market rewards companies that follow this approach with superior returns.

Coherent companies are:

  • 3 times as likely to grow faster than industry average as incoherent companies
  • 2.5 times as likely to be more profitable than industry average as incoherent companies

Learn about our solutions

Top publications and insights

Strategy That Works
Book
Winning companies don’t follow conventional wisdom. They apply five acts of unconventional leadership that allow them to close the strategy-to-execution gap.
The Essential Advantage
Book
Based on extensive research, The Essential Advantage helps you construct a strategically coherent company in which the pieces reinforce one another instead of working at cross-purposes.
The Coherence Premium
Harvard Business Review
Sustainable, superior returns accrue to companies that focus on what they do best. Companies that align their differentiating capabilities with the right external market position enjoy a coherence premium.
The New Supercompetitors
strategy+business
Companies that realize the power of their capabilities can shape how industries evolve.
Cut Costs and Grow Stronger
Book
For most companies, cost cutting in a down economy means across-the-board slashing that "spreads the pain" of budget reductions across many departments.
Grow from Your Strengths
strategy+business
The only sustainable way to capture new opportunities is to remain true to what your company does best.
The Right to Win
strategy+business
Business strategy is at an evolutionary crossroads. It’s time to resolve the long-standing tension between the inherent identity of your organization and the fleeting nature of your competitive advantage.
The Grass Isn’t Greener
Harvard Business Review
Our analysis of shareholder returns of more than 6,000 companies in 65 industries globally and over a 10-year period, shows that the idea that some industries are superior does not hold true.

FAQs

How is Capabilities-Driven Strategy + Growth different from traditional business strategy?

Traditional business strategy approaches are often purely market-back, leading companies to spend too much energy and resources on studying the market and way too little on understanding what they are great at and what will give them a right to win.

Capabilities-Driven Strategy + Growth, on the other hand, by combining a market-back and capabilities-forward view, allows companies to identify attractive market opportunities that give them a "right to win" based on who they are and what they are great at doing. Our unique approach to strategy takes companies through a process where they turn traditional strategy on its head: They look inside first and figure out what they do best. They then develop those three to six capabilities until they’re best-in-class and reinforce one another in a powerful system. They align what they do well with the right marketplace opportunities. This creates a powerful growth engine — the kind that yields sustainable growth for years to come.

Read more about the Capabilities-Driven Strategy + Growth approach

What are the benefits of applying a capabilities-driven approach?

A capabilities-driven approach to strategy allows companies to become coherent — to have a powerful system of capabilities that enables their unique value proposition and supports all of their products and services.

The market rewards companies that follow a capabilities-driven approach with superior returns: coherent companies are 3 times as likely to grow faster than industry average and 2.5 times as likely to be more profitable than industry average companies as incoherent companies.

This is because coherence leads to:

  • Effectiveness – coherence helps companies become better at the things that truly matter for the business by focusing on what is most important day in and day out
  • Efficiency – Coherence helps companies achieve scale by applying their distinctive capabilities throughout the entire company
  • Focused investment – Coherence helps companies focus investment into the areas that really matter to their business, concentrating on what drives advantage
  • Aligned organization – Coherence gives a powerful decision framework to people throughout the organization and thereby creates alignment
  • Better talent – Coherence makes it easier to find, motivate, and retain the best talent in the areas the company — and those people — care about most

Why are coherent companies more successful in executing their strategy?

Coherent companies are very clear about the few capabilities that set them apart from their competitors and build their strategy on those strengths. Since their strategies play off their strengths they are inherently executable. In addition, by engaging everyone in the company in developing and enhancing those few distinctive capabilities, coherent companies make sure that people’s everyday actions are in line with the strategy. Capabilities really are the link between strategy and execution.

How should a company determine which capabilities to focus on?

In order to determine which capabilities to focus on, companies should start by identifying the capabilities that they are already great at today.

Then they should assess the market to understand which “supercompetitors” are likely to emerge:

  • Which value propositions are going to win in the future (e.g. value play, experience provide play, etc.)?
  • Which capabilities are required to win with each of those value propositions?

Then they should determine how big the gap is between their current capabilities and what’s required of each of those supercompetitors. This will allow them to choose the supercompetitor they strive to become – and with it, the set of capabilities that they will need to excel at.

Can one actually measure the financial benefit of becoming coherent?

We’ve measured the financial benefit resulting from coherence in many different ways.

  • We have determined the coherence of major players in a given industry, and mapped that against these players’ profitability. In every industry we’ve performed this analysis, we found that coherent companies perform better than their less coherent competitors.
  • Our surveys with senior executives have revealed that coherent companies are 3 times as likely to grow faster than industry average and 2.5 times as likely to be more profitable than industry average companies as incoherent companies.
  • We’ve found that mergers and acquisitions with capabilities fit tend to perform better. We analyzed deals made between 2001 and 2012 and found that, during the two years after closing, those that enhanced or leveraged capabilities generated significantly higher total shareholder returns than those with limited capabilities fit. By contrast, deals with a limited capabilities fit lost value. Overall, limited-fit deals averaged return of 14.2 percentage points CAGR (compound annual growth rate) less than the others.

Read more on our research

Why should I choose Strategy& to help me develop my company’s business strategy?

We develop strategies that work because we leverage what your company is great at and have the scope, scale, and expertise to build out the capabilities your company needs globally. Helping our clients develop and execute capabilities-driven strategies for many years has allowed us to develop a set of powerful tools (e.g., the coherence profiler, capabilities assessment tool, way to play tool, etc.) that enable us to support you in determining the right strategy for you, in an efficient and effective way.

Clearly recognized as strategists who have invented Capabilities-Driven Strategy, we have been practicing and researching this methodology for many years and have published those ideas in dozens of top tier publications from the Harvard Business Review to the Wall Street Journal.

We are uniquely positioned to develop a winning strategy for your company because we bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are a global team of practical strategists committed to help your company seize essential advantage and build the capabilities required to succeed. We do it by working alongside you to solve your toughest problems and help you capture your greatest opportunities.