External market positioning or internal capabilities are not enough to give companies a right to win. A coherent strategy that aligns them at every level is essential. Only a coherent company — one that pursues a clear strategic direction, builds a system of differentiating capabilities consistent with that direction, and sells products and services that thrive within that system — can reliably and sustainably outpace competitors.
We at Strategy& have come to understand that most strategies fail to give sufficient attention and weight to capabilities and disregard how these capabilities should fit together to form a mutually reinforcing system. Because this blind spot is so common in corporate strategy, the rewards are all the more immense for the companies that do manage to create an aligned set of key capabilities.
What is a capability?
A few differentiating capabilities drive a company's identity and success. But what do we really mean by a capability?
In this video we define what a capability is — the combination of processes, tools, skills and behaviors, and organization that delivers a specified outcome — and show how differentiating capabilities create unparalleled value for a company. We use Frito-Lay and its direct-store delivery capability as an example to illustrate this powerful concept.
PwC’s Strategy& has conducted several studies to better understand how companies create sustained value. Here is what we found: