Research on what drives a company’s success

PwC’s Strategy& surveyed more than 700 executives and found that a capabilities-driven approach to value creation leads to higher returns, on average, than other ways of doing strategy. Capabilities-driven companies owe their success to having a truly distinctive way of providing value, a powerful set of capabilities, and coherence between their strategy and capabilities. By contrast, companies that compete on the basis of economies of scale, lucrative assets, or diversification fare less well. The survey also finds that companies with a clear identity — standing for something unique and consistent over time — tend to perform better than others, and that a capabilities-driven approach helps them develop that identity.

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“Many companies focus too much on the outside when developing their strategy, and don’t combine that market-back perspective with a clear view of what their organization is great at doing. In this survey, as in all the research we’ve done on the topic of value creation, we see that essential advantage lies within. A few differentiating capabilities drive a company’s identity and success.”

Cesare Mainardi, former Chief Executive Officer, Strategy&


Companies have widely divergent views about how to chase success
  • We asked survey participants to identify the most important drivers of success for the three companies they know best among the 15 largest in their industry. We found that no approach is clearly dominant.
  • Pursuing economies of scale was perceived to be the most important success driver (score of 2.0), followed by powerful capabilities (1.8) and lucrative assets (1.6).
Companies competing with a capabilities-driven approach have a clearer identity
  • Companies with a clear identity compete based on the same three capabilities-related factors that drive success in general: a truly distinctive way of providing value, powerful capabilities, and coherence.
  • Companies that base their success on assets, scale, and diversification are perceived to have a weaker identity.
Companies with a clear identity enjoy stronger performance
  • We asked survey participants to tell us how clear an identity the various companies in their industry have—that is, how clearly those companies are perceived to stand for something unique and consistent over time.
  • Their responses helped to demonstrate that a clear identity correlates with performance—the stronger the identity, the higher the company’s three-year TSR growth. The effect is significant: Companies whose identity is perceived to be clearer than the average have a three-year TSR growth that is more than 3 percentage points higher than that of their peers.
Companies competing with a capabilities-driven approach are more successful
  • The more a company’s success is perceived to be capabilities-driven—based on a clear way to play, powerful capabilities, and coherence—the more successful the company tends to be (as measured by TSR growth over three years).
  • Companies that are seen as most consistently following such a capabilities-driven approach include Apple, Caterpillar, Honda, Petro China, SAP, Standard Chartered, Toyota, and Volkswagen.
  • Companies that are seen as competing on the basis of assets, scale, and diversification have significantly lower TSR growth, on average, than companies that follow a capabilities-driven approach.
Strategists’ biggest problems are having too many disconnected initiatives and not focusing on what will create long-term success
  • Two issues emerged as the most problematic when we asked survey respondents to rate the significance of strategic issues: having too many strategic initiatives that are disconnected and focusing too much on short-term performance. In other words, companies aren’t addressing the fundamental questions of strategy that will allow them to create long-term success.
  • Contrary to common belief, insufficient market focus does not appear to be the problem—only 7 percent of respondents consider “ignoring external market forces” to be the most significant issue.
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Is it being focused and targeted, or rather having a broad approach that appeals to many customers? Is it sticking with a steady course in a rough sea, or rather being flexible and using tailwinds whether they take you to port or to starboard? Being good at many things, or rather excellent at a few things and just good enough at others? Focusing on short-term delivery, or rather on long-term positioning?

Key publications

What drives a company’s success?
A Strategy& survey with more than 700 executives finds that a capabilities-driven approach to value creation leads to higher returns, on average, than other ways of doing strategy.
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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
“The Coherence Premium” lays out the importance of coherence for sustainable business success and presents that sustainable, superior returns accrue to companies that link capabilities.

Media releases