Capabilities-Driven Strategy explained
Published: December 19, 2012

In this series of three entertaining yet instructional videos we explain what we mean when we talk about capabilities as the key to essential advantage and sustained value creation and capture.

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.

What is a capabilities system?
For capabilities to deploy their full potential they need to work in a system. Such a self-reinforcing system of capabilities is stronger than the sum of its parts and it is almost impossible for competitors to copy.

In this video we define what a capabilities system is by looking at Frito-Lay. We show how Frito-Lay combines its three differentiating capabilities of direct-store delivery, continuous innovation of new products, and consumer marketing into a powerful system that is at the heart of the company’s success.

How does capabilities coherence create value?
This video captures our philosophy and research on how companies create and capture value over time through capabilities coherence—that is, the mutually reinforcing alignment of a deliberate way to play, a supportive capabilities system, and a relevant portfolio of products and services. We’ve found that most companies do not believe they have a winning strategy and two-thirds lack the capabilities to create value. The vast majority are navigating too many conflicting priorities, and only one in five believe they have a right to win in the marketplace. Our research in various industries consistently demonstrates the direct correlation between capabilities coherence and superior performance over time. This video connects the dots for understanding this coherence premium and how to achieve it.

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