Business Strategy and Capabilities

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The concept of business strategy has existed for a very long time. Pinning down the exact date may be difficult – from The Art of War written about 2,500 years ago to the invisible hand of Adam Smith in the mid-eighteenth century – however, that is not important. The most important part in the continuum of strategy is the actual execution of strategy, because that alone produces the advantages theorized by a strategy. But the execution of a strategy does not produce advantages directly, rather it simply creates business capabilities that in turn creates the competitive advantages enabling a corporation to win.

While a lot has been said on business strategy since Michael Porter came up with his three generic strategies, most of the later concepts  are simply variations of these three. The three generic strategies of cost, differentiation, and focus  continue to be the true basis of all competitive advantage simply because these are the three lowest common denominators of all business activity that consists of selling (hence the cost) product and services (hence the differentiation) to customers (hence the focus).

The ability of a business strategy to drive the required business capabilities is the key to creating successful functional strategies such as the strategy for supply chains. While the concept of a functional strategy is not quite well main-stream yet, it happens to be the missing link in the strategy continuum for a long time – and this is the crux of my book on supply chain strategy, though lately some other people have also started talking about how capabilities mandated by the business strategy can drive the competitive advantages. 

imageIn the winter 2010 issue 61 of the strategy+business magazine, in an article titled, “How The Top Innovators Keep Winning”, the authors argue that it isn’t the amount of money companies spend on research and development that makes them successful, rather it is the particular combination of talent, knowledge, team structures, tools, and processes — the capabilities — that successful companies put together to enable their innovation efforts, and thus create products and services they can successfully take to market. I fully agree with this view point, the capabilities of a corporation are really the only distinct advantages over the competition – specially when seen in their broader context, and these capabilities are created only through a relentless pursuit of understanding what the business strategy mandates and a continuous assessment of “capability gaps” compared to the mandate.

While a lot of supply chain strategy thinking is stuck around the keywords like lean, agile, postponement, speculation, and so on – the real advantages from a supply chain can only be created after a thoughtful assessment of the business mandate and an assessment of existing capabilities. How can one go about doing that? Explore several practical methodologies and real deliverables in my book on supply chain strategy.

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© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

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