This is the fourth question in the cascade of five questions in Roger Martin’s “Playing To Win” strategic framework.
As Deming once said, “a goal without a method is nonsense.” Without the right capabilities, your strategic choice remains purely academic, and, in reality, nonsense.
The choices you make in answering this question bring your where-to-play and how-to-win choices to life. Capabilities are not competencies. Competencies are ante to the game, capabilities are the specific current and future activities that, when performed well, help you win in the way you’ve chosen.
There’s a dangerous tendency to simply list your strengths as the capabilities you need. There are two problems with that approach. First, your strengths may or may not be a competitive advantage. Second, they may not be relevant to those to whom you deliver value. (This is why the traditional SWOT analysis is essentially worthless in crafting a truly new strategy: strengths and weaknesses are only strengths and weakness in the context of a clad where-to-play and how-to-win. Yet, it’s a staple of most strategy efforts.)
Take the example of Burberry. Eight years ago, Burberry wasn’t doing all that well. It was a rather tired and aging British luxury brand based on the trench coat as its signature product.
Then in 2006, Angela Ahrendts, left Liz Claiborne to take the helm as CEO. (Yes, the same Angela Ahrendts who recently became Apple’s svp of retail and online stores.)
Upon her arrival, Ahrendts went about crafting a new Burberry strategy.
Her first moves were all about changing the Burberry brand’s where-to-play and how-to-win. She moved down in the demographic space to position Burberry as the place for younger affluent buyers interested in luxury goods. She aimed much younger than most other luxury goods manufacturers were at the time. She revamped the product line accordingly to appeal to that younger upscale buyer.
Ahrendts realized early on that Burberry need capabilities that they didn’t have at the time. Most young affluent buyers, she realized, preferred to engage not in the physical retail location as older buyers do, but rather online. Burberry had little online presence, and no ability to effectively communicate with the new segment.
She knew Burberry had to build those online capabilities from scratch, and made a gigantic investment to make those capabilities unique. It wasn’t long before Burberry was winning online luxury goods retailing awards (enough to make Apple sit up and take notice). Take a look at how Ahrendts delivered interim results via online video:
Ahrendts also knew Burberry fashion design was in dire need of an extreme makeover, one appealing to younger folks. She appointed a young up-and-coming designer, Christopher Bailey, to lead the charge, eventually moving in to the role of Chief Creative Officer. (Bailey is now CEO.)
Now, it’s a fairly radical move in any organization to essentially flip the org chart, but especially true in fashion, where seasoned senior designers rule the hierarchical roost. And following Ahrendts’s lead, Bailey created a rotating design counsel from which he was able to select young designers with fresh ideas, from all levels and locations from around the world, to be the strategic decision makers for one year only.
By democratizing design in this way, he was able to build the very unique capabilities Burberry needed to realize Ahrendts’s where-to-play and how-to-win choices. Those choices only meant something if she was able to invest in and build the capabilities to deliver to the strategy.
If you support a clear “where to play and how to win” choice with unique and inimitable capabilities, you may just transform your company. And if you do, don’t be surprised if Apple gives you a call.
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Matthew E. May is the author, most recently, of Winning the Brain Game: Fixing the 7 Fatal Flaws of Thinking.