The document argues that the key to sustainable success for companies is coherence, which is achieved through three elements: 1) having unique capabilities that differentiate the company from competitors, 2) a clear sense of their market position conveying their strengths, and 3) product/service portfolios aligned with capabilities and market position. It provides Walmart as an example of a coherent company and discusses how coherence creates value through greater effectiveness, efficiencies of scale, focus on strategic capabilities, and alignment of strategic intent with decisions.

1. Winning through Capabilities
Paul Leinwand and Cesare Mainardi
argue that the real key to
sustainable success is being a
coherent company.
© Copyright 2012 London Business School

2. Very few companies are really clear
on the relationship of their
capabilities to their market positions
and product portfolios. But what
makes a coherent company?
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3. Coherence is a destination that is reached when a
company has three elements:
• A company must be able to set itself apart by its
capabilities compared to other competitor companies.
• Companies must have a clear sense of their market
position to really convey their strengths.
• Product and Service Portfolios must be aligned to that
company’s capabilities system and way to play.
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4. Driven by Capabilities
Your advantage will lie in your differentiated
capabilities; those things that bring customers
back to you and that your competitors cannot
match. Companies will rarely surprise and delight
their customers on the application of a single
capability. What is really necessary is to put in
place a capabilities system which will usually
consist of three to six unique capabilities.
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5. The Way to Play
Once coherent companies have figured out
how they are going to face the market they
won’t dilute their efforts by trying to maintain
secondary or tertiary ways to play. They put
all their wood behind one arrow.
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6. A Product and Service Portfolio
Every product or service should fit the company’s
position by aligning its offerings to the company’s
already established capabilities system.
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7. Walmart’s capabilities-driven
strategy
Walmart, the big box retailer, furnishes a good
example of how the three elements of a
capabilities-driven strategy come together.
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8. The company achieves maximum efficiency by
integrating three capabilities: A highly efficient
supply chain, selection and acquisition of real
estate and sophisticated retail conception and
design. Every one of these capabilities reinforces
the company’s strategic purpose to deliver
‘everyday low prices’ to consumers by getting the
right product, in the right store, in the right
quantity with remarkable efficiency.
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9. Sources of Value
The coherence we have been talking about
creates value in four ways.
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10. First way: Greater effectiveness
When companies focus on their distinctive
capabilities, they contribute to greater
effectiveness because they are continually
improving what truly matters.
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11. Second way: Efficiencies of scale
Companies can spend more wisely and grow more
easily when they deploy the same capabilities
across a larger array of products and services.
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12. Third way: Focus on what matters
Waste not, want not: coherent companies don’t fund
research and development projects that won’t
enhance their position.
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13. Fourth way: Alignment
between strategic intent and
daily decision making
Coherent companies execute better and
faster because everyone in the organisation
understands what’s important.
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14. Paul Leinward is a Chicago-based partner of Booz & Company
and Cesare Mainardi is Managing Director of Booz & Company’s
North American business and a member of the firm’s executive
committee.
They are co-authors of The Essential Advantage: How to Win with
a Capabilties Driven Strategy (Harvard Business Press, 2010)
This report was part of Business Strategy Review, Volume 22
Issue 2 - 2011
Visit the website www.london.edu/bsr
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