“Unlocking Your Core Capabilities” is the fifth in a series of articles about building a high-impact roadmap for the future of your company.
Your core capabilities provide the foundation for your success. In fact, they are what drive your success and, if well understood, will help guide your decisions about where to go next. Investing in and leveraging your core capabilities will help maximize your return on investment and improve your odds of success as you launch new product lines or distribution channels.
“It is not enough to be busy. So are the ants. The question is: What are we busy about?”
Henry David Thoreau
An excellent question from the 1800s that still applies today – what are we busy about? The business world is rife with challenges and disruptive change but also with endless possibilities brought on by lower barriers to entry via technological advances and easy avenues of direct conversation with customers via digital/social media.
To unlock the biggest opportunities for growth, you need to truly understand your situation and have an honest assessment of what is fundamentally driving your success.
The first step is to create or update your SWOT analysis. This is a good team-building activity because it gets planning team members to give some serious thought inside and outside your four walls and starts to crystallize understanding of your current state and major challenges.
Be sure to spend enough time to identify the three to five key items in each quadrant. Once you are done, you will have a roadmap for things to build upon, vulnerabilities you need to fix. Everyone will leave your SWOT analysis with a common understanding of where you are as a company.
Next, it’s time to uncover your core capabilities. The strengths you just identified are a great starting point. Identifying core capabilities takes things one important step further: Most companies have a number of strengths, but an honest assessment will show that only a few actually drive their success and position you for future growth.
Core capabilities are your strategic differentiators, what give you a competitive edge. They create the reason to buy from you instead of your competitors. Competitors find them hard to replicate; they fundamentally make you who you are. They also complement one another, fit together, and reinforce one another. They are the foundation for your success.
Why is identifying core capabilities so critical? Because it sets the stage for the ultimate goal of the strategic planning process: identifying your best strategic options. You will greatly increase your chances for success if you build new revenue streams from the foundation of things you’re already very good at and exploit those things that make you better than your competitors.
How do you identify your core capabilities? Start by brainstorming. Tell your team that you will use the next meeting to identify your core capabilities, define what that means, and ask them to give some thought to the question.
When you get together, record each suggestion on a Post-It note on the wall. No discussion or debate yet; this is the fun, “everyone participates” part. Remember that each person in the planning process is there because of his or her special perspective, and therefore all opinions need to be heard. Call on anyone who’s reluctant to share; this is a good reason to use a facilitator who will manage the logistics and meeting room dynamics, freeing you to be 100 percent present in the discussion.
Once all suggestions are on the wall, start grouping similar concepts to narrow your focus. You don’t need perfect matches, just concepts that express the idea. That should narrow the options to a manageable few. Summarize each grouping with a headline, then get to work challenging each. Does it meet the test of being a true strategic differentiator? Does it drive customers’ buy decision? Is it hard for competitors to replicate? Often by challenging the headline, you can uncover the real core capability.
Ultimately you are seeking to unlock three to four key capabilities. Very few companies legitimately have more. Remember, these are not the things you’re good at; they are the things so important to your customers as to drive them to buy from you and that your competitors would have a hard time replicating.
Case Study: A few years ago during a planning session, we were building out core competencies for a division of a mid-market company. Many in the room were arguing that the brand was a core competency, and while it did meet the test of being hard to replicate by competitors, it didn’t really meet the other tests. By pushing on the headline repeatedly, we uncovered that the real core competency was the company’s ability to leverage the brand and build emotional connections with customers. The use of the brand was limited by some external restrictions, and if the team had stopped at the initial assessment, no value would have been uncovered. Digging further and unlocking the real core capability led to two new product lines under different brands that materially increased revenue for the company. The new brands leveraged the core capability of building emotional connections in a way that simply trying to build on the current brand never would have.
That leads to the most important outcome of identifying your core capabilities – invest in them! Once you unlock the keys to your long-term success, focus your efforts on maximizing their use. You have identified the small number of key building blocks of your success, and your plans will be much more likely to succeed if you invest in and leverage them aggressively.
What are you busy about?
Capture Your Future is a series of articles bringing you practical insights gleaned from over 20 years’ building strategic plans for divisions of big public companies, medium-size privately held companies, and nonprofit organizations. Along the way we’ll share some lessons we’ve learned from doing the right things, and sometimes the wrong things, in building good strategic plans.