Part 1: Capability Strategy Tips Every Business Strategist Needs To Know
Part 2: Capabilities Coherence is Central to Achieving the Strategic Objectives
For each firm in a given industry various internal resources and capabilities combinations must be identified and aligned that will produce the customer value proposition the firm needs to achieve a competitive advantage. It is recommended that each firm consider identifying first the value proposition it believes will give them the greatest competitive advantage. This can only take place if the firm scans the marketplace to determine what competitive strategies are being pursued by other competitors. The selected customer value proposition components usually include some form or aspect of quality, speed, cost, product available, reliability, etc. that could be selected based upon the firm having sufficient resources and capabilities that are aligned to produce a customer values proposition. Throughout our research it has been bought out that many firms attempt to build and execute a particular customer value proposition with inadequate capabilities to do so. This often happens because firms are reluctant to build or buy resources and capabilities necessary to achieve a customer value proposition that will give them a competitive advantage. In addition, in any given industry firms will compete differently based upon its chosen customer value proposition and the related capabilities. However, for each industry there are traditional practices that firms utilize in conducting their business. These variable practices involve various capabilities as inherent routines in how businesses deliver value to its customers Banton (2019). These historical and traditional practices result in a path dependency that inhibits or curtails management decision making approach to its business processes innovatively.
Consequently, often times after the firm has not achieved its competitive advantage due to its inability to change to a new business model and strategy, they are faced to accept the existing internal resources and capabilities are insufficient to achieve one or more of these customer values. The firm is now tasked to either modify (build or buy) existing resources and capabilities to materially innovate new capabilities that are dynamic enough to deliver competitive advantage through exceptional customer values propositions.
The reconfiguring these new resources and capabilities that support the value proposition the firm has decided upon should be coherent and aligned so that they are synergistic as the firm pursues its strategic objective. “This coherent alignment should strategically resonate into a unique “right to win” in a given industry having a superior competitive advantage “Mainardi & Leinwand p. 20 (2010).
For example, a “full-service airline uses industry practices that are configured with a variety of base resources and capabilities to safely get passengers from most any point to another. To reach a large number of destinations and serve passengers with connecting flights, full-service airlines employee a hub and spoke system central to major airports to attract passenger who desire more comfort as they offer first-class business-based service. To accommodate passengers who must change plans, they coordinate schedules and check transfers of baggage. Because some passengers will be travelling for many hours, full-service airlines serve meals. In addition, the scheduling of employees to manage the airline travel is significant.
What is the customer value proposition(s) provided in these traditional airline industry practices? (Is it quality, cost, speed, timeliness, choices privileges, conveyances or all of them?). Are customer values coherently connected to the capabilities in the airline industry practices so the customer is very aware of the value they receive is transparent, consistent and not fragmented? Only one of these deliverables made possible by a capability that does not fulfill the vale proposition promised (lost baggage, flight delays, poor service in flight etc.) will diminish the better valued customer experiences Ulrich (1999).
By contrast the customer value proposition(s) for Southwest Airlines is clearly structured to achieve its strategic objective for profitability using a customer value proposition that is truly aligned and coherent as a low-cost airline utilizing him a set of coherent him airline industry practice by:
- Low cost (low ticket prices/no meals/no baggage transfers or connection services/no seat assignments/automatic ticketing)
- Limited inflight service (no travel agents/ on time flights with reliable departures)
- Lean (highly trained and productive ground and gate crews with high compensation and stock)
- All short flights to low-cost secondary airports with low gate costs
- Uses only one aircraft type (737) for standard maintenance and operations
- Consistent on-time arrival and him departures
Each of the core capabilities is directly or indirectly related to the central customer value proposition of how low costs benefit are provided the customer. As one might consider there are far too many customer values that the full-service airline business practices is trying to accomplish leading to low margins and little completive advantage because the capabilities for providing these full-service benefits nor do they exist.
Therefore, when a firm is attempting to enhance its current capabilities to enhance the current customer value proposition, it must clearly identify the right combination of core capabilities to enhance that are closely aligned to the desired customer value proposition the firm is intending to provide to its customers. This relationship between the customer value proposition and the core capabilities is an essential alignment and a major step in the process toward to achieving a distinctive competitive advantage.