Summer brings back memories of camp. When I was a little boy, all my friends went to a beautiful wooded summer camp where they swam, shot archery, and played. Being highly allergic to playfulness, I was sent to strategy camp. One night, while roasting spinach and tofu around a campfire, the Strategist Bootcamp counselor, wearing a tan short-sleeved dress shirt, plaid shorts, black socks, and Cordoba wingtips, told us this horrific story:
“A few years ago, two managers got lost while hiking in the same woods. As night fell, they wandered aimlessly from one project to the next, unaware of what was the key driver of their business strategy’s success. Suddenly, they heard a strange sound coming from the forest around them. It was the voice of a customer, but they didn’t pay attention because they didn’t want to go through the trouble of updating their plans.
Worried that there was no strategic direction, the two managers frantically flipped through their 65-slide PowerPoint, looking for a way out. But within the pages of size eight Arial font and clip art, there’s no mention of the core abilities and abilities that could insulate their strategy from impending doom. Their screams end up being drowned out in lists of strategic objectives, critical success factors, and tactics that look good on paper but have no real impact on their long-term success.
Needless to say, I couldn’t do a good SWOT analysis for a week after that horrific story. However, it did drive home to me the importance of understanding what drives our strategy. We often spend so much time studying market analysis, goals, objectives, strategies, tactics, and metrics that we lose sight of what actually determines the success or failure of our strategies. A ten-year study of 103 companies at least
Enterprise value of $1 billion shows that strategic mistakes account for the largest loss of shareholder value, at 81%.
Because strategy is “how” we achieve our goals, core competencies and capabilities will drive our ability to successfully realize the potential of our strategy. Let’s take a closer look at these two key concepts.
core competencies
Core competencies are the primary areas of expertise. It’s collective learning based on knowledge and skills that delivers differentiated value to your customers and gives you a competitive advantage. One of the reasons why enterprises lack competitive advantages is that they have no core competitiveness. Failure to identify and develop core competencies results in a lack of resource concentration that ensures products and services are mediocre. Think about your team: What are your core competencies?
Simply put, core competencies are what you know. Common examples of core competencies include Honda’s engine design and development, McDonald’s food delivery systems, and Canon’s optics and imaging. Remember, core competencies are not just things you know a lot about. This is competitively important knowledge embedded within teams, improving the ability to develop and execute world-class standards. Sounds daunting, doesn’t it? While we may not currently have the core capabilities to produce this level of excellence, wouldn’t it be productive to talk about what it might be and work toward that goal?
Strategy camp questions:
1. What areas of knowledge and skills does your team have?
2. Are there any of these areas that are currently the best in the industry?
3. Which of the following areas can bring the greatest differentiated value to customers?
ability
The term competency is often confused with core competencies. Capabilities are competitively related activities performed using key resources. They are the purposeful allocation of your resources through activities designed to drive strategic success. Simply put, capabilities are what you can do with what you have.
Common examples of capabilities include point-of-sale data analysis at Walmart, coordination between software developers and marketers at eBay, and brand management at Nike. When trying to identify abilities, it’s easy to fall into the trap of listing a bunch of things you did before you had the seventy-nine abilities. Remember, capabilities are “competitively relevant” activities—activities that use resources in ways that create unique value for internal or external customers.
Strategy camp questions:
1. What are your team’s top three capabilities?
2. What evidence is there to support that these are the top three abilities?
3. What are your most dangerous competitors’ top three abilities?
Any strategy discussion must begin with an honest assessment of your core competencies and capabilities. Does everyone on your team understand what the core competencies and capabilities are and how they contribute to their development? If not, your team may find themselves lost in the managed forest with no map, no flashlights, and funny-looking rashes. Better check it out.
If you are planning your own strategy camp, download 3 keys to a successful offsite strategy meeting.
