Question: How much of our strategy should be driven by current capabilities?

We are a mid-market process outsourcing company in a very competitive market.

As we have grown over the years, our strategy has slowly shifted from exploiting shifting market opportunities to leveraging and deepening current capabilities.

Structurally, how can we become more nimble, without losing our competitive advantages?


5 Expert Insights

That depends.  [Can you tell I was a consultant for 35 years?  :)  ]

If what you mean by "driven by current capabilities" is "limited to what we currently know how to do," the answer is none.  It's useful to have that as a reference projection.  But what needs to drive a game-changing strategy is what you'd be really excited about doing...which should identify some gaps between what you currently know how to do and what you're striving for.  And the commitment to fills those gaps is what produces innovation and breakthrough and keeps you nimble and ahead of the competition.  There's an organizational element of that as well: recognizing that conserving what you do well is a distinct function from creating new capabilities.

That's not what most companies do, unfortunately.  Which could have a lot to do with the current state of the economy and shortfalls in leadership.  It's not the safe, easy thing to do.

Have you truly defined your competitive advantage?  Sound strategies, particularly for mid-market companies, should be based on capitalizing on strengths. One of the greatest strengths one can build is around your distribution linkage, i.e. your customers, your distribution channel, brand.  Developing additional competitive advantages around this core can include new capabilities as well as your need for continuous improvement (deeper current capabilities) in your current core business. These are not mutually exclusive but are components of a market focused mission.

From the story you told us, it sounds like you have opportunities to be more innovative and nimble. Strategically, I would brainstorm with your leaders what else you could do with the specialized and deepened capabilities you now have to expand your business. Maybe you have done this. If not, ask yourself:
1. What other new markets and specializations could you serve with your current talent base?
2. How can you diversify and expand your business?
3. How would you train and then back-fill as you expand and penetrate new market niches?
4. Are you ready to be successful if a market segment shifted to "In-sourcing" due to shifting financial benefit analysis or very unexpected international circumstances?

Being nimble means many things such as:
1. Do you teach your people to multi-task and  / or to be able to also cover other niche tasks?
2. Do you identify and serve new market segments or specialties?
3. Do you have multiple contingency plans to quickly protect yourself against the unforeseen that could dramatically affect your business.

From the information you gave us, only you can assess how nimble you really are.

“Success comes from delivering value to your customers.  The ability to deliver value comes from having sound concepts of what the customers wants and values.  This is based in the ultimate source of value, the people of the organization; their mind is the most advanced, active, adaptive technology ever created.  A leader has the moral responsibility to align, focus, equip, empower and engage each individual with a common purpose.”

Strategy is defined by two elements:

1. The asset you own and/or control that underpins your business's product/service.
2. The competitive advantage your product/service provides to the customer.

Between these two fixed points are the processes and risks involved in bridging the gap. And, the economics of the transaction which need to cover the cost of capital, return money to investors and reinvest in the business's future.

Contrary to popular belief, businesses DO NOT HAVE competitive advantages; they have property. On the other hand, businesses do provide customers with competitive advantage; the product/services the customer acquires reduces their risk of achieving a goal.

If you were my client I would ask you: "What is your asset? What risk do your product/service reduce, and for whom?" Only after we are comfortable with these answers would we even begin to talk about strategies.