Trends 2015: Capability Counts: Learn about the direct link between capability and competitive advantage by Kirk Botula
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Presentation of Kirk Botula, president of the CMMI Institute about the direct link between capability and competitive advantage. - What is strategy? - Where to play and how to win - Differentiator and Cost Leader - Capabilities express strategy - Capability Areas
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Trends 2015: Capability Counts: Learn about the direct link between capability and competitive advantage by Kirk Botula
- 2. Capability Counts: Learn about the direct link between capability and competitive advantage Kirk Botula – CMMI Institute
- 3. ® ®
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- 6. ® Where to Play and How to Win
- 7. ® 1. Differentiator 2. Cost Leader 2 Ways to Win
- 8. ®
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- 10. ® Winning Value Equations Average Competitor Cost Leader Differentiator Value Cost Margin Source “Playing To Win” Harvard Business Review Press, 2013
- 11. ® “Deliberately choosing a set of different activities to deliver unique value.” Michael Porter, What Is Strategy? HBR , 1996
- 12. ® “The essence of strategy is not the structure of companies products and markets but the dynamics of its behavior…The building blocks of strategy are not products and markets but capabilities.” George Stalk, Competing on Capabilities, HBR 1992
- 13. ® Capabilities Express Strategy 1. Differentiating Activities 2. Cost Leadership Activities 3. Survival Activities
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- 17. ® Survival
- 18. ® Capabilities Express Strategy 1. Differentiating Activities 2. Cost Leadership Activities 3. Survival Activities VALUE CREATION RISK MITIGATION
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- 20. ® Capability Areas • Project and Work Management • Product Engineering and Development • Supplier Management • Supporting Infrastructure • Process Management • People Management • Service Delivery and Management • Data Management
- 21. ® Capabilities Express Strategy 1. Differentiating Activities? 2. Cost Leadership Activities? 3. Survival Activities?
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- 23. ® Product Engineering and Development Survival Cost Leadership Differentiation
- 24. ® Project and Work Management Survival Cost Leadership Differentiation
- 25. ® Service Delivery and Management Survival Cost Leadership Differentiation
- 27. ® Operational Excellence is Necessary but Insufficient Survival Capabilities Cost Leadership Capabilities Differentiating Capabilites Survival Capabilities Survival Capabilities
- 28. ® Operational Excellence plus Strategic Choices yields Market Leadership Survival Capabilities Cost Leadership Capabilities Differentiating Capabilites Survival Capabilities
- 29. ® Good and Bad Profit Customer doesn’t value this Customer values this We are good at doing this Bad Profit Good Profit We are not good at doing this Bad Profit Bad Profit
- 30. ® Capability Building as a Top Priority In Top 3 Priorities Not in Top 3 Source: McKinsey Global Survey results 2015
- 31. ® Top 5 Challenges Capability Gaps Other
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Editor's Notes
- Good morning and welcome It is wonderful to be together today in Seattle at the CMMI Global Congress We have friends from around the world gathering together this week who form a community who is genuinely committed to making the world work better and improving the lives and livelihoods of colleagues and clients around the world.
- Today I am going to talk about how to link Capability to Competitive Advantage Or what does process improvement have to to with profit improvement?
- Roger Martin Rotman School of Business in Toronto Argues that strategy for a business really boils down to a choice of where to play and how to win. By where to play he means the industry, geographies, and target market By how to win he means making a decision to position yourself in one of two ways
- As a differentiator or as a cost leader – so what do we mean by that?
- By differentiator we mean providing products or services or access that deliver unique value to your customer and are difficult to imitate By way of example we might think of what Apple has done
- By cost leader we mean being able to deliver the same value that others can at a lower cost structure. Now a firm may or may not pass that lower cost on to the consumer in the form of a lower price. To illustrate cost leadership I would use the example of Papa Murphy’s Take and Bake Pizza Papa Murphy’s is a pizza chain based in Vancouver went public on the Nasdaq stock market last year. Their approach is to make pizzas on premise but not to bake them. So consumers take them home and bake them themselves. This allows them to run a pizzaria with no ovens and a fraction of the space.
- So there are two basic winning value equations
- Now it is great to make a strategic choice but Michael Porter says the essence of strategy is….
- The Disney Parks twice their nearest competitor with 70% repeat visitors. Parking cars by time and then having a locksmith on a car.
- Cross docking A supply chain practice of transferring contents from inbound trucks to outbound trucks without storing them in inventory combined with a private communications system that tracked all transactions at all stores allowed Walmart to refresh inventory twice as fast as competitors with lower costs.
- Table stakes. For a pizza business offering delivery of baked pizzas being able to deliver within one hour is necessary to survive.
- Now what about the capabilities cultivated in the CMMI?
- Enumerate
- Are these…
- Well it depends…context is king the competitive environment Lets compare three capabilities areas in these
- Home builders in the US are undifferentiated in terms of project delivery. IKEA has actually reduced their costs by displaying all of their products on the floor, giving customers access to the inventory, and letting them deliver their own furniture. It is important to see how the capabilities in different areas reinforce their strategic choices. Lastly in terms of differentiation I worked with a software company that was able to deliver 70% of projects on time and 90% within 5 days of the delivery date. This reliability led to significant gains in market share against key competitors who were not able to perform at the same level.
- Pizza the same Vanguard is US Mutual Fund company who gained a market leadership position by promoting index funds at a low cost. When only 20% of asset managers beat the index in any given year why not just by the index? Singapore airlines
- In a study on building organizational capability McKinsey reported that capability building is in the top 3 priorities for 60% of CEOs
- Because these executives understand that strategic goals can only be achieved on the strength
- On the strength of focused capability
- This is one of the things that we seek to accomplish at these conferences to gather together the community of people who are committing their lives to building the capability that improves the lives of others.