The Essential Advantage: How to Win with a Capabilities-Driven Strategy

The Essential Advantage: How to Win with a Capabilities-Driven Strategy
Paul Leinwand and Cesare Mainardi

Harvard Business Review Press (2011)

The strategic power of coherence

According to Paul Leinwand and Cesare Mainardi in the first chapter, to achieve and then sustain a competitive advantage, a company “must be resolutely focused and clear-minded about three critical elements: its market position (it’s chosen ‘way to play,’ if you will); its most distinctive capabilities, which work together as a system; and its product and service portfolio. In a coherent company, the right lineup of products and services naturally results from conscious choices about the capabilities needed for a deliberate way to play.” There are no head-snapping revelations in this book, nor do Leinwand and Mainardi make any such claim. Their purpose is clearly stated: to help their reader to take deliberate steps — “to reconsider your current strategy, overcome the conventional separation between your outward-facing and inward-facing activities, and bring your organization into focus.” After briefly identifying the “what,” they devote most of their attention to the “how” and “why” of formulating and then executing a capabilities-driven strategy.

For example, in Parts I and II, they explain:

•  The essence of competitive advantage
•  How to achieve it
•  How to sustain it
•  The three elements of coherence
•  How to develop each
•  How to coordinate all three
•  What the “coherence premium” is and why it is so valuable
•  The right “way to play” (i.e. compete)
•  The structure of the capabilities system
•  The elements of a capabilities-driven strategy
•  How to achieve and sustain a product and service fit

They continue the same approach throughout the remainder of their lively and eloquent narrative. In Part III, they explain how to create value; in Part IV, they explain how to “live coherence every day.” As noted earlier, Leinwand and Mainardi establish and then maintain a direct, personal rapport with their reader. They cite dozens of real-world examples of capabilities-driven companies that include Coca-Cola, Cisco Systems, Microsoft, Apple, P&G, Herman Miller, Nordstrom, IBM, and Whole Foods. I was especially interested in what they have to say about the leadership qualities are required.

The word “coherent” is one word that comes to mind when CEOs such as A.G. Lafley (P&G) are mentioned: “They have learned to generate excitement and inspiration in a world of ruthless choice…When they go, they leave behind a company that is stronger, more capable, and more coherent than it was before; a company with a solid way to play and a capabilities system that enables people to grow; a company that is primed to create value, wealth, and quality of life for decades to come. In business, this is the most powerful legacy.”

As Leinwand and Mainardi would be the first to point out, it would be a fool’s errand to attempt to adopt or even adapt all of the information, insights, and recommendations they provide in this book. However, I am convinced and do not hesitate to suggest that the leaders of almost any organization (whatever its size and nature may be) can use their system framework to select a set of integrated capabilities that are most appropriate for their organization, one that will enable it to create value in the path it has chosen. Leinwand and Mainardi cannot make those decisions for them. However, they – and do, in this book – offer guidance to assist that decision-making process.

One final point I presume to add: Capabilities improvement is a never-ending journey, not an ultimate destination. An increase of capabilities must be accompanied by an improvement of the talents, skills, and resources needed to apply those capabilities. The most effective strategies are results-driven as well as capabilities-driven. If the road to hell is paved with good intentions, the road to failure in business is paved with “nice tries.” I agree with the Jedi Master, Yoda: “Do or do not. There is no try.”