Determining capabilities in practice

This paper explains how a variety of business units within a listed corporation have tried to define their strategic capabilities, as part of a process of developing independent business strategies within the corporation's corporate strategy. This paper describes the processes by which strategic capabilities were identified in each unit, the differences and similarities between the capabilities identified at the business unit level, and their consistency (or otherwise) with an overall corporate strategic positioning.

This paper is based on the author's consulting experience with both the parent corporation and its individual business units over a period of 15 years, and most recently on an intensive relationship with one division of the corporation and its 13 business units began three years ago. An objective of these relationships has been clarifying each business unit's strategy and any basis for sustainable competitive advantage of its strategic capabilities. What emerged from this process is a set of definitions of business unit strategic capabilities which are both similar to, but in some cases different from, the corporate parent's perceptions of the strategic capabilities of its business units.

This paper describes the process by which a first representation of “strategic capabilities” emerged in each business unit. For each unit, the agreed descriptions of strategic capabilities helped guide strategic decision making and implementation and assisted each unit in clarifying its strategic positioning in its markets. However, considerable differences remain in the articulation of each unit's capabilities and in what capabilities are considered to exist in the business units.

This paper is designed to give practitioners and academics a case study through which to consider practicalities involved in articulating and operationalizing strategic capabilities in general and in defining corporate strategies in particular.