An organization can become successful because of many reasons. The reasons for an organization’s success can be strong market share, high profits, employees with extensive knowledge base, innovation, emphasis on customer requirements & quality of products or services. In this article, we will discuss about Kay's Distinctive Capabilities Framework and its strategy tools, from which the competitive advantage of a company can be assessed.
John Kay, economics professor at London Business School, developed the Distinctive Capabilities Framework and wrote about it in his 1993 "Foundations of Corporate Success."
The model was created after extensive research by Kay into the origin of corporate and industrial success. He interviewed some very successful business owners and analyzed corporate earnings, annual reports and case studies. Post research he deduced that success is dependent on the relationship a business maintains with its suppliers, customers, shareholders and employees.
- As per John Kay, distinctive capabilities are three in number. These three capabilities forecast the success of a business. Kay’s Distinctive Capabilities Framework assists in improving and assessing the three sources that lead to competitive advantage. These relationships can become strong and sturdy when built in the appropriate way.
- A company cannot achieve success in the long run only by coming up with better products or services, making the selling process more effective or by implementing better methods than their rivals. These approaches are easy and thus, cannot help a company to succeed in the long run. In order to achieve success, a company should implement at least one of the three capabilities mentioned by Kay.
Distinctive capability is a competency that is unique to a business establishment. It is a quality that is superior to the qualities of other companies.
- This quality assists in the production of a unique value proposition in the operation of a business organization.
- Distinctive capability is the platform on which complete competitive advantage can be built.
- The uniqueness distinguishes this capability from all others, whether it is a simple capability or core competency.
The Three Capabilities
The three capabilities are as follows.
This consists of the experience of customers, guarantee, quality, word of mouth and association of warranty with other companies. It also comprises putting the reputation at stake once the company becomes famous.
Architecture is the framework of contacts inside or around the company with suppliers, customers and with employees.
Innovation can lead to competitive advantage and thus can prove to be a harbinger of success.
Sources of Distinctive Capability
- Distinctive capabilities come from position of the business establishment in the industry, technology, relationship of the company with the market, processes adopted by the business, cost, employees, process of manufacturing and customer satisfaction.
Difficulties of Replicating Capabilities
- The in-depth integration of related elements of business model is the sturdiest form of competitive advantage.
- This is because it is tough for rivals to realize and more tough to do exactly what the company has done.
- Replicating becomes all the more difficult when the components of purpose, value, culture, identity and vision are integrated in a strong business solution.
For instance, some companies have distinctive capability in development of management while others have capability in lean manufacturing. These organizations also possess core competencies that are aligned to the particular work they do.
Capability and Benefits
- If a business establishment wants to create and maintain a competitive advantage, there should be a certain amount of competitive advantage which helps in creating value proposition. When a company has distinctive capability it is at a beneficial position than other companies.
- If the business atmosphere is changing, the unique attributes of the value proposition created by implementing special capabilities and finally the distinctive capabilities become less special. Thus, in order that competitive advantage can be maintained, capabilities too should be dynamic and evolving. This helps in maintaining competitive advantage over a long period of time.
# Dynamic Capability
Dynamic capability is the development of competencies in light of changing environment and deliberate changes brought to develop knowledge.
- Distinctive capability should be described in details to make sure that it is understood properly.
- The company’s management should be on the look out for protecting it from being lost to rival companies.
- Distinctive capability can be protected in the form of intellectual property, trade secrets or by making it an important element of total competitive business model, such that competitors cannot imitate it.
- The special capability of the company must constantly go through an evolution and nurturing, so that it can remain distinctive.
Change in Capabilities and Environment
- Strategy connects to the changing perspective of an organization. This is because it has a tendency to adjust between environments and attributes.
- Companies are created when processes render positive feedback to attributes. These companies have competencies that match to its needs.
- The attributes include competitive market economies and biological change.
- Modern understanding of changing processes focus on how little purpose is needed to create result.
- Companies do not succeed because someone had in-depth knowledge of organizational design. There were rather several perspectives of the firm competencies a specific activity needed and the market was the main decider which selected the most effective match. Distinctive capabilities were created, not designed.
This idea is supported by detached history of business. The opportunity for proper strategic management choice was restricted by the past. Strategic choice can be both positive and negative. This is not done to harbor negative ideas about the capacity of executives to make significant differences or the potential for strategic direction. It is done to emphasize the absurdity of utilizing the blank paper sheet approach to corporate strategy.
To Wrap Up
From the above article, it can be deduced that the Distinctive Capabilities Framework pioneered by Kay contributes in realizing the competitive advantage of a company. In fact, advantage of an organization is created on distinctive capabilities of that company. There are three distinct capabilities, namely, reputation, architecture and innovation. A company has to use any one of the distinctive capabilities to be successful and sustain that success. These capabilities are unique and this is what renders the company an edge over its competitors.