Building a capabilities-driven strategy
Joe Saddi, MBA ’83, works for a company
that has been helping large clients solve
complex problems for almost 100 years. One
recent client was the city of Dubai, and the
problem was how to emerge as the business
hub for the Middle East. Saddi says that
the essential principle driving successful
enterprises is simple: Just figure out a few
things that your organization does better
than any others, and make sure you keep
Saddi, who is chairman of the board of Booz & Company, as well as senior partner and managing director of the firm’s Middle East business, delivered a presentation on “Capabilities-Driven Strategy” as a Distinguished Global Speaker at the Johnson School this spring. “It is easy to lose sight of the two or three things that companies are really good at, because companies are engaged day-to-day in so many things,” said Saddi in his presentation. Executives get messages from shareholders, customers, employees, and regulators, and all of them make different demands. “Events tend to overtake managers,” says Saddi, “but the best performing companies in the long run have clarity of focus. They have in mind what they will not do under any circumstances.”
Dubai’s strategy included building an international airport, roads, and shopping malls, but “any country with cash could have done exactly the same thing,” says Saddi. So Dubai created zones where companies could move people and profits in and out freely. They also made it easy for foreigners to get visas and acquire property, which is rare in the Middle East. “They focused not only on the hard assets, but on building the ecosystem of capabilities they needed to succeed.”
- How are we going to create value for our customers?
- What are we going to sell, and to whom?
- What do we need to do well to deliver that value proposition?
Putting the answers into practice usually means setting limits. Honda excels at manufacturing small engines, for example. So the company won’t build engines bigger than a certain size, because small engines are what sets them apart. Wrigley’s strength was in developing new flavors of candy and gum, and also in influencing retailers to display their products prominently on candy racks. So they succeeded by introducing new flavors, and in 2008 they were acquired by a larger candy company, Mars Inc., for $23 billion. For multinational oil companies, two capabilities are essential: They must excel in discovering new deposits of fossil fuel, and also in building large-scale capital projects. Oil companies that do not set themselves apart in these ways become targets for nationalization, Saddi said.