Own the Future: 50 Ways to Win from The Boston Consulting Group

Chapter 5

Competing on Capabilities

George Stalk, Jr., Philip Evans, and Lawrence E. Shulman

Abridged and reprinted with permission. Copyright © 1992 by Harvard Business Publishing; all rights reserved.

This article was first published in 1992 and represented a significant extension in strategic thinking—going beyond scale, position, and operational efficiency to introduce a broader view of competitive advantage.

Companies that compete effectively on time—speeding new products to market, manufacturing just in time, or responding promptly to customer complaints—tend to be good at other things as well: for instance, the consistency of their product quality; the acuity of their insight into evolving customer needs; the ability to exploit emerging markets, enter new businesses, or generate new ideas. But all these qualities are mere reflections of a more fundamental characteristic: a new conception of corporate strategy that we call capabilities-based competition.

For a glimpse of the new world of capabilities-based competition, consider the astonishing reversal of fortunes represented by Kmart and Walmart.

In 1979, Kmart was king of the discount retailing industry, an industry it had virtually created. With 1,891 stores and average revenue per store of $7.25 million, Kmart enjoyed economies of scale in purchasing, distribution, and marketing that, according to just about any management ...