Kay’s Distinctive Capabilities Framework
You might find it hard to feel ‘distinctive’ in the business world. After all, there is an incredible amount of competition in nearly every market, and it seems that all of the good ideas have either been used already, or they have been copied as soon as they hit the market. So how can you stand out and rise above the competition when there is so much market saturation already in place? Key’s Distinctive Capabilities Framework is a great place to start when thinking about just such as problem.
Distinctive capabilities in this framework are exactly what you would think – they are capabilities that are unique to your business, which give you a competitive advantage over the rest of the market. All business owners and managers understand that they need a unique selling proposition, or USP, in order to make a dent in a competitive market. However, that USP can be hard to find, unless you have the advantage of leveraging one or more distinctive capabilities that are held by your company.
While a distinctive capability is not, in and of itself, a competitive advantage, it is what gives you the opportunity to create a competitive advantage that can be taken to market. Think about distinctive capabilities in the same way you would think about talent for an individual – it is a differentiating factor, and it provides the opportunity to succeed down the road.
One of the most interesting parts of this framework is what it leaves out – in other words, the factors that are not seen as being distinctive capabilities. While you might think of some of the points below as being things that would fall into this category, the creator of the framework, John Kay, would not agree.
- Taking better products to market than the competition
- Selling products more efficiently
- Using better methods to produce, market, or sell products
These points are certainly cornerstones of running a good business, so why aren’t they considered to be distinctive capabilities? Mostly because they are not unique and will not be an advantage over other businesses in the long run. Kay considers these parts of business to be ‘easy’ – in other words, they can be copied quickly by the competition.
It’s great to take a quality product to market, but shortly after you do so, the market is going to be filled with other, similar products. Distinctive capabilities need to be, by definition, things that remain unique to the company over the long haul. Only then will they truly be advantages, and only then will they be able to lead the business to success.
Three Distinctive Capabilities
According to Kay, true distinctive capabilities fall into one of three categories. Those categories are listed below, along with a quick definition.
You probably already make many of your buying decisions on a day to day basis on the foundation of reputation, so there should be no doubt in your mind that this is a powerful distinctive capability. If you can build a brand reputation that evokes feelings of trust and confidence in the consumer, you have already won the battle. It is not easy to develop a positive reputation for your brand, but when you do, that reputation should be treated like gold because it is an incredibly valuable commodity.
A good reputation can rise above everything else to make the buying decision easy for the consumer. Rather than picking an item based on cost or marketing, the buyer may select your product on the strength of your reputation alone – which is a unique competitive advantage that cannot be easily replicated by your competition. Although they may be able to create a product that is similar, or even identical, to what you offer, the competition cannot take your brand name, and it is that brand that contains a great deal of your distinctive capability.
The structure of your business is unique, and can therefore become a distinctive capability when it is formed in such a way that it provides value to the business. The connections you have with suppliers, the people you have working for the company, the list of customers that you have accumulated to this point – all of those groups come together to form the architecture of your business.
Sure, there is going to be some overlap with your competition on these points, specifically with regard to customers and suppliers, but the specific structure of your organization is still going to be unique. Taking the time to build this part of the business with great care could lead you to having a big competitive advantage in the marketplace.
It is often the most innovative companies who are proven to be the most successful in the long run. Why is that? Because they can remain one or two steps ahead of the competition on an ongoing basis. The products that they innovate may not remain unique for long, because there will always be competition doing what it can to copy the successful products that are on the market, but that is okay because an innovative company is always moving on to the next big thing. By consistently innovating with new products and ideas, you can leave your competition struggling to keep up.
Another benefit of innovating is building up your reputation as was mentioned in the first capability. When consumers realize that you are consistently innovating within your field, you may build up a degree of brand loyalty and trust that can carry you to a large market share. Even when other ‘copycat’ products hit the shelves, you may still come out on top because of your reputation as an innovator in the industry.
Using Kay’s Distinctive Capabilities Framework will allow you to think about your business in a way that may be new and revealing. Work through the three capabilities that are defined in this framework to find where you might be able to stand out from the competition. The sooner you figure out what it is that makes your company unique from the rest of the field, the sooner you can exploit those differences to claim a bigger share of the market.
- The Distinctive Capabilities Framework was developed by John Kay, economics professor at the London Business School and published in his book ‘Foundations of Corporate Success.’
- Distinctive capabilities are those that are unique to your business, those which give you a competitive advantage over the rest of the market.
- In order to achieve success, a company should implement at least one of the three distinctive capabilities mentioned by Kay. The three capabilities are: reputation, architecture and innovation.
- The buyer may select your product on the strength of your reputation alone – which is a unique competitive advantage that cannot be easily replicated by your competition.
- Architecture is the connections you have with suppliers, the people you have working for the company, and the list of customers that you have accumulated.
- The most innovative companies are often the most successful in the long run because they can remain ahead of the competition on an ongoing basis.
- A company can use any or all of these distinctive capabilities to be consistently successful.