Monday, April 10, 2017

Capabilities matters

Capabilities matters

            This week, I read the article named: The Coherence Premium which wrote by Paul Leinwand and Cesare Mainardi. This article discusses a theory about how a company can set their own coherence system and align its internal capabilities with the right external market to achieve a relative profit. If a company wants to produce the coherence premium, they need to know three main question:
1.     How going to capture the values in the computation and hold it tightly?
2.     What are our capabilities to spread the attraction points toward the customer?
3.     How we can manage all products and serves supported by capabilities system?
By considering these three main factors, the manager can align the correct strategy to size up the market. After that, this article gives a case and elaborates how Pfizer aligns its capabilities.
            From my perspective, the coherence premium theory has been reflected perfectly by the developing processes of Lenovo Inc. As the world's top PC companies, Lenovo Inc. has changed its strategy many times. After Yang Yuanqing became the CEO, he proudly announced that Lenovo will attempt to explore the diversification in the different fields and shift the type of company from mono-technics enterprise to the large, broadly focused company. However, due to the Nasdaq stock market crash, Lenovo lost heavily by investing on FM365, New Oriental school or Yestock rental car. With the three-years plan failed to achieve, Lenovo had to learn from the past mistakes and focus on the core business.           
            From changes of strategies of Lenovo Inc, it is clear that many companies are easily tempted by huge profits from external market, rather than doing what they really good at. However, if they want to translate potential margin into real income and profits, strategists must consider the development of effective growth model firstly. Just like the author mentioned, a company becomes coherent only when its capabilities system is correctly chosen and executed to support a focused strategic purpose.
            After the company figure out the way to play, they need to focus on it and copy it to other markets, products and brands. For example, Unilever notice that Lipton company and Arabia company's performance has been very reliable over years. By researching these two company’s market reports, they found that the reason of success of Lipton is it competed in a wide variety of beverage market, rather than constrained within tea selling market and it also trying to find the best suitable flavor to local tastes. For instance, although the climate of Arabia is very hot, the black tea sales a lot because offering black tea is an integral part of Arab hospitality, and people in the Arab world drink tea throughout the day.

            Finally, once the vision and strategy are established, and the appropriate link is communicated, the next step is to find the right person to perform. As far as I'm concerned, In the implementation process, we need to clear these two principles: to clarify the responsibilities of each employee; decision closer to the customer, and execute it with an aligned strategy under the capabilities system.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.