FROM DISTINCTIVE CAPABILITIES TO COMPETITIVE ADVANTAGE
Part III of this book defined and identified the principal distinctive capabilities which distinguish successful firms--architecture, reputation, innovation--and explained how firms succeed in creating or exploiting strategic assets. The subject of Part IV is how these distinctive capabilities are applied in specific markets to create competitive advantage, and the problems which arise in ensuring that these competitive advantages can be sustained and appropriated.
This seems to leave a gap--or so it has appeared to some early readers of this book and to many of those with whom I have discussed its arguments. They recognize how corporate performance derives from distinctive capabilities. 'But how', they ask, 'are distinctive capabilities established?' Surely that must be the central question in determining strategy for the corporation?
How distinctive capabilities are created is a good question but it is not, I believe, the central question of corporate strategy. Distinctive capabilities of real commercial value are hard to create. That almost goes without saying, since if they were not hard to create they could not remain distinctive for long. What is even more important is to recognize that they are almost never created as the result of a conscious process of strategic choice. This is true for essentially the same reasons. Deciding what distinctive capabilities it would be good, and profitable, to have leads inescapably down the path of wish-driven strategy. The firm may formulate an objective in terms of a distinctive architecture, or reputation, or innovation. But in the absence of some unique attribute which enables that firm to achieve that objective ahead of others, and more comprehensively, whatever architecture, or reputation, or innovation is established can quickly be replicated. The search for distinctive capability is simply taken to a different level.