The article “Competing on Capabilities: The New Rules of Corporate Strategy” by authors Stalk, Evans and Shulman uses the remarkable success of Wal-Mart to explore the idea of “capabilities-based competition” and discusses this in terms of the way that the retailing giant was able to see growth at 25% per year with sales that were unheard for any other competing chain. Aside from the more general explanations about the success of company, the authors assert that company employs a set of “strategic business decisions” that make them capability-based.
The strategic decisions represented in “Competing on Capabilities : The New Rules of Corporate Strategy” include a dedication to consumer satisfaction that was not only based on customer service, but on offering low-cost goods with an inventory that was being constantly replenished through a complex system known as “cross-docking” which allowed for the immediate distribution of goods that rarely sat in a warehouse and were immediately available, thus delivering consumers with lower costs and the chain with far greater profits. This was achieved through a complex network of communication as well as by the rapid transport at the company’s disposal via a vast fleet of company-owned dedicated trucks. This changes the way managers function in an organization as they are not simply charged with personnel management, but of keeping up to date with customer demand and behavior and must have an intimate knowledge of exactly what is going on in their store. These differences that set Wal-Mart apart from K-Mart are based on four elements of success that include concepts such as a process as opposed to product-based strategy, the transformation of these processes into consumer value, the implementation of strategic investments (for example, the fleets of trucks and planes) and having a CEO who has a deep understanding of this model.
In order to best understand the most crucial elements of capability-based strategies, it is most useful to look to the four key aspects in more detail. The first of these is the statement that businesses, particularly in retail, have changed a great deal and the product or offering is no longer the key to success as competition will eventually overtake that. It is most important to have a competitive strategy that is innovative and is an understandable process that strives to create great value for the consumer while maximizing profits so that these goods can stay inexpensive.
The elements listed above and discussed in this summary and analysis of “Competing on Capabilities” by Stalk, Evans and Shulman is absolutely the case with Wal-Mart and not only embodies the second key (transforming process into value) but also the third. The third element is strategic investments. For Wal-Mart, this is the centerpiece of their process. Without the strategic investments such as an extensive trucking and air fleet that was able to keep up with the processes and maximize the concept of cross-docking to the point that this ability, made possible by these strategic investments, eliminated the possibility of facing severe competition from other retailers who did not have the same control of their inventory.
One of the most important aspects that can be applied to our daily organizational management that is expressed in “Competing on Capabilities” is that the CEO’s vision, coupled with the communicative strength of managers who were directly responsible for what was occurring in their stores made the process even more successful. By combining these strengths along with other attributes such as speed, consistency, acuity, agility, and the capacity to be innovators, Wal-Mart proves and guides the theories laid out in this article.
