What capabilities does your business need to be fit for growth?

Create a winning strategy, by understanding two vital things about your business.

Why is an understanding of these two elements so important?

Successful businesses are those that are armed with deep insights into the markets where they can develop a “right to win”, the value proposition to which this “right to win” corresponds, and an understanding of the capabilities they’ll need to deliver that value proposition to customers.

As this underlines, the bedrock of any successful strategy is the right capabilities – which must be identified, nurtured and invested in. It follows that every pound, dollar or euro spent as a cost represents a conscious choice over which capabilities to build and invest in. These capabilities may be truly differentiating, or they may be merely “me-too” or “lights on” (often, though not always the case for back-office support functions) – and therefore might be better used as a source of savings to fund the required investments in those areas of the business that will drive its future growth.

A capability-based view of investment brings several benefits for businesses in any sector. It helps them manage their cost in a more strategic way, by enabling them to cut costs and grow stronger at the same time, thereby enabling them to put their money where their strategy is, by establishing a direct link between where they target their investment and where they create value.

Today, creating this linkage is more vital than ever before, as businesses around the world face up to rapid and profound change, driven by political and economic uncertainty, rapid digitisation of products, services and experiences, seismic demographic shifts, and changing behaviours and social norms across society at home and work, to name only a few. These changes mean that the right strategy is also likely to evolve, as is the investment in the capabilities required to execute on it.

“A capability-based view of investment allows a business to manage cost in a strategic way - which means costs can be cut and growth can occur at the same time.”

However, if we’re going to pick just a couple of data points to illustrate both the disruptive effects of these forces and also the opportunities they open up, try these. According to PwC research, the number of people aged 55 and above in OECD countries will grow by almost 50% between 2015 and 2050, to around 538 million. In light of this ageing of the population, if the UK were able to increase employment rates for the over 55s to the same levels as Sweden, the long-term result could be an £80bn boost to UK GDP – an uplift that would be felt across all sectors of the economy. (source)

It is not just the workforce that’s changing. We have to superimpose the impact of disruption which will reshape the markets companies are trying to sell to, and the supply chains through which they do it – not to mention inbound trading processes and flows as well.

“If the UK were able to increase employment rates for the over 55s to the same levels as Sweden, the long-term result could be an £80bn boost to UK GDP.”

Taken together, all these disruptions represent more than rapid market shifts. They are simultaneously disrupting the capabilities companies need to develop and execute a winning strategy, by downgrading some and increasing the importance of others. Take, for example, the ability to understand where every item is located in the supply chain at any given moment, and adjust the time and place of delivery to meet customer needs. If a business can do this, the customer will remember – and order from it again next time.

So disruption doesn’t just require a new strategy. It also heightens the need for a root and branch assessment of what capabilities are required to turn that strategy into reality – and of how costs might be cut elsewhere to free up resources to build them. Companies that do this can become truly fit for growth.

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