When a company sets out to create a new customer value proposition, it sometimes has to apply its existing capabilities system in a different way or adapt it to support a broader product or service offering. This is the essence of a company being capabilities-forward in its thinking. An example of this was Apple’s launch of iTunes in 2001. The iTunes service took advantage of Apple’s capabilities system, including the many things Apple did (and does) to make complicated technological products intuitive. Indeed, Apple has famously adapted its capabilities for beautiful, functional design and consumer insight into one new market after another: data processing (computers), consumer products (the iPod), mobile phones, online entertainment (music and video), retail stores, tablets, and now publishing (books and magazines). If Apple TV achieves similar success, it will be another example of the dramatic reach of this capabilities system. In emulating this approach to growth, it’s important to remember that Apple had to adapt its capabilities system along the way, by adding an ability to manage content partnerships and work with different kinds of network providers. Only by doing this could Apple succeed with its customer value proposition and win in a new area. (It’s still not clear whether this capability will be strong enough to meet the challenge of providing programs for Apple TV.)
An exercise for articulating your current three to six differentiated capabilities is thus an essential starting point for your growth plans. Consider the following: What capabilities system do you have in place today? How might these capabilities deliver a new product or service to your current or a new market? Given your market “playbook,” what capabilities do you need to invest in, acquire, or develop, to deliver your new customer value proposition?
Looking at Wendy’s from the outside, one might conclude that the restaurant has three truly differentiated capabilities. The first is an ability to project comfort and a homey experience through its brand. The second — reflected in a menu that is relatively broad and offers several healthy choices — is the development and delivery of multiple food types. This includes having enough customer insight to understand which menu items get consumers excited. And the third is a system for procuring and transporting a variety of ingredients, including higher-quality meats than either McDonald’s or Burger King offers.
From Analysis to Product Launch
When markets are new, and competition is embryonic or nonexistent, it may be possible to succeed with a new product by using only one of the three practices: market-back analysis, Darwinian competitive review, or capabilities-forward assessment. Even a hastily built fighting force can gain ground in a new or undefended territory. In more heavily defended, more mature markets, it is far better to apply these three approaches together. We recognize that unpredictable factors often play a role in product launches, even in mature markets: the arrival of an enabling technology, a marketing breakthrough, or, yes, lucky timing. The three practices, no matter how shrewdly applied as thought starters and idea filters, can’t help much with these “X factors.” But they can provide a framework for systematizing the innovation process, one that makes success more likely.
Thus, one can imagine the Wendy’s executives, after completing all three practices, realizing that they could not make much headway among price-sensitive consumers or consumers focused primarily on convenience. As we noted, McDonald’s has these value propositions sewn up. But Wendy’s might look differently at the pure indulgence value proposition. The chain’s differentiated capabilities in developing a broad range of foods and in handling higher-quality meats could put this segment within the company’s reach. Pure indulgence consumers might represent a natural new target, a group Wendy’s could reach most easily from its base among those who want it all. To succeed with this group, the company would have to think freshly about its overall store experience, and fulfill the expectations of superior taste that these customers hold.