Last week I shared why October capability assessment matters before finalizing strategic plans. This week, I'm walking you through the specific framework I use with clients—the two types of capabilities we assess and what each one actually means for execution success.
This framework helps leadership teams move beyond surface-level capability planning (“we need better customer service”) into systematic assessment of what their strategy actually requires.
The Two Types of Capabilities That Determine Results
Working with distribution companies across market cycles has revealed a proven framework. Companies that execute strategy successfully build two distinct types of capabilities that align with their strategic choices. Here's how this framework works:
Organizational Capabilities: Your Strategic Foundation
These capabilities form your strategic foundation. They're universal—every successful distribution company builds them, regardless of how they compete. Here's what each capability creates:
Customer Value Creation represents your ability to build relationships that make customers choose you over alternatives, even when those alternatives might be cheaper or more convenient. Companies with strong customer value creation capability create competitive advantages through the total value equation they deliver.
Here's this capability in action: During the 2022 supply crisis, companies with strong customer value creation capability grew their customer base while competitors scrambled. They leveraged project consultation expertise, inventory planning relationships, and delivery coordination to become more valuable when alternatives were scarce. One building materials distributor grew 18% during the crisis specifically because customers valued their problem-solving approach over competitors' transactional relationships.
Talent & Leadership Development determines whether your strategy grows with your business or becomes a constraint. It's your systematic approach to attracting people who can evolve with your strategic needs, developing their capabilities faster than market demands change, and creating an environment where key people choose to stay and grow rather than chase opportunities elsewhere.
Staying Ahead of Changes serves as your early warning system. Companies with this capability see market shifts, supplier problems, and competitive moves early enough to respond strategically rather than scramble to catch up.
Decision-Making & Follow-Through separates companies that capitalize on opportunities from those who watch them pass by. It's your ability to make good decisions quickly and actually execute them before market conditions change.
Building Strong Relationships has become increasingly critical as supply chains grow more complex and customer expectations continue rising. It's your ability to create partnerships that generate mutual value, not just better terms.
Adapting & Learning keeps you relevant as markets evolve. It's your ability to sense when your business model needs updating, embrace new technologies that actually help your operations, and foster learning that prevents blind spots from developing.
Business Model Capabilities: Your Competitive Differentiators
Business model capabilities build on your organizational foundation to create competitive differentiation. These capabilities are specific to how you deliver value in your chosen markets. Here's what successful distribution companies develop:
Supply Chain Excellence represents your ability to secure the right products at competitive prices while ensuring availability meets customer needs. Companies with strong supply chain capability create competitive advantages through supplier relationships, inventory management, and logistics coordination that competitors struggle to replicate.
Customer Experience Management encompasses your systematic approach to delivering superior experiences across all customer touchpoints. This includes everything from order processing and delivery coordination to problem resolution and account management.
Market Intelligence & Demand Creation combines your ability to understand market dynamics with your effectiveness in creating customer awareness and preference for your solutions. Companies excel here through targeted marketing, sales effectiveness, and deep customer insight development.
Operational Efficiency & Scalability determines whether your business model can support profitable growth. It includes the systems, processes, and structures that deliver consistent results while supporting expansion without proportional increases in complexity or cost.
Why This Two-Layer Framework Matters
Understanding these two types of capabilities transforms how you approach strategic planning. Organizational capabilities enable any strategy to work—they're your foundation. Business model capabilities determine how well you execute your specific strategic choices—they're your competitive edge.
The companies that achieve sustained strategic success build both systematically. They ensure their organizational capabilities can support their strategic ambitions, then they develop business model capabilities that create competitive differentiation.
Most organizations try to build strong business model capabilities without first ensuring their organizational foundation is solid. It's like trying to build a skyscraper on a weak foundation—even the best competitive capabilities can't overcome organizational weaknesses.
Making This Practical: Three Assessment Questions
Before you finalize your strategic plans, use this framework to assess both capability layers:
For organizational capabilities: “What foundational strengths does this strategy assume we have? Can we demonstrate those capabilities through recent examples?”
For instance, if your strategy requires quick market adaptation, can you point to recent examples where you identified market shifts early and responded effectively? If your strategy assumes strong talent development, can you show examples of developing people internally rather than constantly hiring externally?
For business model capabilities: “What competitive advantages will this strategy require? Do we currently have those capabilities, or does building them need to become part of our strategic plan?”
If your strategy depends on digital transformation, do you have the current technology skills and culture inside the organization? If not, what would you need to develop—and that capability building goes directly on your strategic projects roadmap. If customer experience management is critical, can you show systematic approaches to delivering superior experiences across all touchpoints?
For capability gaps: “Which missing capabilities pose the greatest risk to our strategic success? Should we build them before launching our strategy, or integrate capability building into our implementation plan?”
Sometimes the answer is to build foundational capabilities first before pursuing aggressive strategic goals. Other times, capability building becomes a strategic initiative itself—part of the implementation plan rather than a prerequisite.
When Capability Building Becomes Strategy
During the strategic planning process, capability building frequently emerges as a critical strategic initiative itself. This isn't a planning failure—it's strategic clarity.
If your strategy requires capabilities you don't currently have, you face a straightforward choice: build those capabilities as part of your strategic plan, or adjust your strategy to match your current capabilities. Both approaches can work. What doesn't work is assuming capabilities will magically appear during implementation.
The most successful companies I work with often make capability building 30-40% of their strategic initiatives. They recognize that building the right organizational foundation and competitive capabilities creates the platform for multiple strategic moves, not just the current year's goals.
Your Next Step
Before you finalize your strategic plans for the coming year, assess both capability types systematically. Look for honest evidence of each capability through recent examples, not aspirational descriptions of what you'd like to be true.
Next week, I'll share the specific assessment process I use with leadership teams—how to move from framework understanding to honest organizational evaluation using demonstrated proof points rather than subjective ratings.
work well,
adriana