Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.

Taking the High Road to Competition: Achieve Business Capabilities Coherence

Sustainable, superior returns accrue to companies that focus on what they do best. It is that simple. Yet it is incredibly hard to internalize. It is a rare company that focuses on what we do better than anyone in making every operating decision across every business unit and product line. Rarer still is the company that has aligned its differentiating internal capabilities with the right external market position.

These companies are called coherent.

Most companies do not pass the coherence test because they succumb to intense pressure for top-line growth.  They chase business in markets where they do not have the capabilities to sustain success. Being coherent allows our companies to establish our differentiated capabilities to achieve greater profitability and market leadership.

Coherence is achieved when a capabilities system supports a focused strategic purpose, otherwise known as a Capabilities-Driven Strategy (CDS).

Capabilities Coherence Framework

Any company in any market must carefully consider its external market positioning and its internal capabilities (i.e. Core Competencies). However, for the company to maximize its chances of success, it must have in place a “coherent” set of Business Capabilities.

Specifically, Competitive Advantage is achieved when Value Creation, Capabilities System, and Product & Service Fit are aligned.  This concept is outlined in the Capabilities Coherence Framework.

  1. Value Creation. Are we clear about how we choose to create value in the market place?
  1. Capabilities System. Have we articulated those capabilities that we do uniquely better than anyone else?
  1. Product Fit. Do most of the products and services we sell fit with our capabilities system?

Understanding our Value Creation, Capabilities System, and Product Fit requires our company to go through a simple diagnostic that will determine whether our company is going off the rails.

The Pfizer Case Study: A Showcase of Coherence in Action

The consumer health care business of Pfizer is a good example of capabilities coherence.  After its back to back acquisitions of Warner-Lambert and Pharmacia in the early 2000s, the pharmaceutical giant owned several leading consumer products: Listerine, Benadryl, Sudafed, Nicorette, and Rogaine.

In 2002, Pfizer set the goal of becoming a leader in global consumer health care. A capabilities lens was applied to the business. Let us look at the market conditions that prompted Pfizer to take on this strategic direction.

Pfizer was faced with a market that was highly fragmented and no player enjoyed more than 5% share globally.  Competition was stiff as there were mass retailers enjoying alternatives to brand name drugs.  Country by country regulations were tight pulling the overall growth to a very low level.

To gain headway in the market and remain in the lead where competition is stiff, Pfizer realized the need to take the giant step to coherence guided by the 3 Principles of Value Creation, Capabilities System, and Product Fit.  When coherence in capabilities was achieved, breakthroughs were reached leading Pfizer to greater profitability.

By 2006, Pfizer was able to grow its Consumer Healthcare to nearly $4 billion in annual sales. The company redeemed the value by selling the business to Johnson & Johnson 20x EBITDA.  This is a basic example of coherent companies that gain superior financial performance.  Beyond the result is the approach. Pfizer was able to take on the high road to achieving Business Capabilities Coherence in the road called Competition.

Interested in gaining more understanding of Business Capabilities Coherence? You can learn more and download an editable PowerPoint about Business Capabilities Coherence here on the Flevy documents marketplace.

Are you a management consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

About Joseph Robinson

Joseph Robinson is the Vice President of Strategy at Flevy. Flevy is the marketplace for best practices in business management. Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. The documents at Flevy (https://flevy.com) are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience. Flevy covers 200+ management topics, ranging from Digital Transformation to Growth Strategy to Lean Management. You can peruse a full list of management topics available on Flevy here. Prior to Flevy, Joseph worked as an Associate at BCG and holds an MBA from the Sloan School of Management at MIT. You can connect with Joseph on LinkedIn here.

, , , ,

Complimentary Business Training Guides

Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   This 48-page whitepaper, authored by consultancy Envisioning, provides the frameworks, tools, and insights needed to manage serious Change—under the backdrop of the business lifecycle. These lifecycle stages are each marked by distinct attributes, challenges, and behaviors. [Learn more]
We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]   We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function






The Flevy Business Blog (https://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (https://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.

Connect with Flevy:


About Flevy.com   /   Terms   /   Privacy Policy
© 2020. Flevy LLC. All Rights Reserved.