A distinctive capability can significantly enhance a company’s performance, setting it apart in competitive markets. But what does it take to build such a capability? This guide explores how companies can develop competitive advantages, using a proven approach called VECTOR: Vision, Employees, Culture, Technology, Organizational Structure, and Routines.
What Does a Superpower Look Like?
Think of any company you admire. What makes it uniquely successful? It’s likely an institutional capability—a superpower—that sets it apart. For example, Toyota is known for its lean manufacturing, Disney for its imaginative customer experiences, and Progressive for its analytics-based pricing of auto insurance.
Investors are now focusing on the superpowers of leading companies. ASML’s unique chip-making equipment powers the latest growth per Moore’s Law. Nvidia’s vision in software and chips has placed it at the top of the AI world. Apple’s nurturing of the iPhone ecosystem is legendary.
The VECTOR Approach to Building Superpowers
Companies that successfully build distinctive capabilities tap into six elements: Vision, Employees, Culture, Technology, Organizational Structure, and Routines. This approach, abbreviated as VECTOR, has proven effective in our experience. A recent McKinsey survey found that companies focusing on these elements are significantly more likely to outperform their peers.
Vision and Leadership
Developing a Long-Term Vision
Building a superpower starts with a clear vision and leadership. Companies must develop a roadmap for the next two to three years, including plans to embed and scale capabilities across the organization. However, long-term success requires articulating the value to be created over the next decade and linking it to the company’s economic model. Top companies continually expand their capabilities to maintain a competitive edge.
Employees
Investing in People
People are a company’s most significant investment. Successful companies develop skill-building journeys for their employees, sustaining institutional knowledge through corporate academies and multiyear strategic workforce plans. This ensures the right workforce is in place to achieve long-term visions.
Culture and Mindset
Fostering a Healthy Organizational Culture
Organizational health is critical to long-term performance. Healthy organizations deliver higher shareholder returns. Companies must embed desired mindsets into their HR processes to ensure cultural alignment with their superpower goals. For example, Netflix emphasizes talent management, giving managers decision-making freedom and prioritizing innovation.
Technology
Integrating Technology
Building a superpower without technology is challenging. Companies must hard-wire technology into their core workflow systems. For instance, Amazon’s decentralized software platform allows teams to grow businesses quickly, while ASML’s technology leadership in semiconductor equipment underscores the importance of integrating advanced technology into operations.
Organisational Structure
Adapting Organizational Structures
Organizations must ensure their structures can adapt and scale capabilities. This often involves redesigning teams and establishing permanent roles to support the institutional capability. For example, Amazon’s “single-threaded leader” concept assigns managers focused responsibilities, reducing the risk of failure and enhancing innovation.
Routines
Embedding New Processes
Companies need to redesign essential processes to embed new capabilities into their operations. Repetition is key; organizations may need to run new processes multiple times to ensure they are ingrained. Amazon’s standardized routines and mechanisms across various functions exemplify how repeated processes can support scalable business growth.
Conclusion
Building a superpower requires a strategic approach that encompasses vision, employees, culture, technology, organizational structure, and routines. By leveraging the VECTOR approach, companies can develop distinctive capabilities that set them apart from competitors and drive long-term success.
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