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Strategies of the past and the present have been based on structural advantages--e.g., products and markets, geography and cost, technologies. These patterns explain much of the nature of competition between business entities. Structural advantages can be identified and measured; they are differentiated among competitors, and their differences explain profitability.
The 1980s clearly demonstrated that structural advantages are eroding:
* Customer segments are fragmenting, either because customers are more demanding or suppliers are more willing to supply. For example, in the automotive industry, the number of distinct model choices available to the consumer has increased from 450 to 600 in North America in the last decade alone. Being the largest brand name like Chevrolet does not count for much today.
* Product life cycles have been shortened. Even when an organization finds an opportunity in a product market, once it places a product the odds are high that another company will be right behind with a more advanced version.
* Globalization has redefined market share--all companies are subject to the forces of global competition. At the very least, they are affected by the capital markets.
* Information technology provides a vaster understanding of what competitors are doing and what customers want.
All of these changes are beginning to make it very difficult for an organization to establish a structural advantage. Increasingly, international competitiveness hinges less on what you have and more on what you do. What you do requires capabilities; like structural advantages, capabilities can be identified and measured. They too are differentiated among competitors, and their differences also determine profitability levels.
When we talk about structure and behavior, we begin to think about the same types of interactions within the additional dimensions of capabilities--those elements found in a key value delivery process that meet customer needs and lead to customer satisfaction. Key value delivery processes include things like the following:
* Quote-to-order--This is an organization's first chance to win an order, as well as its best chance to lose money. In many companies, this process is not honed and developed.
* Order-to-cash--Most people think in terms of order-to-delivery, but delivery is not relevant until the product or service has been paid for.
* New product and service realization--This process is far larger than simply product...