P&G by AG LAFLEY and ROGER MARTIN

An organizations core capabilities are those activities that, when performed at the highest level, enable the organization to bring its where-to-play and how-to-win choices to life. . . Articulating a firm’s core capabilities is a vital step in the strategy process. . .

P&G needs to be distinctly good at understanding consumers, at innovation, and at branding its products. . . A company needs to invest disproportionately in building the core capabilities that together produce competitive advantage.

In 2000, . . . at an off-site meeting leaders were asked to capture what they thought were the key strengths of the company and what constituted core capabilities…The group came up with five core capabilities:

• Understanding consumers

• Creating and building brands

• Innovating in the broadest sense

• Partnering and going to market with customers and suppliers

• Leveraging global scale

These capabilities would guide P&Gs strategic choices for the next decade.

By identifying the capabilities required to achieve competitive advantage, the firm can apply resources, attention, and time to the things that matter most.

For a corporation to have a chance of delivering greater value together than the units could individually, there must be some core activities in common?both among businesses in the portfolio and between those businesses and the company overall. It is essential that all of the systems have at least some capabilities and activities that line up with the core capabilities of the organization. These shared capabilities?create reinforcing rods that link different parts of the organization together. These reinforcing rods help drive strategy forward at all levels.