Strategy 101: Strategic capabilities of a company

In strategy theory and planning, it is important to consider what a company is capable of. So, this is about the potential of a company to achieve strategic goals but it is also about the missing capabilities of a company compared to strategic goals. By comparing the strategic capabilities and the strategy of a company, you can determine if the strategy can be executed by a company. So, let us have a look at a holistic model of capabilities.

What else besides resources can help to differentiate a company from its competitors? Resources for sure, but there is more that makes a company special, its capabilities. Capabilities are often referenced in strategy literature as the foundation for strategy planning. Capabilities can be both, opportunities and limiting factors for strategy creation, viability and execution. The resource metamodel can be easily extended to a metamodel of the capabilities of a company. In the following, we reference to strategic capabilities just by using the term capabilities.

Like my thoughts? READ MY NEW BOOK
ORDER AT AMAZON
ORDER IN GERMANY

Elements of the strategic capabilities metamodel

Once again, we should cover the following categories of capabilities in the metamodel:

Resources: all people, machines, robots, software and application systems
External entities that can be leveraged by the company, like participants of a platform, but certainly also customers, partners, suppliers.

From a strategy perspective, to come from resources to strategic capabilities,we also need

the business models of the company and its elements,
additional information about people resources, like values and behaviors of people,
non-resource elements like intellectual property, brands, trademarks, trade secrets that can be used strategically for the company,
further capabilities of the company organization like processes, channels,
strategic properties like financial data, e.g. cash flow.

Based on the data model for the M&A process, we can define the capabilities metamodel as described in the following.

Like my thoughts? READ MY NEW BOOK
ORDER AT AMAZON
ORDER IN GERMANY

For better readability, the figure does not contain application objects.

Contained data objects

Application for assessing employee performance: This is an application system that automates the task of assessing employee performance. It is used to determine the performance of employees and evaluate it with regard to the achievement of objectives.
Application system of the target for hiring new employees: This is the target's application system for hiring new employees. For example, applicants are entered and selected for hiring by employees of the target.
Application systems of the target company: These are all application systems of the target company. For each application systems there are different types of application listed, such as payroll application or production application. If application systems of the target company complement the buyer´s application systems is also determined. The risk of each application system is also considered.
Applications for target IT: These are applications used to operate and manage IT functions.
Assumptions of target employees: These are assumptions of target employees. They are usually based on norms and values of the employee
Behavior of the target company's employees: This is the behavior of the target employee. It is influenced by the norms and values of the individual, but also by the values, norms and goals of the target company
Brand of the target: A brand of the target are products and/or services manufactured under a specific name.
Cash flow of the target company: The cash flow of the target company is defined as the cash surplus of a company in a certain period of time.
Channel of the target: A channel of the target is a distribution channel. Distribution channels can be direct (sales to customers by a company) or indirect (sales to customers by third parties). Channels are part of the target's business model.
Country: A country is a geographically defined area with its own legal system. The country determines the company environment, e.g. tax and social security aspects, legal and regulatory authorities. Entities of the buyer, the target and of New-Co can be located in these countries.
Customer of the target: Target customer is a recipient products and services of a target company. The target customer is described in the target business model by assessing the customer´s problem that is solved by target products and services, the value for the customer, the relationship to the customer and the customer segment.
Debts of the target: Debts of the target are all liabilities of the target company.
Ecosystem: The target ecosystem is the set of companies that have a performance relationship with the target. It includes e.g. customers, competitors, partners and suppliers of the target.
Employee employment contract of the target: This is an employment contract of an employee of the target.
External employees of the target: External employees of the target are all employees of the target company who are not employed by the target company.
Finance applications of the target: These are all application systems that the target company uses to run financial processes.
Financial position of the target: The financial position of the target is made up of a number of financial key figures, such as liabilities, working capital, cash flow, etc.
Financial processes of the target: These are the financial processes of the target.
Foreign patent: A third party patent is a patent of a third party company licensed by the target.
GTM applications of the target: These are the GTM applications of the target that are used in the GTM processes
GTM model of the target: This is the Go-To-Market model of the target. For the GTM model, risks of the GTM and complementarity with the buyer GTM model are described. The GTM model is being executed in operations of the target GTM model.
Hiring process of the target: This is the description of the target's hiring processes.
HR processes of the target: These are the Human Resources processes of the target.
Human resources of the target: The human resources management of the target includes all personnel-relevant tasks and their execution in processes and application systems.
Information technology of the target company: This is the information technology of the target company. It includes the technical information infrastructure and the application systems of the target.
Intellectual property: Intellectual property is the sum of the legally protected non-material resources of an enterprise.
Key partners of the target: These are key partners of the target company as part of the target business model.
M&A best practices of the target: These are the best practices for M&A process execution of the target. These might contain documents, process documentation, organization of M&A projects, tools to be used during the M&A process and other information.
Operations of target tax activities: These are the operations of the target tax activities.
Operations of the target GTM activities: These operations describe the execution of the target GTM activities.
Organizational units of the target: This is a component of the organizational plan of the target, an organizational unit.
Partner of the target: These are partner companies that are in contact with the target company.
Patent license: A third party patent license is a contract that allows the target to use a third party patent.
Patent of the target: This is a patent of the target, which was granted to the target by a local or supranational patent authority.
Payroll application of the target: These are payroll application systems of the target.
Payroll process of the target: These are payroll application systems of the target.
Previous acquisitions of the target: These are acquisitions of the target that took place in the past.
Process for assessing employee performance: This is the process for assessing employee performance.
Production application system of the target company: This is the application system for production planning and execution in the target enterprise.
Production capacity of the target: This is the production capacity of the target. It describes the maximum possible utilization of production.
Production of the target company: The production of the target enterprise describes all relevant elements and characteristics of the production function of the target. It covers the operations of the production and the production process including production capacity and costs as well as warehouses of the target.
Production process of the target: This is a production process of the target, which is described by the production plan and various sections, among other things.
Resources for automation of target information systems: These are all target hardware, software and communication components that can be used to automate target information systems.
Revenue streams of the target: These are the revenue streams of the target from the business model.
Standards of the target employee: These are norms of the target employee that influence his behavior.
Strategy applications of the target: These are the application systems used by the target for the strategy process.
Structure of the target costs: The structure of the target costs is a hierarchical breakdown of the costs of the target company.
Supplier of the target: This is a supplier of products and/or services to the target.
Talents of target employees: This describes the competencies of Target employees.
Target business model: A target business model is the way a business of the target is structured. It consists of a value proposition, key activities, revenue streams and other elements. A business model is operationalized by an operations model, that is, it is made executable by a concrete organization.
Target business: The target business is described by the set of business models of the target company.
Target company tax: These are tax aspects of the target company.
Target company: A target company is a company that belongs to the target company.
Target countries: Target countries are all countries in which companies of the target company are represented.
Target culture: The target culture is a set of standards, values, assumptions and behaviors of people in the target company.
Target employees: Target employees are the set of employees of all target companies. Each employee is described by a set of data about the employee, e.g. culture data, where the employee works and what his or her contract is like.
Target financial area: The target financial area is an organizational unit that operates all financial processes of the target.
Target GTM processes: These are the GTM processes of the target
Target IT processes: These are all processes that are executed by the target IT department.
Target locations: Target locations are defined as the set of all locations of the target.
Target operations model: The target operations model is an implementation of a target business model.
Target strategy processes: These are the strategy processes running at the target.
Target strategy: The target strategy is the set of strategic goals, assumptions and measures of the target. Strategic risks and the complementarity with the buyer strategy can be assigned to it.
Target tax processes: These are the tax processes of the target company.
Target value proposition: This is the value proposition of the target to customers, as formulated in the business model.
Target: A target company is a company that is being evaluated for acquisition.
Target's liabilities: These are all liabilities of the target company.
Target's tax applications: These are the buyer's applications for planning, monitoring and reporting taxes.
Trademark of the target company: This is a trademark of the target company.
Values of the target company: These are the values of the target company that are to influence the behavior of the target employee.
Values of the target employee: These are the values or value concepts of the target employee that influence his behavior.
Working capital of the target company: This is the working capital of the target company.