Must-Have Capabilities
Box four of the Strategy Choice Cascade: the specific activities the company must perform at a distinctive level to deliver its chosen way of winning.
Two disciplines separate this box from a corporate self-portrait. First, capabilities flow from the strategy, they do not define it. A capabilities inventory, "we have great engineering, strong brand, deep relationships", is an asset list, not a strategy, and starting from it produces strategies designed to flatter the assets. Capabilities earn their place in box four by being load-bearing for the How to Win: remove the capability and the theory of advantage collapses.
Second, they must be distinctive, not generic. Every company needs competent finance and HR; nobody wins because of them. Must-have capabilities are the ones a competitor would have to replicate to copy your strategy, which makes them the substance behind the Can't-Won't Test: advantage lives exactly where replication is slow, expensive or model-breaking.
The Olay example
In the Olay case study, the must-haves were R&D partnerships and an invented role, the "technical marketer", bridging dermatologists and beauty editors. Note what makes the example instructive: the capability was created for the masstige way of winning and is nearly useless as a generic aspiration. That is the signature of a real box four answer, it looks strange outside its own strategy.
Capabilities decay
Muscles need a nervous system. Capabilities built in a heroic push decay without enabling management systems to recruit for them, measure them, fund them and renew them, which is why box five exists and why skipping it converts transformation into an expensive memory.
How this connects to OKRs
Building a must-have capability is the classic shape of a strategic cross-functional OKR: quarterly, dedicated team, measurable capability outcome. It is also where our bet framing earns its keep, capability building is a wager that the capability will cash out in customer behaviour, and the Key Results should eventually prove it did, not merely that the team was hired and the tooling procured.
Our opinion: capability-inventory theatre, and the lane that starves it
Two failure modes are worth naming because we see both constantly. The first is capability-inventory theatre: a leadership offsite lists its strengths, feels strategic, and confuses an asset register for a choice. A capability only belongs in box four if removing it collapses the How to Win; everything else is a nice-to-have wearing a strategy costume. The second is subtler and more expensive. Capability-building work, because it is unglamorous and internal, quietly gets filed in the Operational lane of the SHOP model, where it competes with business-as-usual and loses. Our position, and it is falsifiable by looking at where the work sits: a strategic capability parked in the Operational lane will be starved by BAU every quarter, and the transformation will die of neglect rather than disagreement. Capability bets belong in the Strategic lane, resourced and protected, or they do not happen.
One line to keep: A capability you cannot see cashing out in customer behaviour is a hobby with a budget.
Our synthesis of Roger Martin’s published work, sources credited. Read the originals: they’re excellent.
Is a capabilities list a strategy? +
No. An inventory of strengths is an asset register. A capability earns box four only if removing it collapses the How to Win. Starting from the list produces strategies designed to flatter the assets you already have.
Where should capability-building OKRs live? +
In the Strategic lane of the SHOP model, resourced and protected. Filed as Operational work, capability building competes with business-as-usual and loses, so the transformation dies of neglect rather than disagreement.
Reading about method is not the same as running it. We install this system and build the capability that stays.
Turn strategy into executed strategy →