Kay's Distinctive Capabilities Framework

Using Relationships to Build Competitive Advantage

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Learn how to use Kay's Distinctive Capabilities Framework to improve your organization.

What makes an organization successful?

You can get a real mixture of answers to this question, such as high profitability, a strong market share, the right scale, great intellectual property, innovative capabilities, quality, customer focus, and a dedicated team.

However, according to economics professor, John Kay, there are three key sources of distinctive capability that ultimately predict an organization's success.

In this article, we'll look at Kay's Distinctive Capabilities Framework, a model that helps you identify and strengthen these three sources of competitive advantage.

Understanding Kay's Framework

John Kay, professor of economics at London Business School, developed the Distinctive Capabilities Framework and published it in his 1993 book, "Foundations of Corporate Success."

Kay created the model after spending several years studying the origins of industrial and corporate success. After interviewing many of the world's most successful business leaders, and after analyzing case studies, business histories, and corporate earnings, he concluded that success depends on the quality of the relationships that an organization creates with its employees, shareholders, customers, and suppliers. When built correctly, these relationships become a strong and enduring source of competitive advantage.

According to Kay's theory, organizations can't succeed in the long-term simply by selling more effectively, by producing better products, or by having better processes than their competitors, as these approaches can be copied quite easily. To succeed in the long-term, they must use at least one of the three distinctive capabilities.

Note:
In his book, Kay refers to commercial relationships as "contracts," instead of using the word to imply a more traditional "legal contact" between two parties.

The three sources of distinctive capability are:

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