Why didn’t a single minicomputer company succeed in the personal computer business? Why did only hbr_130x130one department store—Dayton Hudson—become a leader in discount retailing? Why can’t large companies capitalize on the opportunities brought about by major, disruptive changes in their markets? It’s because organizations, independent of the people in them, have capabilities. And those capabilities also define disabilities. As a company grows, what it can and cannot do becomes more sharply defined in certain predictable ways. The authors have analyzed those patterns to create a framework managers can use to assess the abilities and disabilities of their organization as a whole. When a company is young, its resources—its people, equipment, technologies, cash, brands, suppliers, and the like—define what it can and cannot do. As it becomes more mature, its abilities stem more from its processes—product development, manufacturing, budgeting, for example. In the largest companies, values—particularly those that determine what are its acceptable gross margins and how big an opportunity has to be before it becomes interesting—define what the company can and cannot do. Because resources are more adaptable to change than processes or values, smaller companies tend to respond to major market shifts better than larger ones. The authors suggest ways large companies can capitalize on opportunities that normally would not fit in with their processes or values; it all starts with understanding what the organizations are capable of.

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