- Published: Friday, 08 February 2019 15:10
- Written by David DeCiero
When we take a look at a company, all business capabilities are divided into two categories, either Commodity Capabilities or Differentiating Capabilities. This article will discuss commodity capabilities and what they mean for your business.
Commodity capabilities are the functions of your organization that provide no differentiation from your competitors. The main question to ask when looking at a capability is "If I do this really well, will it make a difference for my business?" We can take some obvious ones that are commodity capabilties, such as Accounting. We all recognize Accounting as an extremely important capability, but will becoming the best at it make a difference to you or your customers? No (as long as you are not an accounting firm), as long as it is done correctly, it will not move the needle in terms of the profitability of your company or whether customers choose your business over a competitor. Each company must ask these questions of their own capabilities. As I mentioned, an accounting firm may indicate accounting as a differentiating capability, but a distillery may not. Another question to ask to identify a commodity capability is "Should I prioritize this capability over other capabilities in my business?" If the answer is a resounding no, then it is a commodity capability. The fact is that you only have so much time and effort to put into each capability and if you are deprioritizing a capability, it is most likely a commodity capability. That is, something that you do not wish to spend time and energy on. Commodity capabilities will not improve your business, so there is no need to spend extra time on them. As long as they are functioning correctly, let them be and focus on the differentiating capabilities. These are the ones that will make a difference in your business.
As an exercise, take a business capability model of your business and just jot down which category you feel that each capability falls into. There is no right or wrong answer. The goal is to get you thinking about where you might be misallocating your time. Are you spending too much time on a commodity capability? It might be time to make a conscious decision about where you spend your time.