Chapter 5 Building the Walmart Coherent CapabilityDriven Strategy

Chapter 5 Building the Walmart Coherent Capability-Driven Strategy The capabilities-driven strategy foundation using the building block architecture (Figure 6 below) is produced by unique implicit tacit results combined with adjacent explicit critical capabilities toward building dynamic know-how-capabilities for creating dynamic capabilities that will differentiate market offerings for the customer value proposition Be High Productivity Be Market Place Agile Be Fast in the Marketplace To Manage Community Positioning

Chapter Five is a demonstration framing the entire process that is presented to the participants using a case study (The Walmart Corporation case study) to show each step is completed and how outcomes are arrived at for achieving the competitive advantages. This detailed conceptual model incorporates how underlying tacit micro foundational elements are harnessed for strategic augmenting capabilities resulting in the formation of dynamic capabilities. The Walmart case study illustrates how participants begin The Strategic Assessments to discover the tacit knowledge and its potential for enhancing internal resources and core capabilities for creating added advantages. (See Figure 7) Figure 7 better shows the transformational process of Explicit Mission-Critical Capabilities (internal resources and base capabilities) that are expanded by the Implicit Tacit Active Results (know- how), which in turn can actively create the pathways of market offerings for a differentiated customer value proposition. Tacit knowledge is know-how gained from experiences, ideas, values, emotions, talents, actions, culture, feelings, information, personalities, and character development (Leonard & Sensiper, 1998).

The Building Blocks of the Coherent Capability-Driven Strategy for Walmart Figure 7: The Ttransformational process for Expanding Explicit Mission-Critical Capabilities Using Implicit Tacit Results Horizontal Tacit Results Figure 7: Critical Capabilities are Strategic Market Offerings are differentiated for creating customer values propositions differentiated using the value of tacit skills results that are combined with adjacent critical capabilities to The Building Blocks of the coherent capability-driven strategy can be used to develop dynamic capabilities by combining tacit results (in Green) with critical capabilities that creates differentiated market offerings (in Blue) for building the customer value propositions leading to competitive Vertical Tacit Results create market offering Know-How Stakeholder Tacit Results Critical Capabilities Tacit Results Customer Tacit Results Critical Capabilities Tacit Results Organizational Tacit Results Critical Capabilities Employee Tacit Results Know-How for Know-How Having Relationship Manager Capability Know –How for Know –How Being Fast in the Marketplace Capability Know-How for Being Know-How Marketplace Agile Capability Know-How for Know-How Highly Productive Capability 3 advantages. Core Process Capabilities Results Based Strategies D. Ulrich, 1998

The Explicit and Implicit elements will be different because of the unique business practices utilized by the firm in a particular industry which of course is different from industry to industry. The Explicit Mission. Critical Capabilities and the Implicit Tacit Activity Results are unique to Walmart for this conceptual model demonstration and will be however, uniquely different for every organization that intends to use this paradigm to build dynamic capabilities. In Figure 8: the Walmart Results Based Knowledge Pathway is organized by explicit critical core capabilities aligned under each of the four capability building blocks architecture (Employer, Organization, Customer, and Stakeholder). Derivatives of these explicit critical capabilities are expanded into a portfolio of Implicit tacit know how results that are aligned with each of Walmart’s management Capability Building Blocks to beginning the design of its Coherent Capability-Driven Strategy.

Walmart Business the Coherent Capability-Driven Strategy with Implicit Tacit Results Explicit Mission Critical Capabilities = Implicit Tacit Know-How Results Employee; Highly Productive Capabilities Portfolio Know-How 1. Commitment = Motivation and Climate 2. Competence = Productivity and Clarity Organization; Marketplace Agile Capabilities Portfolio Know-How 1. Capacity = Learning and Technology 2. Change = Speed and Agility 3. Consequence = Accountability 4. Collaboration = Borderless Organization Customer; Be Fast in the Marketplace Capabilities Portfolio Know-How 1. Connectivity = Customer Satisfaction 2. Cycle time = Value Adding Efficiency 3. Culture = Shared Values 4. Creativity = Prod/Service Innovation Stakeholder; Manage Relationship Capabilities Portfolio Know-How 1. Career Focus = Employee Retention 2. Competitive Margins = Predictable Performance 3. Consortium = Strategic Relationship 4. Capture New Markets = Sensing for Opportunity Figure 8 Explicit Mission-Critical Capabilities (internal resources and base capabilities) are expanded into the Implicit Tacit Active Results (know- how behavior assets),

Our research reveals that Unique Capabilities fill the gap between intention and outcome, and they fill it in such a way that the outcome bears a definite resemblance to what was intended. Coherent Dynamic Capability-Driven Strategy A coherent dynamic capability strategy is the most difficult to duplicate and gives the greatest competitive advantage. The capabilities-driven strategy is produced by a unique tacit results that are aligned with adjacent critical capabilities toward building dynamic know-how-capabilities for creating differentiated market offerings for the customer value proposition. In Figure 9 a Customer Value Reconfiguration has taken place by Explicit Dynamic Capabilities being combined with adjacent Implicit Tacit Know-How to create actionable Explicit Dynamic Capabilities Marketing Offerings for creating a capability differentiated competitive advantage.

Walmart Business the Coherent Capability-Driven Strategy with Implicit Tacit Results with Dynamic Capabilities for Competitive Advantage Explicit Mission Implicit Tacit Know-How Explicit Dynamic Capability Marketing Offerings Critical Capabilities Results for Competitive Advantages Employee Highly Productive Portfolio of Know-How Customer Value Re- Configuration 1. Commitment = Motivation and Climate Friendly Helpful Employees In all Functions 2. Competence = Productivity and Clarity Ensure Efficient Quality Performance Organization Market Agile Portfolio of Know-How Customer Value Re- Configuration 1. Capacity = Learning and Technology Automatic Reorder Using Satellite Connection 2. Change = Speed and Agility Lower-Cost Using Cross Docking in Warehouse 3. Consequence = Responsible Efficacy Reliable Promotional/Product Availability in Stores 4. Collaboration = Borderless Organization Quality Supplier for Direct Product Delivery to Stores Customer Be Fast to Marketplace Portfolio of Know-How Customer Value Re- Configuration 1. Connectivity = Customer Satisfaction Positive Shopping Experience Follow-up 2. Cycle time = Value Adding Efficiency Low Inventory Costs Using Just-In-Time System 3. Culture = Shared Values Easy Customer Return Cash/Credit Policy 4. Creativity = Products/Service Innovation Product Quality and Sales Performance Evaluations Shareholder Manager Relations Portfolio of Know-How Customer Value Re- Configuration 1. Career Focus = Employee Retention Hiring to Values not Skills 2. Competitive Margins = Predictable Performance High Product turnover and low prices 3. Consortium = Strategic Relationship Incentives to Suppliers for lower prices on large Volume Purchases 4. Capture New Markets = Sensing for Opportunity Stock Price Stability and High Earnings Ratio G. Stalk, P. Evans, L. Shulman “Competing on Capabilities: the New Rules of Corporate Strategy Harvard Business Review No. 92209 Figure 9 Dynamic know-how-capabilities for creating differentiated market offerings

Coherent Dynamic Capability-Driven Strategy The Dynamic Capability-Driven-Strategy outlined in Figure 9 shows the Explicit Critical Mission Capabilities being combined with Implicit Tacit Know-How Results to be reconfigured into Explicit dynamic capability marketplace offerings. A capability-driven system of unique coherent connected capabilities is the link that shapes a dynamic capability-driven business model that delivers strategic results. (See Figure 10) These marketing offerings are the basis for creating a new customer value proposition chain for each of the capability levels that when combined results in a Brandon Creating Driven Market Place Distinction for competitive advantage. This business model utilizing the coherent dynamic capability driven strategy Is very simple and focuses on what a firm can do best and matches that competence against the dynamism of the market place. But, the coherent dynamic driven strategy business model can be difficult to internalize the changes in renewing capabilities and innovating their existing business model if the leadership strategy to do so is not thought out Chesbrough, (2010).

Wal Mart Business Coherent Capability-Driven Strategy with Implicit Tacit Results Using Strategic Dynamic Capabilities To Create the Business Model Explicit Mission Implicit Tacit Knowledge Critical Capabilities Activity Results Explicit Dynamic Pathways to Competitive Advantages Employee Highly Productive Portfolio of Know-How Customer Value Re- Formulation 1. Commitment = Motivation and Climate Friendly Helpful Employees In all Functions 2. Competence = Productivity and Clarity Ensure Efficient Quality Performance Customer Value Proposition Chain Created “A Motivated and Valued Workforce” Organization Market Agile Portfolio of Know-How Customer Value Re- Formulation 1. Capacity = Learning and Technology Automatic Reorder Using Satellite Connection 2. Change = Speed and Agility Lower-Cost Using Cross Docking in Warehouse 3. Consequence = Responsible Efficacy Reliable Promotional/Product Availability in Stores 4. Collaboration = Borderless Organization Quality Supplier for Direct Product Delivery to Stores “Valued Operational Customer Be Fast in the Marketplace Portfolio of Know-How Customer Value Re- Formulation 1. Connectivity = Customer Satisfaction Positive Shopping Experience Follow-up 2. Cycle time = Value Adding Efficiency Low Inventory Costs Using Just-In-Time System 3. Culture = Shared Values Easy Customer Return Cash/Credit Policy 4. Creativity = Products/Ser. Innovation Product Quality and Sales Performance Evaluations “Valued Customer Satisfaction” Shareholder Manage Relationships Portfolio of Know-How Customer Value Re- Formulation 1. Career Focus = Employee Retention Hiring to Values not Skills 2. Competitive Margins = Predictable Performance High Product turnover and low prices 3. Consortium = Strategic Relationship Incentives to Suppliers for lower prices on large Volume Purchases 4. Capture New Markets = Sensing for Opportunities Stock Price Stability and High Earnings Ratio Walmart Strategic Mission. Critical Capabilities Tacit Know-How Strategic Assets Coherent Dynamic Pathway Strategies Dynamic Capacities Difficult to Copy G. Stalk, P. Evans, L. Shulman “Competing on Capabilities: the New Rules of Corporate Strategy Harvard Business Review No Figure 10 a dynamic capability-driven business model that delivers strategic results Excellence” “Building the Franchise Value ” Branded Value Creating Driven Market Distinction

Coherent Dynamic Capability-Driven Strategy Companies have not learned to compete through there business model. It requires the right leadership strategy to implement and execute this business model capability driven strategy Casadesus- Masnell & Ricart, , (2011). Be sure to continue with Chapter 6 where we address how the organization and its leadership must continually be catalysts of constant change in the modification of the business strategy to accommodate a sustainable competitive advantages in the volatile and disruptive marketplace dynamics of today.

Be sure to complete your chapter 5 evaluation sheets so that you may receive the next chapter to review and evaluate. On your Power. Point Presentation select the notes page for making your comments and to answer questions. Once having completed your chapter evaluation please email chapter evaluation to me In the next chapter will be sent to you. Be sure to watch Chapter 6 showing The Leadership Strategy to implement and execute the Business Strategy. The Capability Driven Strategy requires the right Leadership strategy makes a distinction between a Business strategy and the Leadership strategy. The business strategy cannot succeed without an integrated future focused leadership plan to execute it.