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b2b colleagues work together in office on computer to build long-term capabilities

Business Builder Series Part 3: Builders Strengthen Business Capabilities

March 7, 2024

Welcome to Part 3 of our Business Builders Series, a journey into the heart of corporate leadership and capability enhancement. 

In this installment, titled “Builders Strengthen Business Capabilities,” we explore the pivotal insights from Chapter 9 of ISBM Practice Fellow, Dan Adams’ influential work, “Business Builders: How to Become an Admired & Trusted Corporate Leader.” This chapter serves as a cornerstone for our discussion, shedding light on the often-overlooked aspect of business leadership: the vital role of building and strengthening business capabilities.

Our exploration is not just theoretical. It’s grounded in the practical, real-world application of these concepts. As we navigate through the insights of this chapter, we aim to connect them directly to the tremendous work ISBM does in empowering its members. 

By focusing on the long-term development of capabilities rather than just short-term results, we uncover the essence of what it means to be a true business builder. Join us as we unravel the strategies that transform ordinary leaders into visionary builders, shaping the future of business one capability at a time.

Quick Takeaways

  • Understanding the four quadrants of business focus, with a shift towards Quadrant 4 (long-term capabilities), distinguishes true business builders. 
  • The current imbalance in business leadership towards immediate results hampers growth, highlighting the need for a shift in focus.  
  • Identifying and systematically building essential capabilities, along with measuring progress through employee surveys and benchmarking, are essential for sustainable growth, with ISBM playing a crucial role in supporting this transition. 

The Overemphasis on Results and the Neglect of Capabilities

In the business realm, a glaring issue is leaders’ intense focus on immediate results, often overlooking long-term capability building. It’s like aiming to climb a mountain without proper training or equipment. 

graphic shows quote from Dan Adams that says most senior leaders are overfocused on results and under focused on capabilities

This approach might yield short-term gains, but it fails to develop the skills and resources essential for sustained success.

Imagine challenging senior leaders on their result-focused strategies. This bold move highlights a crucial point: Most leaders, unless they adopt a builder mindset, prioritize quick wins over building capabilities for future growth. This is akin to a golfer who doesn’t improve their handicap or a pole vaulter stuck at the same height. They may achieve temporary success, but without enhancing their capabilities, they limit long-term growth.

This cycle of focusing only on results, hitting reset annually, and ignoring capability development hinders real progress. The following sections will delve into how shifting this focus can lead to sustainable growth and why nurturing capabilities is key to effective business leadership.

Understanding the Four Quadrants of Business Focus

In the realm of business leadership, understanding where to focus is crucial. Dan Adams’ concept of the four quadrants of business focus offers a clear framework for this. 

These quadrants help leaders identify their current focus and guide them towards a more balanced approach for long-term success.

  • Quadrant 1: Near-term Results – The Decorator’s Domain. This quadrant is where leaders focus on immediate financial outcomes. While it’s important, it often leads to short-lived growth. It’s like decorating a house without fixing its foundation.
  • Quadrant 2: Long-term Results – Any Leader’s Habitat. Here, leaders plan for future outcomes, like through long-term incentive plans. However, without building the right capabilities, these plans can fall short.
  • Quadrant 3: Near-term Capabilities – The Remodeler’s Efforts. This area involves enhancing skills and processes that impact the short term, like sales force training. These efforts are valuable but don’t necessarily guarantee long-term growth.
  • Quadrant 4: Long-term Capabilities – The Builder’s Focus. This is the essential quadrant for sustainable growth. Builders in this quadrant develop capabilities that drive market-facing innovation, ensuring long-term profitability and growth.

Understanding and balancing these quadrants is key. Many leaders find themselves stuck in Quadrant 1, focusing on short-term results. The challenge is to shift towards Quadrant 4, where the focus on long-term capabilities aligns with sustainable growth and market innovation. This shift is what differentiates a mere manager from a true business builder.

The Imbalance in Business Leadership Today

Current business leadership shows a worrying trend: an excessive focus on short-term results at the expense of long-term capability development. 

Surveys reveal that nearly half of employees see their leaders as too fixated on immediate outcomes, with only 11% feeling there’s enough emphasis on building long-term capabilities. 

: graphic shows quote that says nearly half of all subordinates said senior leaders were too focused on near-term results

This imbalance is particularly stark in companies led by ‘Decorators’, where short-term results dominate.

This approach impacts growth. Companies with faster growth rates tend to balance short and long-term focuses better than their slower-growing counterparts, who often prioritize immediate results. Even senior leaders in slower-growing companies acknowledge this imbalance.

The need for a shift is clear. Leaders must move from a narrow focus on short-term gains to a balanced approach that values long-term capability building, a key trait of true business builders.

Identifying and Building Essential Capabilities

Identifying and building the right capabilities is crucial for sustainable business growth. Shifting focus from short-term fixes to developing long-term capabilities is essential for sustainable growth. 

This process involves identifying key capabilities, categorizing them effectively, and systematically building them over time. This approach is at the heart of what it means to be a business builder.

Defining Long-term Capabilities

These are not just temporary fixes but are strategic assets that provide a lasting competitive edge. For instance, Apple’s edge-to-edge phone displays were not just a one-time innovation but a capability that offered years of market leadership.

Examples of Key Capabilities

Essential capabilities might include advanced voice-of-customer methods, technology leadership, or a strong culture of innovation. These are not just improvements; they are transformative changes that drive market-facing innovation.

Framework for Organizing Capabilities

venn diagram shows twenty four long-term capabilities to help businesses understand and meet customer needs

It’s important to categorize capabilities into those that help a company understand customer needs, meet these needs, or both. This classification aids in prioritizing and focusing on capabilities that align with long-term growth and market innovation.

Measuring Progress in Capability Building

To ensure that the shift towards long-term capability building is effective, it’s crucial to have a system in place for measuring progress. This involves moving beyond traditional financial metrics to gauge the growth and strength of business capabilities.

Implementing a Capability "Accounting System"

An “accounting system” for capabilities is essential. This system isn’t about financials but about tracking the development and impact of key capabilities. It involves setting clear benchmarks and regularly assessing progress against these markers. 

This approach ensures that capability building is not just an intention but a measurable, ongoing process.

The Role of Employee Surveys

Employee surveys play a critical role in this measurement system. They offer insights into whether the capabilities are genuinely being strengthened or if they’re merely a facade. 

These surveys should be conducted confidentially and regularly, providing a 360-degree view of the organization’s capability landscape. They help identify areas where the company is excelling and where it needs to focus more effort.

Benchmarking Progress

Benchmarking is a two-fold process in capability building. Firstly, peer-based benchmarking allows a company to compare its capabilities with others in the industry. Secondly, time-based benchmarking tracks the growth or decline of these capabilities over time. 

This dual approach offers a comprehensive view of where the company stands in its capability-building journey.

The Role of ISBM in Capability Building

ISBM plays a pivotal role in guiding and supporting businesses in their journey towards effective capability building. ISBM’s initiatives and resources are instrumental in helping companies transition from a short-term focus to a sustainable, long-term growth strategy.

Empowering Members with Tools and Knowledge

ISBM provides its members with essential tools and knowledge to identify and develop key business capabilities

Through workshops, seminars, and resources, ISBM equips business leaders with the latest insights and strategies in market-facing innovation and capability development. This education is crucial for businesses to understand and implement the principles of effective capability building.

Facilitating Strategic Planning and Implementation

ISBM aids businesses in strategic planning and the implementation of capability-building initiatives. By offering expert guidance and a platform for collaboration, ISBM helps companies create and follow through on effective strategies for long-term capability development. This support is vital for businesses to transition their focus and achieve sustainable growth.

Showcasing Success Stories and Best Practices

Through case studies and success stories, ISBM highlights the best practices in capability building. These real-world examples serve as inspiration and a roadmap for other businesses embarking on this journey. 

By showcasing the achievements of businesses that have successfully shifted their focus to long-term capabilities, ISBM provides tangible evidence of the benefits of this approach.

Achieve Lasting Success through Capability Building Today

This Business Builders Series has underscored the crucial shift from an overemphasis on short-term results to a strategic focus on long-term capability building. The series highlights the necessity of identifying, developing, and measuring key capabilities for sustainable growth. 

ISBM’s role in facilitating this transition is invaluable, offering tools and guidance to help businesses evolve into true business builders. This approach is essential for achieving lasting success and market leadership in today’s dynamic business environment.

ISBM is a nonprofit, global network of business researchers and practitioners. Ask about how an ISBM Membership can help you now or visit ISBM today to learn more!

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