Continuously capable –
how firms stay ahead of their rivals using ‘acme comparators’

Helping firms identify not just the direction of their capability development but also the ways to achieve it

By Brian D Smith

I’ve built this series of four articles on the uncontentious premise that a firm’s success depends on what it is capable of doing better than its rivals. Because of this, effective executives focus on understanding, selecting, building and maintaining their firm’s capabilities.

In the first article in the series, I described how strong capabilities arise from processes that are made up of organisational routines, which are built on microfoundations of individuals’ attributes, team processes and connectivity, and conflict management methods.

In the second article, I described the different kinds of capabilities – hygiene, differentiating and dynamic – and how different life sciences’ business models require different capabilities.

In practice, this means that, especially in changing markets, firms can’t rely on ‘benchmarking’ capabilities against their competitors. They have to build their own set of capabilities – their capabileome – that is right for their chosen business model. Then, in the third article in the series, I shared my research into how firms build their capabileomes from the bottom up, by identifying weaknesses and carefully engineering their microfoundations to enable their organisational routines and express the capabilities they need.

This research-based understanding helps firms to become more capable than their competitors. But it doesn’t address the challenge of staying more capable than strong competitors in a market that is changing. Meeting that continuous challenge is the subject of this fourth and final article in the series.

Sometimes, but relatively rarely, staying more capable than rivals means a change of business model. If this is true for your firm, please go back and read the second and third articles in this series. But if you face the much more common challenge of staying ahead of ever-improving competitors with the same business model as yours, then you face a different sort of challenge. In these circumstances, I found that effective firms had given up on benchmarking’ against others. As one research respondent told me: “Benchmarking helps you catch up but it doesn’t help you stay ahead.”

Instead, leading firms compare themselves to the best possible capabilities for their business model. The same respondent phrased it as: “You have to compare yourself to the best you could be, not the best that currently exists.” Echoed by many of the executives I interviewed, this idea of ‘acme comparison’ is theoretically reasonable but it raises practical questions, such as: The best you could be at what, exactly? What acme comparators can a leading firm use to help it stay ahead of competitors? In my research I drilled down into these questions as they apply to the commercial functions of life sciences companies and I found four acme comparators that commercial leaders use to help them stay more capable than their rivals.

Since all commercial competitiveness begins with understanding the market better than anyone else, leading firms began by comparing themselves to the acme of market understanding. I heard questions like: “What do we know about the market that no one else does?” and “What do we see happening in the market that we can’t fully explain?” In asking these questions, commercial leaders weren’t comparing themselves to their competitors, they were contrasting their business intelligence and analysis capabilities to the theoretical maximum. Often, the answers to these questions were chastening. If everything you know about the market is also known by everyone else and there is a lot you can’t explain about the market, it is a sign you are long way behind your acme comparator.

I found that leading firms used this gap to drive the improvement of their business intelligence and related functions. They first identified critical gaps in their market understanding (eg, why does prescriber preference vary between prescribers with similar characteristics).

‘Whatever capabilities a firm has that give it superior competitiveness very quickly become visible to its rivals, who rush to imitate them’

Then they identified weaknesses in organisational routines that caused those gaps (eg, routines for characterising prescribers’ non-rational motivations). Then they fixed the microfoundations that weakened those routines (eg, weak skills in executing and interpreting qualitative market research). This practical, directed approach to capability improvement was made possible by acme comparison. Since these leading firms were already as good or better at market understanding than their rivals, it could never have been initiated by competitor benchmarking.

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The second acme comparison I observed was in deciding where to focus effort. In this case, I heard questions like: “How different is our focus?” and “How do we know that our focus is best?”

To answer these questions, I had to get past the clutter of detail because, at a very specific level, no two firms do exactly the same thing. But if, at a broader level, commercial leaders found that they were making more or less the same value proposition to more or less the same people, then this provided a humbling acme comparison.

Driven by this, I saw firms identifying weaknesses in their segmentation, targeting and positioning capabilities. These were often explained by industry-typical but suboptimal routines such as those for designing extended, beyond the product, value propositions.  Fixing such routines often involved addressing microfoundations for conflict management between marketing, market access and medical affairs. Again, these leading firms’ motivation and ability to improve their already good capabilities were triggered by comparison to the acme, not to their rivals.

Perhaps the most difficult acme comparison for my research to unravel involved translation of strategic decisions into action. Here, reality was masked by ‘social silences’ and other political behaviours. But eventually I heard questions that can be summarised as: ‘What’s the difference between what we said we’d do and what we actually did?’ To a surprising degree, the answer to this question was often ‘much more than we thought’ and when this was the case it again revealed an opportunity to improve capabilities, this time in strategy implementation.

In one typical case, the implementation issue was addressed by changing the organisational routines for communicating the strategy and designing its metrics. And, to make those routines possible, some restructuring of microfoundations such as team membership and reporting lines was necessary.

This was another example of using an acme comparator to drive capability development that, through the limited lens of a benchmark exercise, appeared unnecessary.

The fourth acme comparator that I observed being used by leading firms was in the area of maintaining organisational learning capabilities. These are distinct from market understanding capabilities and are about how firms learn from experience. When listening to leaders here, I heard questions like: “After we’ve implemented, what will we know then that we don’t know now?” and “What assumptions are we making and how will we know if they were good ones?” Of all the acme comparators, these questions were the most likely not to be answered well and so revealed the most room for capability development.

These missing answers initiated new organisational learning routines such as those for setting ‘if/then’ assumption tests (eg, If this segment doesn’t prefer us, then we will know our assumption that contra-indications drive prescribing behaviour are wrong). Learning routines of this kind were enabled by new microfoundation skills, such as those for deductive reasoning. As with the other three acme comparators, comparing current organisational learning to what was possible identified ways to build capabilities that could not have been revealed by simple benchmarking.

The British have an idiom – ‘Painting the Forth Bridge’ – that alludes to any task that is necessary but can never be completed. What I found in the companies I studied is that staying ahead in a changing, competitive life sciences market is very much like painting the Forth Bridge.

Whatever capabilities a firm has that give it superior competitiveness very quickly become visible to its rivals, who rush to imitate them.

Since imitating is always easier than innovating, the capability gap between leading firms and their followers can close quickly. Only constant attention to capability development can sustain a leadership position. The challenge for leaders is that they lack a pacesetter or benchmark to compare themselves with.

The firms I studied overcame this by replacing competitors with acme comparisons. They asked themselves questions that revealed what capabilities were possible, not what capabilities others already had. This allowed those firms to identify not just the direction of their capability development but also the ways to achieve it.

Critical questions revealed capability gaps. These revealed weak routines, which in turn showed where microfoundations had to be improved.

Building up from those improved microfoundations, the best firms I interviewed followed a path of constant capability improvement. They were, in the words of Claud Levi-Strauss, like the best scientists; they didn’t have the right answers but they asked the right questions.

All four articles available on request from brian.smith@pragmedic.com

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