Values refer to the mission of the organization. What is the organization’s purpose, its reason for existing? What is the organization’s scope; what markets or arenas does the organization operate? What do the organization’s various stakeholders expect of the organization? What do the organization’s leaders expect of the enterprise? What values and beliefs does the organization hold? The answers to these questions are critical for understanding the strategy of an organization and provide the baseline for any strategic analysis. Indeed, the most fundamental question a strategist must initially ask and understand is: what are the organization’s values? An understanding of firm values is the foundation that can give meaning and provide context to the strategic decisions an organization makes.
Opportunities refer to the potential to create value for stakeholders. What does the market demand? What needs may be identified? Who else in the market is satisfying these needs? There are a variety of external forces—competitive, economic, and technological—that influence an organization’s opportunity set. Factors such as the rapid development of information and communication technologies, the increased global reach of businesses, the multinational distribution of labor pools and supply chains, and the worldwide interest and influence of stakeholders of all types have all had a profound impact on the opportunities facing organizations. The strategist requires clear thinking about the economic, technological, and societal environment in which the organization operates as well as an acute consideration of the activities and capabilities of one’s competitors.
Capabilities refer to the organization’s existing and potential strengths. To evaluate an organization’s strategy, one must have both a clear picture of what makes the organization distinctive and a sense of the organization’s ability to marshal resources and leverage capabilities toward desired organizational objectives. This requires, of course, clarity about organizational capabilities: What capabilities do we currently possess? Are these capabilities unique and do they provide the basis for a competitive advantage? What capabilities do we need to possess in the future? How will we develop them?
The challenge for the strategist is to balance these three factors and identify the space where they converge. It is at the intersection of values, opportunities, and capabilities that valuable competitive positions that create and sustain value for stakeholders emerge.