"Distinctive Capabilities" a kind of business strategy concept. Distinctive Capabilities approach claims that a successful company achieves a competitive advantage other firms can not replicate.
Distintctive capabilities are establishing a unique, distinctive character in the relationships a firm has with its external environment/stakeholders or internally: with customers, suppliers, employees, investors, shareholders.
Distintctive capabilities concept is developed by John Kay. According to John Kay distinctive capabilities are a relevant factor of an organization’s resources. Companies with distinctive capabilities have attributes, which others don’t have and cannot replicate. In “foundations of corporate success”, John Kay argues that the best businesses derive their strength from a distinctive structure of relationships with customers, suppliers and employees. He explained that, stability and continuity in these relationships is essential for a co-operative and flexible response to change.
According to John Kay, there are three distinctive capabilities which a company can possess to achieve competitive advantage through relationships:
Architecture: it is a structure of relational contacts within or around the organization with customers, suppliers and with employees.
Reputation: this includes customer’s own experience, quality signals, guarantee, word of mouth spreading, warranty, association with other brands and staking the reputation, once it is established.
Innovation: provided that the innovation is translated to competitive advantage successfully.
An organization’s capabilities are distinctive only, if they emanate from characteristics that other organizations do not possess. A distinctive capability must possess the qualities of sustainability and appropriateness. Sustainability refers to the distinctive capabilities of a resource that is able to persist over time. Appropriateness means the distinctive capabilities of a resource benefit the institute, in contrast, to other parties such as employees or customers. Organizations should not seek to imitate distinctive capability since, by their very nature once another organization acquires them, and they are no longer distinctive. The distinctive capabilities that derive from reputation, innovation and architecture are part of a process that involves an institute’s employees, customers, suppliers and shareholders. There are number of organizations to which the firm may network. The architecture therefore, refers to the relational contracts that exist outside and inside the organization. Distinctive capabilities that derive from innovation are associated to the organization’s architecture. An organization’s ability may simply be part of processes, structure and relationships that exist inside the organization.