The Long and the Short of It (International edition): A guide to finance and investment for normally intelligent people who aren’t in the industry

by John Kay

The modern company is best viewed as a collection of capabilities. It is defined by its brands and its products, through its internal systems and its relationships with customers and suppliers, by the resources to which it has access and the operating licences it holds, and by its reputation with the public, governments and prospective employees. We have capitalism without capital. When the company’s most valuable assets descend in the lift at the end of the month, they take their pay cheques with them. The ability of the company to generate returns for shareholders depends on its ability to add value to its employees through its own capabilities. In a competitive market-place a business can add such value only if there is something distinctive about these capabilities that yields a competitive advantage.