How did Gillette, a razor blade company, justify spending $7 billion to buy battery maker Duracell? How has SAP, Europe’s leading software company, managed to sustain such high growth rates? And how has entrepreneur Li Ka-shing been able to pull off the kinds of deals in China about which others only dream?

The answer is capabilities: the skills, assets, and relationships that companies assemble to build competitive businesses. Our research into companies that succeed in sustaining growth for long periods reveals that they think broadly about capabilities. Naturally, some rely on operational skill, the narrow definition of capability. But a surprising number from our sample thrived by employing less obvious capabilities.

When businesspeople refer to organizational capa-bilities, they usually mean the skills embedded in a company’s people, processes, and institutional know-ledge. These are so basic to survival that they are often referred to as core competencies. In any competitive environment, a company must be good at what it does and possess skills that make it stand out. Distinctive competencies allow growth companies not only to make more money from existing businesses but also to extract greater value from new opportunities.

Important as operational skills or competencies are to a...