This paper attempts to explore the primary capability configuration in business transition. The business transition from Contract Manufacturing to Own Brand Manufacturing inherently changes the importance of each source of innovation, including lead users, customers, suppliers, external scientific expertise, internal R&D, universities and competitors. Some of the innovation capabilities may no longer be available or useful while new capabilities may need to be built up to generate the right ideas and respond to market demands. How to manage the change in the reconfiguration of innovation capability appears to be vital for firms' survival and sustainable advantage whereas the emergence of the knowledge economy, intense global competition and considerable technological advance has seen become increasingly central to competitiveness. How to manage the change appears to be vital for firms' survival because innovation is widely acknowledged to be a major source of firm growth and key to survive its competition.