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Organizational Capabilities The Basic Building Bock of Your Firm and the Basis of Your Competitive Advantage |
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By: Vadim Kotelnikov, Founder, Ten3 Business e-Coach – Innovation Unlimited, 1000ventures.com, 1000advices.com
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"Our only limitations are those which we set up in our minds or permit others to establish for us." – Elizabeth Arden |
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Characteristics of a Capability2
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Capability Defined Capability represents the identity of your firm as perceived by both your employees and your customers. It is your ability to perform better than competitors using a distinctive and difficult to replicate set of business attributes. Capability is a capacity for a set of resources to integratively perform a stretch task. Balanced Organization: 5 Basic Elements Corporate Capabilities (Wood):
Organizational Capability Approach vs. Traditional Functional Paradigm "In the capability model, senior managers are predominantly concerned with issues about the quality of products and services provided to customers (external and internal), the flow of value-added work, and roles and responsibilities. The dominant view on performance measurement shifts from the traditional focus of actual-vs.-budget to a more balanced model that includes the timeliness, quality, and cost of providing products and services to customers. Allocation and budgeting of resources moves from the traditional practice of individual units vying for resources based on their own needs toward cross-group teams that jointly assess resource needs based on the flow of work needed to create value to customers. Problem solving would seldom involve situations in which unit managers had to compete with each another; instead, organizations would adapt to departmental interdependence, recognizing that issues are best addressed through cross-group problem-solving sessions focused on providing services to customers and the required flow of work."9 Capabilities – the Basis of Your Competitive Advantage Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. As a source of competitive advantage, a capability "should be neither so simple that it is highly imitable, nor so complex that it defies internal steering and control."4 Capabilities grow through use, and how fast they grow is critical to your success. According to the new resource-based view of the company, sustainable competitive advantage is achieved by continuously developing existing and creating new resources and capabilities in response to rapidly changing market conditions. Among these resources and capabilities, in the new economy, knowledge represents the most important value-creating asset. Distinctive and Reproducible Capabilities The opportunity for your company to sustain your competitive advantage is determined by your capabilities of two kinds – distinctive capabilities and reproducible capabilities – and their unique combination you create to achieve synergy. Your distinctive capabilities – the characteristics of your company which cannot be replicated by competitors, or can only be replicated with great difficulty - are the basis of your sustainable competitive advantage. Distinctive capabilities can be of many kinds: patents, exclusive licenses, strong brands, effective leadership, teamwork, or tacit knowledge.
Reproducible
capabilities are those that can be bought or created by your
competitors and thus by themselves cannot be a source of competitive
advantage. Many technical, financial and marketing capabilities are of
this kind. Your distinctive capabilities need to be supported by an
appropriate set of complementary reproducible capabilities to enable
your company to sell its distinctive capabilities in the market it
operates. 3 Strategies of Market Leaders Building Capability through Leadership Attributes Leaders are responsible for building organizational capability. You need the ability to translate organizational direction into roadmaps, vision into action, and purpose into process. To do so, you must demonstrate at least five abilities7:
Creating a Culture for Innovation The first step is to understand where the greatest deficiencies lie, and which levers will deliver the most impact. For many organizations, the most critical levers to assess initially include structure and metrics, though establishing innovation processes and providing employees with new skill sets are also critical drivers of culture. The act of visibly sponsoring (let alone personally driving) specific initiatives focused on creating new organizational capabilities that promote innovation serves to send a message and establish new symbols and stories that reinforce a culture of innovation.... More 7 Dimensions of Strategic Innovation The Strategic Innovation framework weaves together seven dimensions to produce a range of outcomes that drive growth. Core Technologies and Competencies is the set of internal capabilities, organizational competencies and assets that could potentially be leveraged to deliver value to customers, including technologies, intellectual property, brand equity and strategic relationships... More Inspirational Leadership: 10 Roles Inspirational leaders create an inspiring culture within their organization. They supply a shared vision and inspire people to achieve more than they may ever have dreamed possible. They are able to articulate a shared vision in a way that inspires others to act. People do what they have to do for a manager, they do their best for an inspirational leader... More
Three Primary Sources of Distinctive Capabilities... Trust as a Distinctive Capability... Coherence... MegaChange – a New Approach to Organizational Transformation... Creating Competitive Disruption... Approaches Favoring Systemic Innovation and Development of New Capabilities...
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