What are the inherent strengths of your business? What are the things you do best, ideally, better than any of your competitors? These things are your Core Capabilities.
So what are Capabilities? Put simply, they are the things your business can do. Core Capabilities therefore, are the things you do that are essential to your strategy, your differentiators, the things that make you different from everyone else, especially your competitors.
A Core Capability has three primary attributes:
- It is not easy for competitors to imitate;
- It can be used and reused widely for many products and markets;
- It must contribute (significantly) to the benefits the end customer experiences and the value of the product or service to your customers.
Having a detailed understanding of your Core Capabilities help you focus your efforts on which products and services you should create and offer to your target customer segments. They also help you determine how you should differentiate yourself in the marketplace through your positioning, marketing and value propositions.
It is also just as important to know what you are not good at (e.g. a core weakness). If you are great at direct to consumer sales but not good at partner management, you probably shouldn't bet the firm on a new line of products that rely on effective and efficient distribution via a network of distributors.
So what are capabilities?
People often use the terms competency and capability interchangeably and in the small to medium business space that is probably OK. I use the term Capability as being comprised of 4 different dimensions:
- People, the people engaged in delivering that capability; individual people have competency, e.g. levels of skills and expertise required to execute the capability.
- Process, the sequence of activities and logical decisions embedded in the executing the capability
- Information, the data, measurements, metrics used in both decision making, monitoring and as an output of a capability
- Systems, the (normally) technical systems and platforms that are used in executing the capability. Most capabilities will have some form of system but this isn't always true.
So in this context we are distinguishing Capability from Competency by saying the Capability defines the things a business does whereas the competency of the people is the level of skills required to execute a capability to a required standard. Others disagree with this distinction, that is OK, use the one that works best for you.
Why distinguish Core Capabilities from Non-Core Capabilities?
Understanding which of your Capabilities are core gives your business focus. They provide clarity on what to invest in by allowing you to ask the questions "Is this new product or service leveraging one of our Core Capabilities?", "Does this investment improve one of our Core Capabilities", "Are we good enough at this capability to successfully execute our strategy". All of these questions help you to stay focused on what is important to your business over the next 90 days, the next year and the 3 - 5 year timeframe.
Why is understanding your Core Capabilities so important?
Once you have an understanding of your Core Capabilities, you can start to assess them in different ways. Assess them in different ways allows you to ask significant and insightful questions on your strategy and your ability to execute that strategy. These are some of the dimensions I often measure capabilities:
How good are we at executing this capability and how good do we need to be? On a simple scale of 1 - 5, how mature is this capability. The question we can ask once we know the maturity of our capabilities is "Are we good enough at the things we do to successfully execute our strategies and, if not, what do we need to do to raise their maturity".
Where and how much are we currently investing in our core capabilities and our non-core capabilities and is that the best investment spread across the capability portfolio? The question we can ask is "Are we investing our (limited) resources in the right things and are we over-investing in any particular capability?".
Based on the resources currently allocated to that capability, what is the maximum capacity of that capability and what capacity is it currently operating at? The question we can ask once we understand the capacity of our capabilities is "Do we have sufficient spare capacity in our capabilities to be able to scale up in line with our strategies? If not, where do we need to invest to increase our capacity?"
Which capabilities are critical to us successfully executing our strategy? This question pretty much defines what a core capability is so if you find your strategically aligned capabilities are not your core capabilities or your strategies are not leveraging your core capabilities, you have a strategy - capability alignment issue and you had better have a plan to resolve that situation.
In my work with my clients, we quickly build out a picture of an organisations Core Capabilities and measure them across key dimensions. This helps us maintain clarity on where we are going and allows us to stay focused on the most important things safe in the knowledge that our Core Capabilities are good enough (for now) to be able to successfully execute our strategies.
Posted by : ged | On Tuesday, 27 February 2018 | Modified On Wednesday, 29 August 2018