NOTE: The frameworks in this class can be applied on their own, as well as being used
as part of a more complete business model.
Organizations with few resources are not necessarily doomed to weak, low growth performance.
If they do not possess or have access to important resources, they can develop those they need.
For this purpose, they need the capability to build and sustain resources.
Whilst "resources" are useful things that we possess, or to which we have somewhat reliable
access - both tangible (customers, cash, equipment …) and intangible (reputation,
data, skills …) - "capabilities" are important activities that we are good
at doing. There are operational capabilities, ensuring efficient and effective
execution of business activities, and strategic capabilities that enable the strong and sustained
development of resources. However, strong operational capabilities can enhance the power of the
Capabilities are made up of human skills, plus information and
procedures that enable them to exercise those skills. Capabilities allow us to do
an activity quickly, with high quality, and at low cost.
"Learning" means adding to capability, and can be achieved by intentional effort to use findings
about how well an activity is done to further enhance the skills, information and procedures.
Whilst capability on each operational or resource-building activity is valuable in its own right, the
impact on how performance improves over time when multiple capabilities and learning combine is enormous.
Key issues addressed
- The importance of clear terminology and specification for capabilities
- Capabilities as activities that groups are good at doing, made up of human skills,
information and procedures
- Operational capabilities ensure that important activities are done efficiently and effectively -
very important in their own right, and supportive to …
- … strategic capabilities, concerning the growth, development or retention of
resources, so are found at each resource flow in the strategic architecture
- Capabilities show up in getting things done quickly, with good
quality and at low cost
- Small differences in capability explain large differences in performance
- Learning as the self-reinforcing connection between an activity (or the growth of a
resource) and the associated capability
- The powerful consequences arising from capabilities working together
Class 10.0 - Capabilities: Summary - (31 min)
This segment defines capabilities and distinguishes them from resources. It explains
the distinction between operational and strategic capabilities and
examples of each. The video shows how a capability arises from having people with the necessary
skills for an activity, plus the information they need, and
procedures to guide how they do it. It also shows how learning
concerns the growth of a capability, which arises from experience of the activity with which
it is associated. The segment demonstrates with a working model the strategic performance impact
of just a single resource-building capability, concerning the store-expansion efforts of a retail chain.
Class 10.1 - Operational Capabilities - (13 min)
This segment gives examples of operational capabilities and explains that they enable a
group to do an activity quickly, with high quality and
at low cost. It demonstrates the quantified impact of
capability on the speed with which a customer-support team can operate, using a working
model, and shows how the quality and cost of the activity also benefit from that capability.
The video also emphasises the considerable importance of strong operational
capabilities, often built through intense effort to specify procedures, and
the leverage they offer to enhance the strategic development of an organisation.
Class 10.2 - The Power of Multiple Capabilities - (26 min)
This segment explains how capabilities for speed, quality and cost arise for all
resource-building efforts of an organisation, as well as for operational
effectiveness. It shows, through the results from a working model of a retail store-chain’s
growth, how several capabilities operating together can make orders-of-magnitude
improvements to performance. It also points out how a competitor would need to replicate the
entire system of complementary resources and capabilities if they are to
beat a strong organisation.
This course is supported by a series of worksheets provided in both PDF format and as Sysdea
Class 10.0, Capabilities - summary, is supported by a model that allows exploration of the impact of
improvement in capabilities, with the example of a retail chain and looking at a single capability of
store opening lead time.
Class 10.1, Operational Capabilities, uses an extension of a model used in class 9 - looking
at the contribution that customer-data makes to the volume of calls that can be handled by a
customer-support team. Here we look at the impact of capabilities on the teams ability to
provide that support.
Class 10.2, Multiple Capabilities, uses an extension of a model used in segment 10.0 - adding more
Additional materials are available to registered teachers as
well as free access to the complete course.
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register here for more information.
Other resources and links
Daniel V Hunt, 1996, Process Mapping: How to Reengineer your Business Processes, Wiley: New York.
Michael Schrage, 2000, Serious Play, Harvard Business School Press: Boston.
Kees van der Heijden, 2004, Scenarios: the art of strategic conversation, 2nd Edn, Wiley: Chichester UK.
I Nonaka. and H Takeuchi, 1995, The Knowledge Creating Company, Oxford University Press: New York,
Peter Senge, 1996, The Fifth Discipline (Revised edition), Random House, Sydney;
Chris Argyris, 1999, On Organizational Learning (2nd Edn), Blackwell: Oxford;