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Emerging changes of an industry can be both a challenge and an opportunity. Technological, behavioral, and other disruptions are impacting markets and industries, forcing them to change and adapt in an increasingly faster pace. To stay relevant and innovative, companies need to be able to hypothesize and experiment with their collective intelligence and capabilities.

A capability driven strategy identifies the possible activities an organization is able to perform today and the activities which the organization would like to be able to perform in the future. These activities are the capabilities of the organization. A capability driven strategy is important for realizing and benefiting from the changes in opportunities and threats in a fast moving and dynamic world. Mapping the capabilities of your company ensures competitiveness. Identifying your capabilities enable you to evaluate how good you are performing on certain activities and it can help you to decide on more appropriate and targeted actions for improvement initiatives and transformations. Mapping of capabilities can enlighten and drive innovation from the business itself. There may be capabilities identified and owned in your company that shows potential for entering into new markets, sectors or even brand new industries. This provides you with a much larger chance of identifying opportunities that may have been hidden before. Then why are not all strategies capability driven? And why don’t all companies have a clear capability map?

 “We have experienced that it is still rare that companies have aligned their own unique internal capabilities with the appropriate and suitable market position.”

 

Stating the capabilities of a company can be difficult. Capabilities may come in different forms and in different levels of abstraction. They might not be easy to understand, figure out or map in a coherent, usable and concrete way. A capability can be seen as an activity, or a set of activities, which are realized by a certain mix of resources, through which a desired effect, purpose or outcome is achieved. The capabilities have dependencies and connections between one another and to be able to understand their coherency it is important to know these connections and the supporting fundamental capabilities. We have experienced that it is still rare that companies have aligned their own unique internal capabilities with the appropriate and suitable market position. It becomes powerful when the capability mapping is done in a proper way. In Ortelius we know how this can be built up in a capability framework with a value system to create more organized and fundamental way of capturing the capabilities.

 

“Capabilities are a way to concretize and turn strategy into actions performed by the business.”

Capabilities are a way to concretize and turn strategy into actions performed by the business. It helps to evaluate what strength and weaknesses the company has and how these are related to the threats and opportunities of the industry environment that the company is operating within. Furthermore, capability mapping enables collective intelligence and allows for more people along with computers to think together collectively and can enable much larger capabilities than any could alone.

The thing that has been missing from strategy analysis is an assessment and an understanding of capabilities, organizational capabilities. How they are created, how they evolve, how they transform. (Moore, 2013)

As Described by David Teece in an interview on Silicon Valley Business Models: “The thing that has been missing from strategy analysis is an assessment and an understanding of capabilities, organizational capabilities. How they are created, how they evolve, how they transform” (Moore, 2013). It is equally important to know the competition and markets well, and to also understand yourself and your differentiated offering to create a competitive advantage. The capabilities of a company along with its assets and strategy will enable a more accurate and true decision ground for the decision makers to navigate in the industry environment. The benefit of combining these three provides a broader and more targeted way forward for your company. The strategical and tactical layer can be connected to the operations layer by having capabilities as the translation in between. This creates a common point of reference when referring to strategy.

 

Sources:
Moore, K. (2013) David Teece on Silicon Valley Business Models, available online.

Author: Amalia Larsson Hurtig, Consultant at Ortelius