Informed in Five: “Capitalizing on Capabilities”

on Capabilities
by Dave Ulrich and Norm Smallwood, Harvard Business
, June 2004

most admired companies don’t stand out because of their structure or management
approach but because of their ‘organisational capabilities’: an ability to
innovate for example, or to respond to changing customer needs.

capabilities are the collective skills, abilities, and expertise of an
organisation and the outcome of investments in staffing, training,
compensation, communication and other human resources areas.

are more difficult for competitors to copy than capital market access, product
strategy or technology and explain why some companies have higher market
valuation than others despite having lower revenue and profits.

problem is that these organisational capabilities are difficult to measure. The
solution is to carry out a ‘capabilities audit’.

authors suggest a five-step process for the audit:

  1. Determine which part of the
    business to audit.
  2. Create the content of the
  3. Gather data from multiple
    groups on current and desired capabilities.
  4. Synthesise the data to
    identify the most critical capabilities requiring managerial attention.
  5. Put together an action plan
    with clear steps to take and measures to monitor, and assign a team to the
    job of delivering on the critical capabilities.

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