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Sustainable Growth:

Competitive Advantage

Corporate Capabilities

The Basic Building Bock of Your Firm and the Basis of Your Competitive Advantage

by Vadim Kotelnikov, Founder, The first-ever BUSINESS e-COACH for Innovative Leaders, 1000ventures.com

"Our only limitations are those which we set up in our minds or permit others to establish for us."  - Elizabeth Arden

 

Sustainable Competitive Advantage Sustainable Competitive Advantage Intellectual Property Rights (IPR) Brands and Brand Management Leadership Tacit Knowledge Teamwork Organizational Culture Partnerships

Characteristics of a Capability2

  • Is built around a tight business focus closely linked to the company's mission and values

  • Is based on value proposition which can be measured in terms of time, value, or cost

  • Is a corporate property, and therefore it is a corporate responsibility to ensure its development and deployment

  • Is broadly based across the value chain

  • Consists of an integrated set of enablers across business functions:

    • Organization's knowledge and skills

    • Business process and organization structure

    • Supporting systems and technology

    • Positional assets and/or resources

Three Primary Sources of Distinctive Capabilities5

  1. Market structure that limits entry

  2. Company history which by its very nature requires extended time to replicate

  3. Tacitness in relationships - routines and behavior of "uncertain imitability" which cannot be replicated because no-one, not even participants themselves, fully comprehend their nature

Related Chapters of the Business e-Coach:

Sustainable Competitive Advantage

Resource-Based Model

Capability Defined

Capability represents the identity of your firm as perceived by both your employees and your customers. It is you 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 of an activity.

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.

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:

  1. To build your organizational infrastructure

  2. To leverage diversity

  3. To deploy teams

  4. To design human resource systems

  5. To make change happen...More

Trust as a Distinctive Capability

Trust-based working relationships are an important source of your sustainable competitive advantage because trust is valuable, rare, imperfectly imitable, and often nonsubstitutable...More

MegaChange - a New Capability-based Approach to Organizational Tranformation

MegaChange3 is a total systemwide cultural transformation of your organization. It means designing and transforming organizations based on assumptions of human capability rather than limitations.

Bibliography:

  1. "Strategic Management - Competitiveness and Globalization", M.A. Hint, R.D. Ireland, and R.E. Hoskisson, 2001

  2. "The Centerless Corporation", Bruce A.Pasternack and Albert. J. Viscio, 1998

  3. "Strategy and the Delusion of Grand Designs", John Kay, 2003

  4. "Investment in Strategic Assets: Industry and Firm-Level Perspectives", P.J.H.Schoemaker and R. Amit, 1994

  5. "Strategy and the Delusion of Grand Designs", John Kay, 2003

  6. "MegaChange", William E. Joyce, 1999

  7. "Results-Based Leadership", Dave Ulrich, Jack Zenger, and Norm Smallwood, 1999

  8. "Strategic Management: Competitiveness and Globalization", Edition 4, Thomson Learning, 2001

Founder - Vadim Kotelnikov. © Copyright by Ten3 East-West.  | Copyright | Glossary | Links | Site Map |

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