Capabilities, the Building Blocks of Strategy
New capabilities, whether digital or physical, are essential to protect your organization from disruption and/or to achieve new competitive advantages.
“Focusing solely on what you can potentially do better than any other organization is the only path to greatness.”
– Jim Collins
The mental model below illustrates strategy building concepts and highlights the important role capabilities play in executing your strategy. In a sense, capabilities are the building blocks for your strategic objectives.
Figure 1: Strategic alignment to building capabilities
Figure 2: Core components that form a capability
Align your strategy to a capability roadmap and execute. Sounds easy right? But like many of you, I’ve struggled to successfully transform a new technology into a new capability. These “experiments” quickly devolve into sunk costs and then slowly fade into the dreaded ether of “remember when” and “we tried that before”.
Example: A site in Europe implemented a new, innovative technology to utilize asset information, but the experiment never left the four walls of the plant.
So how do you get out of this Pilot Purgatory?
Transforming from new technology to a capability that shapes how we work, is challenging to say the least. It takes a concerted effort with many resources and time. The mental model below depicts what I believe to be is the playbook to do so successfully.
Figure 3: Mental Model for establishing capabilities mental model
While many organizations have these types of activities the roles and responsibilities of each and the working relationship between the parts is what makes this an innovative approach.
1) Centers of Excellence
Centers of Excellence (CoE) are typically comprised of a small group of subject matter experts that are reallocated to solely focus, full-time, on establishing and governing a new capability. These “think tank” groups should be taken out of the day-to-day whirlwind and given a chance to disrupt your business. Consider a Discover, Develop, and Deploy approach. It’s a big task that requires oversight and investment. Don’t skimp on this part. These efforts should result in translatable artifacts that accompany the capability including:
- A Business Case with a demonstrated Proof of Value
- Definitions and process details, including where and when to use
- Training materials
2) Communities of Practice
Communities of Practice (CoP). I’m sure your organization has some form of this, whether formal or informal. This is typically a group of likeminded, subject matter experts (SMEs), gathered around a general topic, process, or problem in your organization. They play an integral role in the above mental model and are there to serve two purposes, Share and Scale. Once the capability has been established by the CoEs, the CoPs utilize their network and credibility to sell it throughout the organization.
3) Performance Improvement
This Performance Improvement group is made up of continuous improvement experts throughout the organization. They are typically skilled in Lean Six Sigma or Process Engineering. They’re the boots on the ground to learn and deploy the new capabilities. They lean heavily on the CoEs and CoPs for the standardized way of deploying and derive feedback from the user community for any configuration needed. Rule of thumb is that this configuration shouldn’t exceed 20% off the standard process. This will allow for easy transfer to the next operation.
4) Shared Services
Shared services are needed in areas where your organization is lacking the competency or capacity. They bring outsider perspective to benchmark these capabilities to derive the highest value potential.
A good example of executing these mental models is when large firms strategically establish Six Sigma Problem Solving capability. The successful firms required a CoE, centralized at a corporate location, with support from Shared Services to govern and supply the tools, training, coaching, etc. These successful Six Sigma programs almost always had some form of CoP, typically made up of Master Black Belts and corporate thought leaders, who would share and scale better practices using performance metrics. Finally, these firms built an army of Black Belts, Green Belts and other key roles necessary to deploy and configure the capability to each global location.
The Impact to Your Firm
Beyond the obvious waste elimination, the greatest benefit in deploying the mental models above is to become agile to adapt to disruption; and ideally to proactively build new capabilities to get ahead of future disruption. New generations of customers want more experience with their products and services. With customer expectations ever-increasing and new technologies disrupting business models, organizations that fail to effectively establish new capabilities will be left behind.