Capability Analysis
Capabilities Analysis
What is it?
Capabilities analysis helps clarify the major sets of activities, skills, and resources that drive value to customers.
When do we use it?
Capabilities analysis can be useful at the time of strategy formulation—when firms are assessing which strategic options are currently feasible—and may be included in a broader process of determining strengths, weaknesses, opportunities, and threats (SWOT). In addition, capabilities assessment can be used as an initial step in strategy implementation. Assuming an appropriate time horizon, firms may use the analysis to ascertain which capabilities need to be enhanced or developed in order to execute a chosen strategy. As part of this, capabilities analysis can be used to determine which capabilities are perhaps non-core and therefore candidates for outsourcing or external partnering.
Why do we use it?
Truly understanding a firm’s competitive strengths requires more than just an understanding of that organization’s tangible assets. Indeed, the key building blocks of competitive advantage are often more likely to involve the firm’s intangible assets. Such assets can be understood as the resources that organizations tap in order to create value, such as a tacit understanding of a complicated market segment, trusting relationships with key suppliers or customers, or an efficient set of back-end processes that produce faster or more responsive products.
Yet an intangible source of competitive success is not always by definition a capability. For instance, the “innovativeness” of a key product offering may indeed generate customer revenue and even capture sales that might have otherwise gone to a competitor. But what if that particular product was a fluke? Or what happens when that product no longer seems so innovative to customers? If a firm truly intends to compete on innovation, a more lasting source of competitive advantage may be the firm’s capability around innovation,
What is it?
Capabilities analysis helps clarify the major sets of activities, skills, and resources that drive value to customers.
When do we use it?
Capabilities analysis can be useful at the time of strategy formulation—when firms are assessing which strategic options are currently feasible—and may be included in a broader process of determining strengths, weaknesses, opportunities, and threats (SWOT). In addition, capabilities assessment can be used as an initial step in strategy implementation. Assuming an appropriate time horizon, firms may use the analysis to ascertain which capabilities need to be enhanced or developed in order to execute a chosen strategy. As part of this, capabilities analysis can be used to determine which capabilities are perhaps non-core and therefore candidates for outsourcing or external partnering.
Why do we use it?
Truly understanding a firm’s competitive strengths requires more than just an understanding of that organization’s tangible assets. Indeed, the key building blocks of competitive advantage are often more likely to involve the firm’s intangible assets. Such assets can be understood as the resources that organizations tap in order to create value, such as a tacit understanding of a complicated market segment, trusting relationships with key suppliers or customers, or an efficient set of back-end processes that produce faster or more responsive products.
Yet an intangible source of competitive success is not always by definition a capability. For instance, the “innovativeness” of a key product offering may indeed generate customer revenue and even capture sales that might have otherwise gone to a competitor. But what if that particular product was a fluke? Or what happens when that product no longer seems so innovative to customers? If a firm truly intends to compete on innovation, a more lasting source of competitive advantage may be the firm’s capability around innovation,