How to do internal capabilities assessments
Internal capabilities assessments may be part of strategic planning activities or internal sales training programs. They should also pro-actively drive competitiveness.
Resources and competencies
Assessing internal capabilities is not a frequented routine activity. Most of the time it is part of an extra ordinary strategic planning task or is requested in order to provide overviews of what a company does. Say: as content for a sales training program for instance.
While it is crucial to know which resources a company has it is equally important to understand how these resources are being used. This is where competencies come in.
A machine or plant can be a commodity but the way in which specialists take advantage of the assets might create a competitive advantage. So, in order to really assess internal capabilities one should look at resources and competencies in conjunction:
Resources can be:
- Credit lines
- Other capital
- Brand value
Competencies are the methods and skills to use these resources in order to meet real customer needs. These market needs should be carefully examined by means of several external market analysis.
You can not buy sustainable competitive advantage
Once the capabilities and market needs are known company owners will ask “so what?” in order to understand the bottom line impact. Or in other words: “what do we get for our investment?”.
And they don’t necessarily look for an answer regarding today but one that projects the following quarters and years. Meaning: is there a competitive advantage or unique value proposition as a market differentiator to further protect the investments?
In order for internal capabilities to make a real difference in the market place in a sustainable way resources and capabilities will not only have to meet real market needs but they also need to be continuously protected, improved and expanded.
This is value that can simply not be acquired. It has to be supported, cultivated to grow organically within the organization.
Creating a competitive advantage
To recap: we acknowledged that capabilities will only be unique to customers if the resources and competences meet their needs to succeed in the market place.
And in order to keep delivering this value to the customers they need to be continuously protected and expanded.
This is the crucial opportunity to outperform competition in the market place: acquire assets and consciously use them in a unique, value-adding way.
Crafting strategic intent from the internal capabilities assessment
In order to establish additional opportunities as to how internal capabilities can beat the competition ask these questions:
- How do we use the resources?
- Are we meeting or creating market needs?
- With this: do our capabilities become unique (enough)?
- How do we protect the uniqueness?
- Can we expand this competitive advantage to outpace the competition (blue ocean)
The following simple table can help to guide through these questions (the three examples are described below the table):
A “Service X” that is offered uses two key technologies, A and B. Customers ask to keep sourcing products from technology A but they would like to fill their own assets by using technology B themselves.
The uniqueness is that the company owns the intellectual property for technology B. Which is where an opportunity arises to not only protect the technology through global IP protection but also expand the use to many customers by licensing it out. The additional revenue improves the bottom line and the licensing facility strengthens the brand value.
As a resource the company can use their solid cash flow. Customers and partners are open for financial support with credit lines as purchase options. Since the company can already offer a lending facility through their own bank there is a real competitive advantage.
In order to protect this service regulatory compliance is required at all times including regional specialties. Since the service is not available to Asian markets however a franchise configuration could expand the option to that market.
The research and development teams are all known in the market for their top skill as they are often hired directly from the best universities. Customers require new product features quite frequently which is absolutely possible given the strong setup with the mentioned innovative talent.
In order to protect this innovation power and keep the key researchers happy, an ideation or innovation idea generation program could spike interest and motivation among the scientists. In order to expand this competitive advantage additional university programs could make young students aware of this career path early on.
When going through this process it should become clear:
- How resources are being used
- If they meet current or future market needs
- Whether the offering is unique (enough)
- What needs to be invested in order to protect this value
- Which defined measures can create additional competitive advantage
Decision makers can now define the initiatives and steps to execute these strategic options. If this process was part of a strategy review, strategic planning process or a strategy creation the content of the table could easily end up in the Strategy Map.