Only a handful of businesses focus on human capability as a source of competitive advantage
In the fast-paced world of business, the ability to adapt, grow, and thrive is crucial. Any organization looking to do all of this needs its human capital to possess some unique skill or competence which will help differentiate it from the competition.
Yet, many businesses often overlook this fundamental aspect for their success. In this piece, we will delve into the concept of capability, its significance for individuals and institutions, and how it can be the driving force behind organisational sustainability.
Before we dive into the specifics, let’s clarify what capability means. In essence, capability is the capacity to perform tasks, solve problems, and achieve goals effectively and efficiently. It encompasses a wide range of skills, knowledge, and resources that enable individuals and organisations to excel in their endeavours.
At the individual level, capability can take many forms, from marketing and sales expertise to data analytics proficiency. These skills are essential for personal growth and contribute to an employee’s organisational value. But this does not only apply to skills as employees, as entrepreneurs also utilize their unique skills to start and grow businesses.
More importantly, and relevant to our subject, organizations are required to develop unique capabilities to compete effectively in the market. We often hear the term “our people are our biggest asset” from C-level executives. But what does this really mean? What exactly is valued by organizations? Is this only about paying people fairly according to their market value? I am afraid most businesses tend to think this way.
What is often not realized is the fact that it is institutional capability which holds the key to sustained success. This capability may include a very well-crafted business strategy. It can cover efficient management practices which provide cost advantages. It often encompasses technical and functional skills such as marketing, sales or financial acumen, and finally, it can be based on superior leadership which is able to guide and direct the organization in ways which are distinctive when compared to the market.
For leaders and organisations, building capability should be the top priority. It’s not a one-time effort but an ongoing commitment and should be the real focus of leadership roles. Boards and C-level executives should hold themselves accountable for investing in capability building.
But first, they must consider which capability to build; An automotive manufacturing company such as BMW considers its engineering capability to be superior to its competitors and therefore it focuses on hiring the best engineers and continues to train and develop them.
On the other hand, a technology business like Apple deems innovation and design as its core capability and hence seeks and builds superior research and design capability as its source of competitive advantage. Although some people will argue that Apple’s real advantage was in having visionary leadership in the early stages of its life. Of course, it could be both.
Boards and top managers need to invest time in understanding how to shape their organizations from this perspective.
They also need to understand that consistency is the key. They could think of it like going to a gym to work out. A once-a-month visit cannot yield any benefits, just like a couple of training programs in a year cannot provide many benefits for an organization. Instead, a consistent step-wise process including informal coaching and mentoring for individuals, in addition to specific targeted formal training will be much more rewarding.
To truly benefit from capability building, it should be directly linked to the organisation’s performance. It’s not just about acquiring skills; it’s about leveraging those skills to achieve tangible results. Performance management processes within organizations need to figure out ways to determine which capabilities will be built and how will the organization go about it.
Ultimately, the return on investment (ROI) for capability building becomes evident when you’re consistently practising it. Linking it to performance ensures that your efforts yield tangible results.
Building capability directly impacts hiring and retention strategies. Even the best talent needs continuous development to stay engaged and perform. In today’s business landscape, skills are the currency of success.
Forward-thinking organisations recognise the importance of capability building. It is often wrongly thought of as a requirement only for larger businesses. In fact, it is even more critical for smaller businesses and entrepreneurs must embrace this mindset, especially when scaling their ventures.
In conclusion, capability building isn’t a luxury; it’s a necessity for individuals and organisations alike. It’s a journey that demands commitment, consistency, and a clear link to performance. By embracing this mindset, businesses can chart a path towards sustained success in an ever-evolving business landscape.