Identifying, analyzing and managing organizational resources, capabilities, competencies accurately

Estimated Read Time: 8 min
 
All organizations have resources and capabilities. However what we hear today from most of the organizations is that they do not have adequate resources to run day to day activities. As a result the ultimate corporate objectives of the organization will be negatively impacted. One of the main reasons for this is the lack of knowledge in identifying, analyzing and managing resources and capabilities. This blog will help you to identify, analyze and manage resources correctly. 

What are resources?

First, we need know what are resources? In general we state those are all tangible and intangible assets owned or managed by the organizations. Then what are capabilities? it is the way in which the organizations use their resources. Next, it is important to identify what is the relationship between resources and capabilities. You need capabilities to access and manage resources. For an example, your organization may have ample staff, but management do not have the capability of managing them. Then the result will be negatively impacted on their performance.

Now let’s look at how an organization could identify their resource base correctly. Using different methods to categories organization’s resources and capabilities is an important aspect of internal analysis since it assures that the management does not miss any important strengths or weaknesses. We can use a framework developed by Thompson et al (2013) for resource   categorization. According to this categorization, resource are mainly divided in to two parts as tangible and intangible resources.

Tangible Resources

Under tangible resource, first one is physical resources. This includes resources like manufacturing plants, lands, machinery, outlets, vehicle fleets, oil, minerals, etc.  Majorly of the items in this category comprise of property facilities and natural resources.

Second sub type is financial resources. This is all about   the worth of the company in financial terms. For an example, it could be working capital, cash borrowing capacity, market securities, etc. 

Next sub category is technological assets. This includes ownership of copyrights and patents, along with things like trade secrets, manufacturing technologies and digital processes.

Last subcategory under tangible resources is the organizational resources. These include asset such as planning co-ordination and control systems and design of organizations management and marketing information systems.

Intangible Resources

When considering about intangible resource the first sub category is human asset and intellectual capital. This is more about the number of employees who work inside the organization and the skill levels of the staff, educational qualification they have, the certifications they have undergone, maybe the hands-on experience they have together with their capacity on innovation, creativity and knowledge sharing. Hence, it is very critical for an organization to enrich their employees with knowledge and train them.

I recall a popular post in social media - CFO asks the CEO ”What happens if we invest in developing our people and then they leave us?” and the CEO replies “What happens if we don’t, and they stay”

Next sub category is brand image and reputational assets.  These are stakeholder based assets starting from brand names, slogan, logos, trademarks, etc. Further, the organization corporate reputation, good will, country of origin, licensing opportunities and customer loyalty will play a major role here. 

Then let’s discuss about the sub category of relationships. These include the relationships your organization have with all internal, connected and external stakeholders. For an example, it can be your franchise operation, dealer and distribution network and how well the organization is managing the relationships with them.  I recall in year 2018 or 2017 KFC ran out of chicken in US as they have changed the logistic partner to DHL. Because of this decision the supply chain was interrupted.

Next, let’s discuss about the final sub category- organizational culture and incentive systems. These spread to the attitudes, norms, beliefs, assumptions and values of the company. The level of commitment and dedication of employees to go an extra mile motivated through proper incentive schemes.

The identification of resources can be done through the above framework and you can examine the level of impact on your company operation. Below is an example of such an analysis.

After identifying and analyzing resources, this can be developed as a sustainable competitive advantage. VRIN model which invented by Jay Barney 1991, can be used to identify your organization’s competitive advantage.

First, it has to be valuable. It has to create value for the company and other stakeholders.

Secondly it has to be rare. May be the IOS of Apple can be taken as an example.

Thirdly it has to be inimitable. Let’s take Coca Cola. It is the taste they have- it is imitable.

Finally it has to be non-substitutable. You can’t replace Coca Cola brand with Pepsi or any other cola.

Now let’s look at a working example;

According to above discussion, we can see that, identification and analysis of resource can be lead to sustainable competitive advantage. However, in order to sustain this advantage, it is important to have good knowledge and analysis of your capabilities and competencies.

Capabilities and competencies are the keys to explore your identified resources.  Under this, first we will discuss about core competencies. Organizations need to understand what their core activities are. An organization in telecommunication, their core activities will be digital communication technology and innovation where they can outsource their other activities like CSR, vehicle fleet management, etc. Knowing your core competency will allow you to focus on your related specific activities and plan your priorities according to that. In order to be a core competency it has to fulfill specific criterion.

Refer the below Knowledge Spark @4.55 for a detail explanation.

Dynamic Capabilities

Next, we will have to look on capabilities according to Ambraosini et al, 2009. There are three types of dynamic capabilities.

First one is incremental dynamic capabilities which allow the organization to exploit opportunities in the existing resource base and this occurs in stable environment.

The next one is renewing dynamic capabilities. These capabilities can be used in dynamic environments and still it is within the organization boundary and organization knows the market, competition and rules in the environment and this supports the organization to renew its resources base.

The third category is the regenerative dynamic capabilities and these can be used in hyper environments. This is the most uncertain and volatile environment beyond organizational boundaries. These capabilities will be used to turn the company to transform its entire business model and the dynamic capabilities that it has previously relied on. Your blue ocean strategies will be prominent in taking this risk or to minimize the risk of brand new transformation.

Check the below Knowledge Spark @7.34 for details. 

As mentioned in the beginning of the discussion, we will provide you with guidelines of identifying analyzing and managing organizational resources. According above facts, we can observe that organization should have in-depth analysis of their resources, competencies and capabilities to deploy their growth strategies in this digitally disrupted environments. However, there are various ways and means of analyzing resources, capabilities and competencies further. We will discuss and write in detail explanation of those innovative mechanisms in future blogs.

 
Chamara Ekanayake, ARCTube  | @echamara 

Initial and Mandatory Steps to Go Digital

Estimated Read Time: 6 min

It is in fact a challenge to survive and grow your business in this highly volatile digital market. Before you plan your objectives and strategies, it is mandatory for you to identify where you stand right now when considering your internal and external factors. If you know where you are, then you will be able to come up with practical objectives and strategies to achieve your digital vision.

We all know about SWOT analysis and yet we really do not know how well we can use it to shape our organizations as well as ourselves. First you need to know about your strengths. We all have strengths. Then, the question comes to our mind is what are my major strengths? You should focus on you major strengths rather than counting on other minor strengths.

To be a major strength it should create value for your organization and to your target market.  Value in terms of what? This should add value to its value chain activities which enable you to earn higher margins compared to your competitors. For an instance it can add value to human resource, infrastructure, systems etc. Value creation for customers or increasing customer value proposition. The strength should give a reason for your stakeholders to choose you or your origination over other competing offers.

Moreover, to be a strength it has to be unique. Why it has to be unique? Because, the strength has to differentiate your organization. For an example, how many digital platforms are available to make payments online? But we are using only a very few reputed platform to do it.  One of the reasons could  be the trust the brand has built over time in online payments.  Further, it has to be lasting. If you cannot sustain your strength it cannot be a major strength. For an example, Apple has sustained their ability in digital transformation in the perspective of digital innovation. Again, you can see it is all interlinked. If it can create value, of course it will drive you to be unique in the market place.  Amazon is another example who has sustained their strength across all digital platforms.

Furthermore, your major strength cannot be copied by any one easily. For an example Google holds more than 90% of the market share in SERPs. Why it is only Google? It’s because of their unique crawling & indexing mechanisms. Next, it is very complex for someone to identify their formation of search engine algorithms. Have you ever thought a strength itself can be used to analyze a substantial part of your capabilities? But, above proves how complex it is to identify your super powers and it cannot be analyzed over a short period of time.

Next internal factor is weaknesses. Again you need to analyze this internal aspect critically. If you really do not know your major weaknesses, it will be very hard for you to face market competition and other external challenges in the macro environment. There can be weaknesses which are not that critical and there are weaknesses which are critical. However, it is hard for you and your organization to identify and prioritize your weaknesses. To be a weakness it has to pass through following test.

First it has to be meaningful to your target audience. That means customer knows what your weakness is. You may have heard what outsiders talk about your company. May be complex and low user friendly processes can be a major weakness where it will be known by your consumer through negative past experience coupled with negative word of mouth. Next, it has to be unique to yourself. For an instance, if your digital marketing ability is low, how will it be unique to yourself? You might be good in digital marketing in the platforms of Facebook and LinkedIn, but not performing well in other platforms of Instagram and Google ads. On the other hand your competitors’ weakness in digital marketing will be unique to themselves.

If it is a major weakness, finally it is difficult to fix or that will take a long period of time to fix that issue. In the below video you can see we referred it as Achilles heel. In other words, if your competitor knows you weakness very well, you are in a major risk. This weakness maybe caused by a sticky resource which the organization may have had; previous success stories or investments which have not given expected returns.

Now let’s take our focus to the external aspects which are opportunities. We generally talk about opportunities, but are we capitalizing on the correct opportunities? To know the correct or suitable opportunity, first it has to be large in general. Before explaining that, the opportunity which is large for you will not be that large for your indirect competitors. For an example, you may have started a new taxi application where you will be considering your local nearby market as your opportunity, whereas a global player would not consider that market as an opportunity.

If it is an opportunity it has to accessible, if it is not accessible or hard to access, it will not be an opportunity. However, you need to equip with required capabilities and competencies in order to access your correct opportunity to explore. Further, this opportunity should last for a time period. However, with technological revolution, the lasting opportunity will be subjected to incremental changes. Finally, if you have identified a great opportunity it has to be in accordance with discussed criterion.

Next external element we discuss is threats. What facts will cause a negative impact on organization activities? Not all activities in a macro environment are going to have a negative impact on the organizational activities. Hence, you should identify what are the threats which are having critical negative impacts? In order to be a threat, it has be significant. In other words critical. You will be facing immense competition in digital marketing which is very critical where your customers are tempted to switch to a new platform due to increased value proposition. Moreover, threats also have to be lasting now. If we take the example of competition, it is long lasting.

By knowing your strengths, weaknesses, opportunities and threats you will have a better understanding about your current stand. But, it is much meaningful if you can deploy a strategy by the clearly analyzed elements. You can develop four strategic paths form this analysis. Those are as follows;

Strengths to Threat

Maxi-Mini strategic option: managers should think about which organizational strengths can mitigate or reduce  the threats in the environment.

Strengths to Opportunities

Maxi-Maxi strategic option: the strategic level of the organization should look at which organizational strengths can be used to exploit opportunities in the external environment.  

Weaknesses to Opportunities

Mini-Maxi strategic option: the managers should concentrate which organizational weaknesses need to be addressed on priority basis in order to grab the external environment opportunity.

Weaknesses to Threats

Mini-Mini strategic option: organizations need to focus on which organizational weaknesses need to be addressed and which threats are to be mitigated. In other words, when you focus on minimizing your major weakness over long time period, that will enable the organization to face the challenges as the thereat is mitigated.

Identifying your strengths, weaknesses, threats and opportunities cannot be done overnight. This is a continuous journey. Hence organization should have good monitoring and controlling system to be on the edge and ride on the wave of competition. Further this analysis can be developed in to the concepts of blue and red ocean strategies.

Chamara Ekanayake, ARCTube  | @echamara