capability

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Definition

Resource-based view of capability --
Capabilities are a firm's capacity to deploy resources (Amit and Schoemaker, 1993, p 35). A firm must have access to the appropriate capabilities to effectively use, or exploit, a resource. See resource-based view.

 

Discussion --
Capability refers to the power and ability of the organization. In this body of knowledge, capability is more general than and a precursor to competency, as in the organization must be capable before it can be competent. Certain capabilities must be present in order to develop competencies to form and execute strategy to create and sustain advantage. Organizational capabilities derive from the skills and capabilities of the people in the organization and the organizational processes and structures, which collectively produce results for the business organization. Capability encompasses information, knowledge, know-how, and understanding, know-why, on the intelligence hierarchy.

Particular organizational capabilities required -

  • Systems thinking, synthesis, to understand complex wholes, needed to form strategy. Particular capabilities include iterative inquiry and modeling of non-linear systems.
  • Analytical thinking, to plan and execute strategy.
  • Induction to exercise intuition, especially useful in forming strategy.
  • Deduction, to solve well defined problems, and to prepare minds for making better intuitive decisions.
  • learning - single loop learning, double loop learning
  • adaptation - adaptive learning including transformational abilities
  • processes thinking - to understand and harness the mechanisms of self-organization and novelty creation

Helfat et al's definition of capability --
From Helfat et al (2007, 37, 121): Capability refers to the capacity to perform a particular task, function, or activity. A capability, dynamic or otherwise, implies a potential for action. A capability is the ability to perform a particular task or activity. The word ""ability"" refers to the power or capacity to act. But until the capability is exercised, the action remains latent.

Schreyögg's and Kliesch-Eberl's definition of capability --
Schreyögg, Georg, (2007), and Martina Kliesch-Eberl, How Dynamic Can Organizational Capabilities Be? Towards a Dual-Process Model of Capability Dynamization, Strategic Management Journal, Vol 28, No. 9, Sep 2007, pp 913-933 --

The authors address a key strategic management issue. In the resource-based view organizational capabilities have been identified as one major source for the generation and development of sustainable competitive advantages (emphasis added). With the consideration of volatile markets, environmental uncertainty, and change, the reliance on a specific set of nurturing capabilities has been called into question. This question has been answered with some form of dynamic capabilities, where the capability itself is dynamic, adapting to take advantage of the changing environment, thereby renewing organizational capabilities.

Capabilities described --
In this discussion, capability does not represent a single resource in concert with other resources such as financial asset, technology, or manpower, but rather a distinctive and superior way of allocating resources. The complex processes that form organizational capabilities are conceived as collective and socially embedded in nature, representing a collectively shared 'way of problem solving' (Cyert and March, 1963).

the primary characteristics of capabilities are --

  • Capabilities are conceptualized in the context of collective organizational problem-solving. These capabilities are attributed to outstanding skills that have proved to solve extraordinary problems. Theses problems are described as complex. Complexity refers to the characteristics of problem situations and decision making under uncertainty, addressing ambiguous, ill structured tasks.
  • Capabilities are close to action; conceptually they cannot be separated from acting or practicing
  • A capability must work in a reliable manner. Capabilities represent a reliable pattern: a problem-solving architecture composed of a complex set of approved linking or combining rules -- proved to be successful across various situations.

The meaning of organizational capabilities --
Labels for organizational capabilities include: competence, core competence, collective skills, complex routines, best practices as well as organizational capabilities. The term 'capability' seems to be the predominant one.

There seems to be a consensus that a capability does not represent a single resource in the concert of other resources such as financial assets, technology, or manpower, but rather a distinctive and superior way of allocating resources. 'Capability' addresses complex processes across the organization such as product development, customer relationship, or supply chain management.

In contrast to rational choice theory and its focus on single actor decisions, organizational capabilities are conceived as collective and socially embedded in nature. They are brought about by social interaction and represent a collectively shared 'way of problem solving' (Cyert and March, 1963).

Accordingly, organizational capabilities can be built in different fields and on different levels of organizational activity, for instance at departmental, divisional, or corporate level.

Conceptual view of the primary characteristics of capabilities --

  • problem-solving and complexity -- Capabilities are conceptualized in the context of collective organizational problem-solving. These capabilities are attributed to outstanding skills that have proved to solve extraordinary problems. These problems are described as complex. Complexity refers to the characteristics of problem situations and decision making under uncertainty, addressing ambiguous, ill-structured tasks.
  • action oriented; practicing and success -- Capabilities are close to action; conceptually they cannot be separated from acting or practicing
  • reliable over time -- A capability must work in a reliable manner. Capabilities represent a reliable pattern: a problem-solving architecture composed of a complex set of approved linking or combining rules -- proved to be successful across various situations. Time is a basic dimension of capabilities. Capabilities development takes time and the specific way in which time has taken is relevant for the gestalt of a capability -- its configuration or pattern having specific properties that cannot be derived from the summation of the component parts. It is exactly this time intensive and not fully understandable evolvement that makes up the non-imitable essence of the strategic relevance of organizational capabilities (Barney, 1991; Lenard-Barton, 1992).

Capabilities result from... --
Overall, any organizational capability is the result of an organizational learning process, a process in which a specific way of 'selecting and linking' resources gradually develops. Organizational capabilities apply to various problem situations, but not to all situations. They have been formed through successful responses to specific historical challenges and are thus bound to specific types of constellations (Winter, 2003). Problem-solving is embedded in organizational design, information procedures, micropolitics and communication channels as well as other organizational characteristics (culture, control regimes, etc.). All these features shape organizational capabilities and thus define their distinctiveness.

 

Resources and capabilities -- Capabilities do not actually represent a resource; they focus rather on the combination and linking of resources. Although there are interactions between them, resources and capabilities represent two conceptual levels with their own commitment dynamics. The commitment to resources resulting from specific investment should be clearly differentiated from commitments evolving when practicing capabilities. This differentiation accordingly implies a separation of resource-based inertia and capability-based rigidity (Gilbert, 2005). See organizational inertia.

 

For further discussion along these lines, see dynamic capability.

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