How Fit Is Your Company? Getting Your Capabilities in Good Shape
When your company is successful, you will notice that outside people find some of its traits admirable. They may like its drive to innovate, its ability to attract talent, its consistently high-quality products, or its steadfast adherence to certain principles. Such admirable traits are a direct manifestation of your company’s capabilities. These capabilities are what sets you apart from your competitors.
Capabilities are very valuable for several reasons, one of them being that they are much harder to copy than technologies or strategies. They could be described as the “flavor” of a company. As such, they are intangible assets; in other words, they are hard to measure, so it is easy to forget about them when you make your business plans or implement your new strategy.
What physical fitness is to the human body, capabilities are to the company. Just like you need hours and hours of exercise to develop your muscles or stamina, you need a lot of time and effort to breathe in a certain spirit into your company. Capabilities make your organization healthy and allow you to embark on new and challenging strategies that require a strong mindset.
The fitness metaphor is actually very useful to describe the capabilities in a simple way. There are many similarities between exercising your body and developing the capabilities of your enterprise. We will point out some of these similarities for your benefit. They are easy to remember and could change the way you approach changes in your organization.
Common elements, different application
Five measurable attributes collectively define your physical fitness: cardiovascular endurance, muscular strength, muscular endurance, flexibility/mobility, and body composition. We use and apply these attributes differently in each sport or in daily activities. For example, marathon runners rely more on cardiovascular endurance and muscular endurance than sprinters do.
We can also define and measure attributes for capabilities common to all organizations. We often call these “foundational capabilities.” Foundational capabilities include people, processes, and systems.
Companies use the combination of these capabilities differently. For example, professional organizations such as law firms rely on people skills more than e-commerce retailers do.
Are you training properly?
When athletes train, they work on their physical fitness as well as the particular sport they do. Tennis players, swimmers and soccer players, for example, will all lift weights to improve their muscular strength and/or endurance even though none of these sports involve weight lifting. Training always includes two parts: one focuses on improving physical fitness while the other focuses on the application of fitness along with other skills to the sport. An example of a sport skill is dribbling in soccer. Athletes need to improve their foundational capabilities (their physical fitness) as well as other capabilities particular to their sport.
The same applies to companies. They must improve their foundational capabilities as well as how they apply them to their business strategy. Improving employees’ skills, increasing process reliability and capacity, and enhancing systems features and functions will help any company become more “fit” to compete in the marketplace. Oftentimes companies focus too much on their external market strategies and neglect the need to build their own capability (their fitness level) to be able to compete in those markets.
Your physical fitness is affected by your muscular structure, which is written in your genes. If you are built like a weight lifter, you will never be a swimming world champion no matter how much you train. Those with a more suitable body will always have a big advantage over you. That is why you do not want to waste your energy on trying to be the best at everything. This effect may not show as much when you are still in the bush league. Playing in the professional league, however, is about both natural talents and the life-long development of those talents.
Not all companies are the same. Your firm could be a startup, a 100-year-old utility company operating in a highly regulated market, or a tech company competing in the fast-paced global market. The nature of your company affects which capabilities you want to develop and how you want to develop them. Startups are naturally more willing to take risks, faster and quicker to react, but also less reliable and more prone to failure. On the other hand, utilities are focused on reliability with system redundancies, layers of testing, and checks and balances. You can try to make a utility company more agile and faster in accommodating technology changes, but it will never be as fast as a startup or an e-commerce company.
Your fitness level today says a lot about your life in the future
“A bit of exercise a day keeps the doctor away.” You have probably often heard this statement or some variant thereof. There is a correlation between your physical fitness, affected by the current level of exercise you do, and your future health. Being more physically fit can prevent or delay the onset of certain chronic diseases. Physical fitness is just one of the factors contributing to your future health. You cannot eliminate the risk of cardiovascular disease, but increasing your physical fitness – in particular your cardiovascular endurance – can decrease the probability of cardiovascular disease in the future. Other factors such as lifestyle, eating habits, and genes are still at play and can cause cardiovascular issues even if you maintain a high level of physical fitness.
Similarly, assessing the capabilities of a company today can tell us a lot about its future. For example, we can predict the failure of a construction company based on its cash flow management processes as early as two years in advance! Research has also shown that the assessment of the culture of an organization has a strong predictive ability for evaluating the success or failure of mergers between companies.
Many things could affect a company other than its current capabilities. The advantages of using capabilities as predictive tools are twofold: (1) they are usually controlled within the company, as opposed to external forces with a source outside the company, and (2) capabilities change slowly, so the predictive window is relatively longer, allowing us to identify performance issues before they happen.
Match your goals with your fitness level
Finally, be realistic when estimating the extent of your capabilities. If you are a couch potato, you should not try to run a marathon. You might hurt yourself. Start with a walk in the park instead. There are no shortcuts to being in good shape.
If your company’s capabilities are not mature, do not structure your business strategy to compete in the most fiercely competitive markets! Match your business strategy to the capabilities of your firm. Develop those capabilities that deliver a strategically competitive advantage.
Otherwise you will be just another couch potato trying to run a marathon overnight. We all know how that scenario ends.