Organizational capability enables strategy. As a framework, it can take many forms by drawing upon and aligning people, systems, structures, technologies and culture. Building organizational capability fosters innovation, transformation and change. But, how does the business (and HR) identify, assess and advance organizational capabilities?
Michael Ehret, Vice President, Human Resources, Supply Chain at Johnson & Johnson, discusses how to identify, assess and advance organizational capabilities.
Michael Ehret, Vice President, Human Resources, Supply Chain at Johnson & Johnson broadly defines organizational capability as anything an organization does that drives meaningful business results. And to enable business strategy, it pays to focus on the key capabilities that will drive value differentiation and then allocate the time and resources needed to improve and grow those capabilities.
Identifying, Assessing and Advancing Capabilities
“Many organizations try to focus on too much. They want to be the best at everything, the lowest cost provider with the highest quality and the most innovative in terms of product solutions,” says Ehret. “The key is to hone in on the critical strategic elements and then the two or three critical capabilities that you can’t afford not to be good at to deliver on those strategic elements.”
But how do you identify your organizational capabilities? Ehret has a five-step process he uses to identify, assess and ultimately advance capabilities.
- 1. You need a map: First, identify whether a true strategy or road map to deliver upon the business vision exists. This goes one step further than a simple vision statement, but tangibly details how you’re going to get achieve the vision.
- 2. Capabilities: Don’t get caught in definitions, which is easy to do at this stage. It’s important to determine what capabilities or strengths are required to execute upon the organizational strategy. The key here is to brainstorm and to create a list of things that the company must be good at.
- 3. Dare to dream: Take those capabilities (the things that you must be good at) and define the future state of each one.
- 4. Build the bridge: Undertake a gap assessment. This is where you take your capabilities from 3 above and be honest with where you are today versus where you want to be.
- 5. Priorities and plan: Create a tangible plan that will allow your organization to close the gap between where you are today and where you want to be (step 3). And then prioritize. You won’t be able to do them all at once, so choose the ones that will drive value differentiation and allow you to execute on your business strategy.
Ehret has found the above steps to work well across a range of organizations and added that these steps typically take place after a strategic planning discussion, when a capability strength or gap has been identified.
Capability as a Strategic Advantage
Organizations can gain a competitive advantage by building strong, foundational capabilities; however, there should be a deliberate need to understand which capabilities are likely to impact business performance. As with any strategic objective, when senior leadership set the agenda for capability building there is likely to be greater alignment with what is most important to business performance.
