Identifying and classifying

resources and capabilities

Session 2

1
 From the previous session
• Strategy- direction
• Growth
• Business model

2
 The reality of resources
• Resources come into play immediately after
the firm is formed
– There are a few resources within the firm, as
compared to that available outside in the market
– The firm becomes an owner- has some kind of
ownership right over different resources
– The nature of resources change with the evolution
of the firm

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 Characteristics of a resource
• Classification- typology
• Location
• How do we measure/quantify it/identify it

4
 Creating value from resources
• Resource combinations- indicated by the
business model/value chain
• Leverage into new contexts where the
resource is relevant
• Use it commercially/sell it to realise value for
the firm

5
Assets

6
 Assets
• Human
• Non- Human-
– Financial
– Physical- plant and machinery, land
– Legal- IP
• Intangible vs tangible
– Knowledge, informal processes
• Organizational
– Culture, structure, processes, brand, networks

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Types of competencies/capabilities

8
 Competencies and capabilities
• Threshold
• Non-core and Complementary
• Core

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How to identify competencies

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How to identify competencies/res
• Activity based- value chain, activity map,
business model
• Product/market based- product/market
matrix, Competency tree
• Resource Audit/Identify nuggets- functional,
• Use of internal/external capabilities for
resource identification
• Understanding micro linkages of cap-skills =>
task specific=>functional=> cross functional
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Identifying resources on the value
chain
• The value chain can be used to understand
the resources at each activity level
• Where is it used- at what level?

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13
 Concept of business model
• Value proposition: the offering; the target
customer; the basic strategy to win customers
and gain competitive advantage
• Value Creation and delivery system: Resources
and Capabilities; Organization (the value
chain, activity system, business processes);
position in the value network
• Value capture- Revenue sources; the
economics of the business
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Going from resources to resource
combinations

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 Impact of resources
• Implications of combinations
– Eg. Impact of defense forced based on
• Skills: soldiering and weapon training
• Cultural traditions: Independent action, adherence to
mission
• Commitment to ideology- motivation
• General staff- overall coordination
• Combination of all the above
– Differences of team performances when the
coach changes
– Each resource- importance and relative strength

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 Decisions after resource
identification
• What decisions does a value chain/business
model analysis enable you to take?

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 Decisions after resource
identification
• Which resources in which activity?
• Vertical integration
• Scale/scope of operations
• Location of operations
• Linkages across different parts of the value
chain

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• How do we go about identifying the
resources?- benefits/costs of audit vs activity
approach
• Using both approaches to identify resources
• Is there a pattern to the accumulation of
resources? What patterns can be identified?

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20
 Resources and capabilities

• There are combinations of assets underlying

any capability
• Capabilities are also key in combining assets
to meet different requirements
• Combination of assets/resources lead to
capabilities

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Using functional divisions to
approximate capabilities

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 Functional capabilities of organizational capabilities
Functional area Capabilities Examples
Functional area Financial control Capabilities
CORPORATE Examples
ExxonMobil, PepsiCo,
Functional area Capabilities Examples
FUNCTIONS
CORPORATE Management
Financial control development General Electric, Shell,
ExxonMobil,
CORPORATE
FUNCTIONS FinancialInnovation
Strategic
Management control
development ExxonMobil,
Google,
PepsiCo, Haier,
General
FUNCTIONS Multidivisional
Management coordination
development Unilever, Shell,
PepsiCo,Shell, Cisco
General
Strategic
Acquisition
Innovation
management
Electric,
Systems,
Strategic Innovation
Multidivisional coordination Electric,Haier,
Google, Shell,
International
Multidivisional management
coordination Google, Haier,
Acquisition management Unilever, Shell, Cisco
Management Comprehensive,
Acquisition managementintegrated MIS network linked to Walmart, Dell
Unilever, Shell, Cisco
International
managerial
management
decision making
Systems,
computers
information International management Systems,
Management Comprehensive, integrated MIS network Walmart, Dell
RESEARCH
Management AND Research
Comprehensive, integrated MIS network IBM, Merck,Dell
Walmart, 3M, Apple
information linked to
Innovative
managerial decision
new productdecision
development
making computers
DEVELOPMENT
information linked to managerial making computers
RESEARCH AND Research
Fast cycle new product development IBM, Merck, 3M,
RESEARCH AND Innovative
DEVELOPMENT Research new product development IBM, Merck, 3M,
Apple
OPERATIONS Efficiency in volume manufacturing Toyota, Harley
DEVELOPMENT Fast Innovative
cycle new
Continuous
newproduct
productdevelopment
improvements
development
in operations
Apple
Davidson
Fast cycleand
Flexibility new product
speed development
of response
OPERATIONS Efficiency in volume manufacturing Toyota, Harley
OPERATIONS
PRODUCT Efficiency inimprovements
Design capability
Continuous volume manufacturing
in operations Toyota, Harley
Apple, Nokia,
Davidson P&G, J&J,
DESIGN Continuous
Brand Management
Flexibility improvements
and speed of response in operations Davidson
L’Oreal
MARKETING Flexibility
Building and speed
reputation of response
for quality
PRODUCT Design capability
Responsiveness to market trends Apple, Nokia, P&G,
PRODUCT
DESIGN Design
Brand capability
Management Apple,
J&J, Nokia, P&G,
L’Oreal
Sales
DESIGNand Effective
Brand sales promotion and execution
Management Pepsoco, Pfizer
J&J, L’Oreal
MARKETING Building
Efficiencyreputation
and speed offor quality
processing
distribution
MARKETING Building reputation for quality
Responsiveness
Speed of distribution to market trends 23
Responsiveness
Customer service
to market trends
The hierarchical nature of capabilities

Cross functional capabilities

CFC

Broad functional Operations, R&D design, MIS

capabilities capability, Marketing & sales, HRM

Activity related Eg. Mft, materials mgmt.,

capabilities process engg, prod engg.
Eg. Manufacuring related-
Specialized capabilities assembly, production

Single activity capabilities eg. Assembly related only

Resources

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 Strategic resource mapping?
• Trying to map individual resources to the
competencies

25
 Assessing quality of capabilities
• Identify the major capabilities you believe your firm needs to
have to "play" in your competitive environment

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