Becoming a digital enterprise is not a choice but a necessity. An enterprise may remain inert to adopting digital ways but that has its own risks and consequences. But how much digital to become and in what ways are the critical questions.
Centering this question on business capabilities is an effective way of answering them.
Capability is a cohesive mix of people (skills, attitude, and motivation), processes (enterprise know how, learning routines) and technology, intended to obtain a desired outcome. CEOs across enterprises seem to have one common experience- frustration with the inability of getting the desired outcomes from their enterprises. With time, enterprises become a black box of habits and practices, which makes them inert to accomplishing anything new and fresh. In such conditions, it needs new capabilities to remain actively competitive.
Capabilities are also the bed rock of contemporary strategy thinking and practice. The traditional ‘outward in’ paradigm (industry analysis, gap analysis, positioning and defending the positioning through building entry and exit barriers) is more appropriate for a relatively stable environment where long cycles of strategy may work. In a (VUCA) volatile, uncertain, complex and ambiguous environment, which requires an enterprise to demonstrate strategic agility, a capable enterprise is the best strategy.
In such scenario, strategies do not remain constant for a long period and emerge every day and with every action. Creating relevant capabilities, which competitors cannot imitate, is one sure way to win. The ‘inward out’ paradigm is not intended to replace the earlier ‘outward in’ paradigm but they should be complementary to each other.
The following are the important aspects of capability-
1. Process Centricity
Capabilities are built around processes, not around products and services. The unique processes, which combine the enterprise resources towards meeting intended goals result into unique capabilities. They require investment into support infrastructures like IT and HR to enable them cut across functions and SBUs
They are so deep rooted in unique enterprise processes that many a time their strategic import is not in awareness of those at the helm. They require appreciative inquiry into what’s good, discovering of hidden patterns and analytics to bring them to the awareness.
They remain only temporally relevant; they need to be constantly rebuilt according to the contemporary challenges
4. Strategic Leverage
Even if the enterprise has relevant capabilities and it is aware of them, sometimes it fails to leverage it strategically. Appropriate leadership focus and structures are required to leverage them strategically
5. Future Options
Capabilities may be existing and dormant today, but they are like future options. They can be leveraged when needed. Capabilities cannot be built overnight, they should rather be managed as a portfolio, which can be accesses when needed.
6. CEO’s Mandate
Since capabilities cut across functions and SBUs, they require the CEO’s attention and focus. It requires a collective play at the C-suite.
Enterprises need to assess their environment and deliberate upon the key capabilities they require to cope with the contemporary demands of the environment. The capabilities they decide to build should determine the extent of digitization and the related priorities.
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