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Analysis of capabilities and competencies

Identifying core organisational capabilities and competences is the internal bedrock of strategic analysis that has to be linked to customers and competitors to develop well-founded business plans and strategies.

A businesses will 'know' what it does, however, articulating core strengths, seeing how these capabilities can be leveraged into new areas and deciding where to allocate resources for development and investment are always subject to judgement and need to be clearly articulated and mapped on to customer needs and competitive threats.

A striking feature of most businesses, is that the internal view of the capabilities of a business, and what the business is, often diverges from a customer's eye view of the business. For instance, customers will identify strengths, particularly in softer areas like culture, service or help, that are less clearly articulated in the business.

In strategic analysis, we carry out internal work through interviews and workshops to develop an internal view of the capabilities of the business and a perspective from the inside of what the opportunities (possibilities to reach more or different customers), and threats are.

The aim is to identify a portfolio picture of the business from the inside. The core skills and competences, the possible new directions, and the areas that can be developed or culled. This internal view is then mapped against customers and competitors to identify defensible market positions and opportunities.

The objective is to develop a picture of opportunities for development, identifying cost and resources required to maintain, grow and move the business forwards that is backed up by hard insight and good research.

Frameworks for analysis

There are many different frameworks for analysing the capabilities and competencies of your firm. For instance looking at tangible resources (finance, physical), intangible resources (technology, reputation) and human resources (skills, flexibility). Or McKinsey's 7S's (skills, staff, style, shared values, systems, structure, strategy).

Our preference is to use a portfolio variation of Porter's value-chain analysis identifying where the business is, against what is most valued by customers and who is providing this value. This means looking at the product and service the customer receives in terms of what and who provides:

development/technical skills,
procurement/production skills,
sales/communication skills,
distribution/logistics skills,
service/support skills,

These skills and resources are often closely aligned to the customers view of what they want and need and so you can identify the key value points for your customers.

A key feature of the value chain approach is that you do not have to be (and perhaps shouldn't be) good at all of these areas. Indeed, as there is a cost and return associated with each skill for each of your products/services, this analysis can start to identify which areas produce the greatest returns to your business.

It is also common that different customers value different elements. Consumers may be drawn by a whizzy technical product, but for corporations logistical and service skills may be valued more highly. Identifying the what current customers value, might give a different view to what new customers might look for. So not only does the business have to manage its own transition, it has to bring customers along with it.

In terms of planning for investment and development, the business needs to think not just of what is can do, but also how it makes the journey - the steps in the plan and the milestones for delivery.

Our strategy development process therefore looks not just at what the options are, but also identifies potential mechanisms and partners to make the change happen.