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Capabilites

In: Business and Management

Submitted By shutterguyfl
Words 5342
Pages 22
HBR SPOTLIGHT

Assets like leadership, talent, and speed are what produce superior market value. A capabilities audit can show you how you measure up-and how to build on your intangible strengths.

Capitalizing on Capabilities by Dave Ulrich and Norm Smallwood they admire, people quickly point to organizations like General Electric, Starbucks, Nordstrom, or Microsoft. Ask how many layers of management these companies have, though, or how they set strategy, and you'll discover that few know or care. What people respect about the companies is not how they are structured or their specific approaches to management, but their capabilities an ability to innovate, for example, or to respond to changing customer needs. Such organizational capabilities, as we call them, are key intangible assets. You can't see or touch them, yet they can make all the difference in the world when it comes to market value. These capabilities - the collective skills, abilities, and expertise of an organization - are the outcome of investments in staffing, training, compensation, communication, and other human
JUNE 2004

I

F YOU ASK THEM WHICH

COMPANIES

resources areas. They represent the ways that people and resources are brought together to accomplish work. They form the identity and personality of the organization by defining what it is good at doing and, in the end, what it is. They are stable over time and more difficult for competitors to copy than capital market access, product strategy, or technology. They aren't easy to measure, so managers often pay far less attention to them than to tangible investments like plants and equipment, but these capabilities give investors confidence in future earnings. Differences in intangible assets explain why, for example, upstart airline JetBlue's market valuation is twice as high as Delta's, despite jetBlue's having significantly…...

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