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Capitalizing on Capabilities By Dave Ulrich and Norm Smallwood 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.

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[bio] Dave Ulrich, on leave from the University of Michigan, is currently mission president of the Canada Montreal Mission for the Church of Jesus Christ of Latter-day Saints; he can be reached at dou@umich.edu. Norm Smallwood is a cofounder of Results-Based Leadership; he can be reached at nsmallwood@rbl.net. Ulrich and Smallwood are coauthors of Why the Bottom Line Isn’t! How to Build Value Through People and Organization. When asked which companies 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 these 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. The collective skills, abilities, and expertise of an organization, these capabilities are the outcome of investments in human resources—staffing, training, compensation, communication, and other practices. 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 access to capital markets, product...

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