Sunday, November 8, 2015

Connecting the Dots between Process vs. Capability

Both capability view and process view are useful in managing business transformation, which to use depends on the purpose you have in mind.

The process is a "basic cell" in the sense of transforming inputs into outputs so it can be used to build the whole operation. Process Management is to manage known from the flow. Capabilities are an accumulation of competencies which are used for achieving the strategic goals. Competencies are what people know, use, do and can achieve. How to connect further dots between Process and capability?

A capability must have some sort of activity - that doesn't necessarily have to be a process. Process management comes from the need to develop repeatable sequences of activities that are reliable because they happen the same way each time you do them - which is great, but it only makes sense to think about the process with a set of activities that you are going to repeat. So, capabilities can be one or more processes with a set of resources needed to carry them out, or they can be an activity with a set of resources to carry it out.

Processes without supporting assets cannot be regarded as capabilities. There is no doubt that processes do not equal capabilities; although they are related.  Hence processes can be designed, approved, documented, and owned, but almost always require some combination of physical assets, data assets, resource/people assets, measurement and monitoring systems, management systems, and coordination systems to truly become capabilities that organizations can deploy, manage, and attenuate/amplify against demand variety as needed. Even there is little repeatability in a particular organization's primary activity, it may not require a defined process, but certainly in a corporate environment, there are few processes of this nature, even development ones, so a proper understanding of processes, assets and capabilities is essential.

One critical difference is that whilst a capability may have a process, it must have resources: whereas, you can view process or design one in isolation without factoring in resource -When people do process modelling or redesign to address a problem, but they completely ignore the question of resource, so the redesign stays as a theoretical exercise and the capability (or lack of it) stays the same even though the process is supposed to be different. Resources are considered tradable as economic factors in their respective markets, whereas capabilities are non-tradable. In system theory terms, capabilities have emergent attributes that could not be explained in terms of their components (resources). “Emergence” results from the fact that resources are embedded in the firm influencing and being influenced by the broader context of the organization (culture, leadership style, paradigms, proprietary technology, etc.)

Process and capability are different, but there are overlaps. Both capability view and process view are useful in managing business transformation, which to use depends on the purpose you have in mind.  As of today, capabilities continue being considered firm-idiosyncratic and market-relevant bundles of resources with the potential to drive competitiveness, and the discussion has moved to dynamic capabilities in the context of hyper-competitive markets, or qualify those that are both market-relevant and difficult-to-imitate/substitute, as strategic capabilities.


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