1
RESOURCES
LECTURE 5
Course Program
2
Resources
Customer Customer
(assets,
Value Interface
capabilities)
WEEK 3
Profit
Costs Sales
Revenue model
Learning Objectives
3
Understand the difference between capabilities and assets
Discuss relevance of different kinds of capabilities
Understand how to improve capabilities
Understand link between capabilities and firm performance
Understand the impact of market-based assets and firm
performance
Resources
4
Assets
Resource endowments the firm has accumulated
Material and immaterial possessions of a firm (e.g. buildings, trucks
BUT also brands, customers, channels)
Capabilities
“Glue that brings the assets together and enables them to be
deployed advantageously” (Day 1994)
Sets of human behaviors that relate to what firms are capable of
doing
Resource Analysis
5
Insight into:
Resources of the organization
Current and potential leverage of resources (inside-
out; RBV- or Competence approach)
Consistency, interdependency and synergy of
resources
Vulnerabilities
competence-profile in light of
sustainable competitive advantage
Capabilities
6
“Capabilities (=competencies) are complex bundles of
skills and accumulated knowledge, exercised
through organizational processes that enable firms
to coordinate activities and make use of their
assets” (Day, 1994, p. 38)
THUS:
bundles of skills and knowledge
rooted in organizational behaviors and routines
exercised through organizational processes
Capabilities
7
Manifest in processes such as
- Order fulfillment
- New Product Development (NPD)
- Service delivery
- Customer Relationship Management (CRM)
- Supply Chain Management (SCM)
Different types of competencies
8
Distinctive capabilities = key success factor
Make a disproportionate contribution to provision of superior customer
value
Permit firm to deliver value to customers in a more cost-effective way
Difficult to develop + resist imitation
Robust + can be used in different ways to speed up a firm’s adaptation to
environmental change
(RBV: convertible, rare, imperfectly imitable, no perfect substitutes)
Core competencies = capabilities that span and support
multiple lines of business
Dynamic competencies = competencies that enable the
organization to develop/change/adapt
Classifying Capabilities (Day 1994)
9
Inside-out
capabilities
Financial Management
Cost control
Technology development
Logistics
Manufacturing
HRM
Environmental health & safety
Day 1994
Classifying Capabilities (Day 1994)
10
Outside-in
capabilities
Market sensing
Customer linking
Channel bonding
Technology monitoring
Day 1994
Classifying Capabilities (Day 1994)
11
Spanning
capabilities
Customer order fulfillment
Pricing
Purchasing
Customer Service
NPD
Strategy development
Day 1994
Identifying Core & Distinctive
12
Capabilities
Value Chain (Porter 1985)
Differentiation drivers
Cost drivers
Linkages
Internal
External
Identifying Core & Distinctive
13
Capabilities
Activity System (Porter 1996)
Key competencies/activities
Supporting competencies/activities
Interdependence
Synergy
Coherence
Activity System
14
Dynamic Capabilities
(Teece et al. 1997; Gatignon 2002)
15
Competence destroying
willingness to cannibalize (Chandy & Tellis 1997)
Competence enhancing
Adaptive/exploitative learning
Generative/explorative learning (Baker & Sinkula
1995)
Organizational memory (depth/diversity)
(Moorman)
Network capabilities (bundling; infrastructural)
Improving Capabilities
16
Diagnosing current capabilities
Mapping (business process reengineering)
Benchmarking (e.g., Vorhies and Morgan 2005)
Anticipating future needs for capabilities
Bottom-up redesign of underlying process
Top-down direction = top management commitment
Continuous monitoring of progress (measuring KPIs)
Summary
17
Resources are capabilities and assets
Capabilities play a crucial role in creating a market-oriented firm
A resource analysis (the “internal analysis”) helps to identify
distinctive resources and thus provides insight into the inside-out
potential for customer value
Interdependence, consistency, coherence and synergy of resources
is crucial for operating an effective business model
