Page 347 - Operations Strategy

322 CHAPTER 9 • THE PRoCEss of oPERATions sTRATEgy – foRmulATion And imPlEmEnTATion
● Statements should be specific and avoid blandness: there is little point in stating
ideas that everyone believes in.
● Analysis should distinguish between where the company wishes to be and where it
is now; the gap should be realistic.
● It is important to be realistic about the strengths and weaknesses of one’s own and
competitive organisations.

Capabilities

Analysing strengths and weaknesses is the starting point for understanding resources;
the next challenge is to understand the capabilities that they (may) represent. The idea
of core capabilities is central to understanding how operations strategy can be sustained
over time. But the idea of operations capabilities is not a straightforward one. Capa-
bilities derive from strategically important assets – those that are scarce, difficult to
move, difficult to copy and difficult to substitute for. But these types of assets are, by
definition, more difficult to manage than those assets that are well understood, widely
available and easy to copy. Practical analysis and implementation that is based upon
a concept that is so ambiguous is therefore not always easy. However, it is possible to
highlight a number of critical issues:

● Definitions (such as, What is capability?) can be important. As one confused engi-
neer once exclaimed to one of the authors, ‘This is very difficult you know, you don’t
walk around the factory and bang your head on the core capabilities of the firm!’ Yet
they do exist, and identifying them is an obvious first step in nurturing them.
While complex definitions of different types of capability can be used, the more
abstract the definition, the less likely it is that managers will find it useful. This
drastically reduces the legitimacy of any decisions based upon the analysis and
makes it harder for the dynamics of capability development to be incorporated on
an ongoing basis. Therefore, if possible, keep definitions of capability as simple as
is practical.

● The level of aggregation in how capabilities are defined is also critical. For instance,
while one might reasonably assert that Sony’s core capability is ‘miniaturisation’,
this may be too generic for Sony’s managers to act upon. Collis and Montgomery
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illustrate this challenge with the example of a manufacturer of medical diagnostics
test equipment that had defined its core capability as ‘instrumentation’. Such an
intuitively obvious definition was too broad for managers to act upon. Analysing to
greater levels of disaggregation, however, revealed that the company’s strength was
mainly the result of competitive advantage in designing the human/machine inter-
face. In order to exploit and deepen this competence, the firm hired ergonomists and
set out to design a product for the fast-growing general practitioner market, where
the equipment would not be operated by skilled technicians.
● Articulating capabilities in very abstract terms may capture their essence but can
make them difficult to use. Some degree of operationalisation is usually necessary.
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Collis and Montgomery argue that ‘evaluating whether Kraft General Foods or Unilever
has better consumer marketing skills may be impossible, but analysing which is more suc-
cessful at launching product-line extensions is feasible’. In many ways, such analyses are
essentially forms of internal benchmarking and, as with that process, the greater the
level of detail, the greater the cost and time necessary to perform the analysis.

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