Organizations with few resources are not necessarily doomed to weak, low growth competitive positions in their industries. If they do not possess or have access to important resources, they can develop those they need. For this purpose, they need the capability to build and sustain resources. Whilst this much is clear in principle, making use of capabilities to design and deliver strong strategic performance faces the same difficulties as those encountered with intangible resources in Chapter 9; namely a terminology that is wide-ranging, inconsistent and abstract.

Key issues addressed

• Capabilities as activities groups are good at doing, that can be and often are deliberately identified and developed
• The importance of clear terminology and specification for capabilities
• Most important capabilities concern acquiring, developing or retaining resources, so can be found at each resource flow in the strategic architecture
• … and three detailed capabilities are often required; to get things done quickly, with good quality and at low cost
• Small differences in capability explain large differences in performance, with no need to invoke complex, abstract concepts
• The dividing out of capabilities amongst teams with particular responsibilities
• Contrasting the stock-and-flow view of how capabilities develop resources vs. the activity flow of business process mapping
• The self-reinforcing link between resource flows and building capability as the basis for learning
• Capabilities as composite asset-stocks, combining people, skills, processes and information systems
• Certain capabilities that are not linked to resource flows
• Capabilities in non-commercial settings
• Learning mechanisms incorporate limits to growth and the forgetting of capabilities
• The powerful consequences arising from capabilities working together
• Learning from games

Lecture segments associated with this chapter are: