The perpetual race for competitiveness and its enemies.

The perpetual race for competitiveness and its enemies.

Resources and capabilities are different at the very basic level:

whereas resources are tangible assists (may they be goods are people), capabilities are what make a resource become a product. Having said that, resources are pivotal for the development of capabilities, and location matters a lot: if a country has plenty of rare or appealing resources (e.g. China and the immense number of engineers and vocational training schemes), it will look very attractive for a foreign direct investment.

CSA – FSA

What a firm does by using resources is commonly know as a capability; roughly speaking, a resource could be seen as a Country Specific Asset (CSA), while capabilities are more Firm Specific Assets (FSA); in theory, not all resources are CSA, while not all FSA are capabilities, but this would drive our discussion quite too far.

KNOW HOW

Indeed, know how is the ideal metrics to assess the interaction between resources and capabilities. If a firm knows how to enhance the potential of a resource though outstanding capabilities, its know how will be a key to success. However, many firms tend to be too reliant on their capabilities and for too long. This is evident in firms that focus mainly on learning by doing: being incremental in nature, cabilities based on repetitions and adaptations have a foreseeable lifecycle set by competitors innovations. In few words, capabilities and disruptive innovations (read new ways to produce or to deliver a service) are the right equation to keep a firm competitive; it is compelling to say that static mindsets among managers is a death sentence: in 2012, Kodak filed for bankruptcy, while selling its patents for a staggering 525 USD millions, and that shows how innovation is important even for tech intensive companies.

In conclusion, firms need to invest in research and development, avoiding being reliant on learning by doing or at least understand when the incremental capability should overrun by change, and this is where advisory is much needed.

For more information:

info@svadvisory.com

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