Bridging the capability gap

According to this article by McKinsey: ‘Half of executives rate capability building as one of their companies’ top-three priorities.’ These are some other considerations about capability building which are explored in the article:

1. What drives the selection of capabilities to develop?
   • Customer demand
   • Strategic importance
   • Need to stay abreast of competitors’ capabilities
   • Capabilities which are primary drivers of value.
2. What type of capabilities required, e.g.:
   • Functional / technical capabilities
   • Leadership capabilities
3. How are these capabilities learned, e.g.:
   • On the job learning
   • Taught courses
4. How is learning embedded?
5. How are capabilities measured?

Large companies such as those McKinsey works with can buy in or build capabilities themselves.

Businesses’ capability building is of no less importance for small businesses, but they do not have the luxury of time and resources that large companies do – so what ways do they use to build their capabilities? What we have seen with our small business clients is that they focus on capabilities that:

• They can learn from people they work with and whose skills and abilities represent opportunities for the business;
• Help solve their priority problems or overcome their biggest challenges. And just as capabilities are required to solve these problems, choosing where to direct their time and which problems to solve is a valuable opportunity for entrepreneurs to level up the capabilities they consider strategic on the job.

Learning from people you work with is symbiotic – a system of mutual advantage.

For instance, exposure to our clients’ problems has led to us developing skills and knowledge that has helped our clients’ businesses whilst expanding our own capabilities. Similarly, our clients have recognized how we work and taken that on board to ensure they think ahead to determine what the implication of financial events might be and to consult with us in advance, collecting the data required at the same time.

Small business advancement built on close, longer term relationships may be similar to what one sees in sports such as athletics, where a team of runners (for example) all improve to a high level because as a subsidiary benefit of exposure to the energy and persona, work ethic, training technique, tactical approach or frequency and level of exposure to competition that tends to be assimilated by everyone.

The capabilities of all are enhanced as a result of this exposure to more frequent and more advanced challenge and competition, and this is what small businesses want to be the case for them too.

Choosing objectives according to how much they will equip founders or staff with key capabilities is secondary to expedience and even if strategically important has to be considered from a risk perspective.

How does exposure to risk factor in considering which undertakings to pursue? Well, committing to insurmountable challenges can have negative impacts which are long lasting and may even lead to business collapse. It is important to recognize which challenges are survivable and offer the right level of payoff in comparison to risk.

There is a great video on YouTube showing Denzel Washington’s May 2011 Pennsylvania University commencement address where he advises students that they should get used to the idea of failing, and not to be afraid of it but to take it on the chin and ‘fall [fail] forward’, i.e. to fail small and in a way which lets them learn and progress towards their goal. If you can design your strategy or mode of operation so that you are exposed to very survivable failures and where each failure takes you closer to accomplishing a rewarding objective, then it is only a matter of time before you reap that reward.

This may be easier said than done because there are unanticipated side effects to any course of action and any venture can quickly run into snags or expose unforeseen obstacles, but these are more survivable if your initial foray has not committed you irreversibly to large liabilities, you have reserves to surmount difficulties, or you still have access to paths for reversal or for significant changes of direction.

Survivability and adaptability are obviously characteristics of both the externalities of circumstances and objectives and also of internal attributes of entrepreneurs such as personal energy, toughness and resourcefulness, so paths which are open to some people who are seemingly very similarly equipped for success to others based on skills, experience and resources will be closed for many others. If your perspective of both the external requirements and your internal resources is realistic, you may be able to identify and exploit opportunities where you enjoy competitive advantage.

It is obviously also to your advantage to gather data and feedback so that your perspective and awareness of your environment is well grounded and as expansive as possible. Good understanding of situations can let you extrapolate the potential consequences of actions and to prepare accordingly, so being able to access good, insightful advice is likely to support your development.

We are keen on ensuring that our clients develop and we will try to build this theme of continuous development into our future newsletters with specific content that is insightful and action-oriented (where possible) to help with this.