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Resources and Capabilities by Dr. Andrea L. Santiago The textbook definition of a resource is an input to the production’s process. It may be tangible, as in the assets of the company that can be seen or quantified. Human resources, funds and physical plant and equipment are examples of these tangible assets. Resources may also be intangible, such as reputation or a stock of patents and copyrights. Capabilities on the other hand refer to a company’s ability to make use of its resources in a highly productive manner. Both resources and capabilities are sources of competitive advantage and can be imitated. But that which is harder to imitate is a capability. If one had the cash, it is relatively easy to purchase a warehouse and a fleet of delivery trucks. It would be much harder to transform that warehouse and vehicle fleet into FedEx. Highly competitive organizations thus spend a considerable amount of resources to develop their capabilities. They employ highly driven individuals, and within the corporate environment they create, allow these individuals to unleash their creativity. Success builds upon success and in time competitors would target these performers to work for them. Experience with the executive search industry has shown that competitors believe that if they are able to attract the star performers, who appear to give the organization a competitive edge, then their organizations immediately gain an advantage. Their inability to imitate their rival’s human resource talents leads to pirating that talent, sometimes at a price that upsets their own compensation structure. The pirated talent, on the other hand, thinking that he or she has moved up the career path faster, and excited by a new environment, grabs the offer. Reality then sinks in. Several months into the job, the talent feels frustrated and the employer, disappointed. Reviewing the many occasions this mismatch has happened, draws one’s attention to the concept of capability. Star performers in an organization believe that their success is based primarily on themselves. What they fail to see is that they are able to perform well because the work environment was designed for them to do just that. For instance, brand managers have a retinue of advertising and research agencies to draw from, can count on support from production managers, work with budgets that top management understands are needed for their programs to be a success. But the new organization in which a pirated manager finds himself may be smaller, may have fewer resources, may have a vastly different culture and way of getting things done. The new hire may possibly confront with limited funds that curtail his marketing vision, may have constant struggles with suppliers and production personnel. He may find innovation slow 1 because the new organization is bureaucratic, with departments concentrating on preserving turf rather than meeting corporate goals, and with mindsets that are firmly opposed to creativity. Then again, the star performer recruited from the outside is likely to have come in at the expense of some home-grown manager, who sees his career prospects threatened by an alien invader, and who may have allies in the department who would only be too happy to see the newcomer stumble. Competitors who hire star performers would like to believe that their new talent can advance the organization, unmindful of the fact that they may have to change their decision making process to allow their new recruits to do their job effectively. Like star performers, they think that the success factor lies with the individual and thus when the expected outcomes are not achieved, then the star performer is the only one to be blamed. The lesson learned is that one cannot simply imitate a resource, especially a human resource, and expect to gain an instant competitive advantage. The right ingredients have to be present. Simply taking one resource without examining how that resource works within the entire system is insufficient. A highly competitive organization builds that organization’s total capabilities, knowing that it is virtually impossible to replicate this totality. So if human resource movement has to be done, the parties involved must take into account all factors that contribute to success. And if the object is to develop a competitive edge, then the parties involved must be able to replicate the environment and prepared to develop that capability of coordinating resources so that human talent can deliver its full potential. Dr. Andrea L. Santiago, DBA is an Associate Professor at the Business Management Department, College of Business and Economics of De La Salle University-Manila. These article are contributed by the CBE Faculty in the column of Business Focus of Manila Bulletin published July 18, 2003. 2