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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
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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.
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