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Capitalizing on capabilities.

Dave Ulrich1, Norm Smallwood

  • 1University of Michigan, USA. dou@umich.edu

Harvard Business Review
|June 19, 2004
PubMed
Summary
This summary is machine-generated.

Leveraging organizational capabilities, such as talent and innovation, can significantly boost market value. A capabilities audit helps identify key strengths and areas for improvement to gain a competitive advantage.

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Area of Science:

  • Business Strategy
  • Organizational Management
  • Competitive Advantage

Background:

  • Organizational capabilities, defined as employees' collective skills and expertise, are crucial for enhancing a company's market value.
  • While no universal list exists, 11 key intangible assets are identified in well-managed companies.

Purpose of the Study:

  • To identify critical organizational capabilities that drive market value.
  • To introduce a "capabilities audit" methodology for assessing these assets.
  • To guide organizations in developing action plans for improvement.

Main Methods:

  • Identification of 11 key intangible organizational assets.
  • Description of a "capabilities audit" process.
  • Case studies of two companies conducting capabilities audits.

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Main Results:

  • Well-managed companies excel in approximately three capabilities while maintaining parity in others.
  • Underperformance in any of the 11 capabilities can lead to dysfunction and competitive disadvantage.
  • Capabilities audits highlight crucial assets and guide improvement strategies.

Conclusions:

  • Effectively utilizing organizational capabilities is essential for improving market value.
  • A capabilities audit provides a framework for assessing and enhancing intangible assets.
  • This process enables strategic alignment and tactical execution across all organizational levels.