Saturday, January 28, 2006

Capability and Business Strategy

In their book The Only Sustainable Edge, John Hagel and John Seely Brown describe two main schools of business strategy: the Core Competence school and the Leverage school. The approach advocated by Hagel and Seely-Brown represents a synthesis of these two schools. A closely related approach is advocated by David Alberts ("Power to the Edge").

Core Competence Leverage Sustainable Edge
Focus Resource-Based Network-Based Edge-Based
Source of Strategic Advantage Identifying and strengthening core competences within the firm Mobilizing resources outside the firm Taking power to the edge of the organization.
Key advocates Gary Hamel & C.K. Prahalad Adam Brandenburger & Barry Nalebuff, James Moore John Hagel & John Seely Brown, David Alberts.

Whereas the Core Competence school operates with a fixed notion of the required capability of the firm, the Sustainable Edge school involves dynamic specialization, connectivity and leveraged capability building. In other words, a successful business organization requires meta-capability – the capability to build capability, and the capability to build capability-building partnerships.

In our view, this kind of meta-capability is essential for the adaptive enterprise – after all, the defining capability of the adaptive enterprise is the capacity to adapt. However, in order to implement the adaptive enterprise, it is necessary to be specific about the nature of adaptation and adaptive capability required in a given context.

The capability model allows us to reason about which capabilities should be regarded as core competences.

Extract from Business Modeling for SOA - Part 1 What the Business Does (CBDI Journal, January 2006)

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