Saturday, June 1, 2013

Why is Enterprises Success so Difficult to Replicate

Business capabilities are path-dependent. 

There are many businesses in the world; few are very successful, what are “Differentiating Factors" which can make business more successful - even if business model/strategy was duplicated - there has to be something "better" or different. 

Distinctive Business Capabilities are Key Differentiator

Business capability defines "What" a business does or can do by encapsulating all organization resources (tangible, intangible or human resources). Enterprise success is dependent upon few core and differentiating business capabilities.

    • Business capabilities are path-dependent: A firm's capabilities today are result of its history and this history constrains what capabilities the firm can perform in the future. Due to this reason, business capabilities cannot be bought in the marketplace. To acquire a business capability, one has to acquire the company owning the capability as well. Hence, it’s difficult to replicate capabilities of one company by other company     
            
    • There are many "ingredients" within a capacity: Among them, Capability encapsulates Process, People and Technology and other intangible and tangible resources which are important for a business capability to be effective. One capability may be implemented by multiple business processes for multiple products and services. Process is important as "glue" which coordinates (like an orchestra's conductor) other ingredients to produce a particular result. Also, process is more flexible than many of other ingredients. And explicit processes have many useful features. 
    • Distinctive Capabilities as Success Factor: Capabilities *are* abilities that organizations have and are closely related to competencies. It is not a matter of replicating capabilities per se, it is a question of understanding the 'distinctive capabilities' of an organization and attempting to replicate those.  

The People Dimension-Culture Factors

Capabilities are not the sole source of success. One could perfectly replicate a set of capabilities, but if they are deployed in a different context, they might not ensure success.

  • The culture role: One of the most challenging aspects is upon understanding the role that organizational culture plays in the 'distinctiveness' of the capabilities. Even more challenging is attempting to replicate the culture because culture is organization-wide not capability based. In order to replicate the distinctive capabilities of an organization, you first have to replicate the distinctive culture of the organization.  
  • Culture is collective human behaviors and habits that could be considered part of the people skills/competencies component to model a business capability. It is through the culture, routines/processes are established and through these routines, resources are integrated and ultimately capabilities are developed 
  • Business capability model, one of the elements of business capability is to capture the culture element as well. It is considered an intangible resource. A business capability is the ability of an organization to perform a particular type of work and may involve people with particular skills, knowledge and culture, intellectual property, operating facilities, software, tools and equipment etc.
A model of culture should include:
- What is Culture?
- How is Created?
- How is it operationalized & maintained?
- How is it expressed?

People, culture, leadership, circumstances, belief etc are all very important - but the cases where replication has seemed to work all align this to flexibility and a focus on what the principles underlying the "copied" enterprise were, and how they can then be best applied to the new structure. 

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