When I witness a pianist playing an intricate piece effortlessly, I am often in awe of him. I am not talking about the beauty of music he creates, but the effortlessness in music creation. The same is true about a perfect shot by a volleyball player. I used to wonder how these people achieve this effortless perfection.
The Volleyball Team Practice
The answer hit me one day when I was running on a treadmill at Babson College. It was a brutal New England winter, and I was running indoors that day. I noticed the volleyball team practice in the court. I saw a few players take the same shot sequence one and over again. They did it over fifty times. At the end of that practice, they were repeating that shot effortlessly. Or so it seemed.
I am sure even the pianist spent hundreds of hours practicing.
Organizational Capabilities
Just as individuals achieve automatic perfection in activities, organization do that too. Have you wondered how your paycheck gets deposited each month at the same time without any issue? Or how Apple brings out a new iPhone every year?
These capabilities allow a firm to achieve an output in a repeatable and reliable manner.
This perfection is a result of organizational capabilities. These capabilities allow a firm to achieve an output in a repeatable and reliable manner. The organization is just like that pianist who hits the right keys over and over again. How else do you think consumer goods companies such as P&G launch new products every few months?
Where do Capabilities Live?
We know that the skill of a musician or a volleyball player resides in the muscle memory. That is how one can repeat complex physical coordination tasks without thinking. But where does a capability of an organization live?
An organization is similar in this respect. Muscle memory allows codification of complex knowledge music theory and an instrument. Similarly, organizations also codify complex knowledge in some way.
Organizations encode knowledge through two means. First through a set of systems and processes that allow information and material flow. Second through a shared culture that permits the use of right values. Both pieces are critical for a capability.
Organizations encode knowledge through two means.
When an organization produces a new product on a regular basis, it uses this knowledge. Once knowledge becomes embedded in this manner, the organizational skills become depersonalized. At that time people can be replaced with newcomers and the corporate results do not change. That is the power of capabilities.
Innovation Capabilities
If a firm has to innovate in a reliable manner over and over, it needs innovation capabilities. If a company is reliant on a single person or a small set of individuals, its capability is nascent.
After Steve Jobs had passed away, people were afraid that Apple would lose its innovative edge. But that would mean that Apple did not have innovation capability.
Apple has shown no change in its innovation output. It is an example of the power of capabilities. They may start with a gifted founder but eventually get codified within an organization. Without those abilities, a firm cannot produce an output again and again.
What is within an Innovation Capability?
Innovation capacity is a complex skill. In fact, it is a lot more complicated than an ability to close books or forecast demand. Its complexity arises from the complex nature of the innovation process itself.
Innovation capability consists of a vast number of sub-skills. Although these sub-skills are too many to describe here, they can be grouped into two categories. The first group is invention capabilities. The second set is commercialization capabilities. Both sets of abilities are needed for a firm to innovate over and over again.
Are There Limits of Innovation Capabilities?
Although many firms have innovation capabilities, these capabilities can differ in a significant manner. Procter & Gamble is an innovative company, and so is Apple. But they differ in their core DNA of innovation.
P&G can produce incremental innovations in product, packaging, and channel. Apple can create new categories using technology and user experience. Both companies are innovative, but their DNA is different.
P&G will find it hard to develop new multi-billion dollar categories using technology. But it can develop new billion dollar brands without technology. Apple, however, will struggle to develop product extension innovations. In this sense, every company’s innovation capability has a natural limit.
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When Dark Jager, pushed P&G to become more like a technology company, he faced a limit of P&G’s innovation capabilities. P&G hit a bit of a rough patch back then, and John Pepper had to recenter P&G back to the comfort zone of its capabilities.
Do you understand the limits of your organization’s innovation capabilities?
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