5 Resources, competences and capabilities
The resources an organisation possesses are clearly central to the RBV but as the approach has developed, the idea of what constitutes a resource has been refined. This is largely due to attempts to distinguish between resources that are strategically important and those that are not. The result, as we have already seen from the material discussed so far, has been that many scholars of RBV use the terms ‘capability’ and ‘competence’ rather than ‘resource’ when discussing RBV research and theory. However, the meaning of capability and competence overlaps and thus establishing what is what can be confusing. Both terms relate to knowledge and its use in organisations, and are consequently a product of organisational learning, which is to be expected given the discussion in previous sections of the anatomy of a capability.
For example, Boisot (1998, p. 5) defines a competence as ‘the organisational and technical skills involved in achieving a certain level of performance.’ He then defines capability as a higher level concept: ‘[Capabilities] are focused on a broad range of characteristics that together explicitly address customer needs. Competences are narrower and more technically defined.’ To use Boisot’s example: a competence in jet engine design and manufacture may produce one with low fuel consumption and low noise − essentially a technically defined skill. By contrast, a capability relates to the organisation’s ability to produce engines with price, performance, and delivery characteristics that respond to a wide variety of clients.
A further refinement of RBV terminology is the use of a term that has already been noted: ‘core capability’ or ‘core competence’. In essence, this implies that the capability or competence has a higher degree of strategic importance (as we saw with the example of robotic technology and minimally invasive surgery earlier in the block). Teece describes a core competence as:
Those competences that define a firm’s fundamental business as core. Core competences must accordingly be derived by looking across the range of a firm’s (and its competitors) products and services. The value of core competences can be enhanced by combination with the appropriate complementary assets.
Complementary assets in this context are those resources or capabilities that enhance a core competence in some way. They may already be available within the organisation, or they may need to be acquired. This may mean licensing a technology, building alliances, or buying out other organisations.
A comparatively recent example of this has been the way the British retailer Tesco launched the Hudl, its own tablet computer. It is clear from the ‘Extend your learning’ activity that follows, that Tesco were not attempting to switch markets to become a direct competitor to Apple or Microsoft. Instead, it is important to see this in terms of acquiring a complementary asset to its core business of retailing. The launch of Hudl represents a conscious development of capabilities that underpin Tesco’s core business of multi-channel retailing and its high-level strategic aspiration to develop sustained customer loyalty. It should be noted that the technology for Hudl was by no means specialised, comprising relatively standard hardware and software that could be regarded as commodities to be bought in. The strategic importance of Hudl is that it underpinned the important aim of developing Tesco’s core capability in managing big data.
Extend your learning
For more on the Hudl tablet, read the following article from The Independent newspaper: