(funky music)
-: Understanding strategic capabilities is critical
to identifying where an organisation
can gain competitive advantage in an industry.
Looking at our subject framework funnel,
we can see that we analyse strategic,
operational and people and organisational drivers
as part of the internal analysis funnel.
So, out of these drivers,
where do we get our strategic capabilities?
A strategic capability can occur anywhere in your business.
It can be a person,
a division,
a process
or anything else that gives you
an advantage over your competitors, which is key here.
It's not a strategic capability
if all of your competitors have the same capability.
There are four tests for each capability you analyse
that enable you to determine
if there is a competitive advantage.
The tests are, is it valuable?,
is it rare?,
is it difficult to imitate or replicate?,
is it substitutable?
It's important to remember that an organisation
might have a strategic capability
in one area, but not in others.
For example,
Unilever is a multinational manufacturer of consumer goods,
from food products to cleaning products.
Unilever does not use particularly different
manufacturing techniques or distribution
or use IT in a different way to its competitors,
but it does have a strategic capability
in understanding consumers,
innovation
and branding.
It's difficult to conduct the four tests
on resources or capabilities without having
intimate knowledge of the organisation.
So for our example,
we decided to look at ourselves.
As a registered training organisation,
KnowledgeEquity operate in a similar manner
to other education providers.
However, we have developed specific resources
and capabilities which we can analyse now.
Video production of our educational content.
Most competitors outsource this function,
however we developed ours in-house,
which makes it rare.
The capability is valuable as
we can write, film, edit and publish content
much faster and cheaper than our competitors.
It also allows us to keep our content
more up to date and more relevant to our customers.
This capability cannot be imitated easily,
we went through a number of hurdles to get where we are,
and implemented a tech start-up style process
or basically test, learn, develop and retest.
Our capability in this area is non-substitutable,
at the moment.
Competitors can use third party production companies,
but these companies can only provide filming and editing.
At Knowledge Equity we perform a process from start to end.
Often the non-substitutable test
is the hardest to meet,
because after time most capabilities
can be substituted with another,
that comes into the market.
The next example is on our technical experts.
At Knowledge Equity we pride ourselves
on the skills and experience in our team.
Some of us had an academic background, but not all.
We bring deep experience from a variety of industries,
which is different to some of our competitors
and have used that to our advantage
in the way we engage our customers and build our content.
We don't teach using traditional methods,
nor do we operate as a team in a traditional manner.
We don't have a formal management structure,
which allows us to be very flexible
in how we approach the high workload.
People's roles are interchangeable,
however we have employed people
with specific expertise outside just being a CPA,
subject matter expert.
Some of these areas include,
financial risk management consulting,
auditing and media production,
as we mentioned before.
We also have expertise in
marketing and social media strategy,
which has enabled us to build a community of followers,
in six months that has already surpassed our competitors'.
These skills are valuable to delivering high quality
content, but also generating other revenue streams
for the business.
Some of these skills,
such as the marketing,
are not rare across all industry,
but are rare in our segment of online education.
They cannot be easily imitated
by our competitors who operate using much more
traditional education business models.
To substitute this capacity we would need to
outsource all of our employees,
or build some pretty fancy robots
-: it's unlikely to work.
At this point, I won't talk anymore about us,
or we'll give away all of our secrets.
So let's recap,
when considering an organisation's strategic capabilities
remember to apply the four tests.
A capability can be a business operation,
a person,
a particular process
or even something else.
Remember that you are determining
whether that strategic capability
gives the organisation an advantage
over their competitors in their industry.
And all of your tests have to be met
to have that strategic capability.
You then expect it to influence
which strategic options you choose,
it will also likely be a part of the
risk assessment of your strategy
as it is critical to the organisation
successfully implementing its strategy.