Features

Adequacy of Capability Models in the Age of Disruption

January 17th 2017 - Tuesday

By Ramachandran Ramasamy

 

Disruptive Technology or Disruptive Innovation?

One has to understand, have adequate knowledge and acknowledge business disruptions that have taken the organisation by surprise, before one could effectively formulate an implementation strategy in overcoming the business challenges. As Gartner succinctly put it, convergence and reinforcement of information, cloud, mobile and social elements well supported with speed, seamless communications irrespective of time, geography and cultures, multi-facet technological capabilities and diverse devices are poised to register a continuous plethora of new business opportunities and technological innovations.

Over the past one-decade, many disruptive technological innovations have emerged in the ICT sector market space. The entire business landscapes and market structures as well as consumer behaviour and lifestyles have undergone drastic changes. Harvard Business School professor Clayton Christensen is known for popularising the term “disruptive innovation” in his bookThe Innovator’s Dilemma.

The Professor differentiated between “disruptive technology” and “disruptive innovation”. He cites: “Disruptive technology brings to a market a very different value proposition than had been available previously”. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect – typically, by first designing for a different set of  consumers in the new market and later by lowering prices in the existing market.

On the contrary, disruptive innovation is one that “helps create a new market and value, and eventually goes on to disrupt an existing entire market and value network”. Disruptive innovation is the introduction of new technologies, products or services in an effort to promote change and gain advantage over the competition. In this context, the word disruptive does not mean to interrupt or cause disorder – it means to replace.

For example, the automobile was a revolutionary technological innovation, but it was not a disruptive innovation because early automobiles were luxury items that did not disrupt the market for horse-drawn vehicles. The market for transportation remained essentially intact until the debut of the lower priced Ford Model T in 1908.

The mass-produced automobile was a disruptive innovation because it changed the transportation market. In the current information era some pertinent examples that have disrupted market space vehemently include Apple iPod irrevocably altered the landscape for portable audio players that Sony Walkman perceivably had its unshakable dominance; advent of e-mail mitigated the role of postal services that did not appeal well with millennials; cordless smart phones pushed landlines to the obsolescence; Microsoft Office, in particular when Microsoft Word begun to gain wider acceptance and adaptation incrementally killed the typewriter market that considered a gift from above for word processing job; beginning with e-commerce and subsequently mobile commerce models well supported with Internet and mobile banking as well as online transactions modes and means providing much convenience online shopping over physical stores et cetera.

 

Having Adequate Knowledge on New Age Things

The rage and race for disruptive innovation is continuously on with new emerging technologies and new business models, practices and processes, which reinventing customer preferences and behaviours as well as satisfaction. ‘Consumerisation’ of the Information Technology (IT) phenomena, advent of social businesses, cloud computing, Internet of things (IoT), information of things (IOT), wearable technology, mobile social commerce, big data analytics (BDA), platform as a service (PaaS), infrastructure as a service (IaaS), software as a service (SaaS) are increasingly impacting the way one undertake business planning and transactions; creation and delivery of public services; demanding new work cultures, norms and practices; exerting unduly pressures on reconfiguration of data security and authentication systems especially for dealing with porous borders and redefining rights, roles, rules and regulations for individuals and families participating in the new age phenomena and generating new networks of customers, partners and employees through ubiquitous and pervasive social technology platforms. 

Perhaps, these are only the tip of the iceberg, with many other things are latent or yet to come.

As the Harvard Professor pertinently indicated that such changes are not only evolutionary but sometimes revolutionary, impacting not only the technology providers but also the users communities. Thus, continual review and realignment of ICT capabilities of an organisation is crucial to business growth at least for three apparent reasons.

First, creating new knowledge products and services through creativity, innovation and research and development activities. Second, viewing customers and clients satisfaction with totally new approaches and perspectives. Third, efficiency and efficacy within the internal working of the companies themselves, encompassing management norms, administration, finance, audit and inventory procedures, human resource developments, production and delivery mechanisms, supply and value chain management and communications and branding. Without having adequate ICT capability or failing to cope up with changes in ICT developments organisations are likely to be in the trajectory of becoming incompetent and obsolete, more so irrelevant!

In the production sector quality of products conforming to customer requirements, expectations and aspiration is more critical. Bad quality products will affect consumer’s confidence and image and consequently the sales and the revenue of the company.

Customers are basically ensuring the product is worth for the price they pay for.  If they are not satisfied they will resort to similar products from the competitors. Thus, in this whole equation customer is central. While in the case of provisions of intangible services, the thrust of quality is very much dependent upon employees who are at forefront of the services delivery processes.

Specifically, ability to perform the promised service dependably and accurately; willingness to help customers and provide prompt service; knowledge and courtesy of employees and their ability to convey trust and confidence and providing empathy, caring and individualised attention to the customers.

A company may have aesthetic appearance of physical facilities, equipment, personnel, and communication materials but this only constitute a necessary condition but not sufficient conditions, which relates to the quality of employees. Thus, in managing the internal dynamics, the organisation capability is important for its ability in balancing customer demands and organisation resources; creating a conducive working environment and motivational elements for its employees; and how flexible, versatile, and responsive it is towards changing work culture and practices, business dynamics and sustainable growth.

In other words, organisational capability does not only involve business factors but also institutional and people elements that support business growth. As such, when firm level strengths and weaknesses are aggregated across the industry, it will provide a cumulative reflection on industry level business capability.

 

Shades of Capability Models in ICT

There are many types of models and levels of capability assessment targeted at the organisational, team and even individual level. Some pundits viewed core competence of a firm as a tree – roots constitute competencies, trunk and limbs as core products and flowers representing end products. While, some conceived firm level capabilities as a vertical chain consisting of R&D, raw materials sourcing to marketing and up to sales and distribution.  

However, the predominant view about organisational capabilities is integration of knowledge hierarchy entailing various functional and cross-functional capabilities at strategic, tactical and operational levels. Simply put, any organisational capability model is simply aimed at measuring what organisations are able to do, or more precisely, deploying resources towards achieving a desired end result.

Thus, it is the question of how organisations build or create their capabilities, which may entail cognitive search through one or more of the following: covert or overt learning via concepts and models, that is sourcing from outside or transfer of capabilities from existing to new businesses culled from prior employment of the founders knowledge, that is conversion from tacit to explicit modes between individual and organisational levels or simply learning by doing.  

 

Capability Models in ICT

In the ICT sector, models such as Capability Maturity Model Integration (CMMI) from the Software Engineering Institute (SEI), used for gauging software development maturity and Information Technology Infrastructure Library (ITIL) for gauging IT management practices are widely used in assessing organisational capabilities and competencies. Some organisations that pursue CMMI also, in tandem, implement People Capability Maturity Model (PCMM), also from SEI, which is used for gauging workforce competency at organisation wide level.

Similarly, agencies like the Green Computing Initiative (GCI) provide dedicated certifications for organisations and individuals in the area of Green Computing that aligns all IT processes and practices with the core principles of environment sustainability, which are to reduce, reuse, and recycle wastes.

In the contemporary outsourcing sector where ICT usage is the core, capability models like e-Sourcing, Capability Model for Service Providers (eSCMSP) and the e-Sourcing Capability Model for Client Organisations (eSCM-CL) from International Association of Outsourcing Professionals (IAOP) are deployed in assessing organisational competencies. Some capability models are organisation specific like IBM Process Reference Model for IT (PRM-IT), which assesses IT management processes within IBM, mainly by providing a checklist on adherence to process and quality.

 

Subject Matter Specific Capability Models

Besides sector specific organisational models, some models are subject matter specific but applicable to any sector including ICT. To name a few, these include new product development, project management, R&D capability, acquisition capability customer relations capability, engineering capability and quality and process improvements capability using Six Sigma or Lean Six Sigma (LSS) or Design For Six Sigma (DFSS) methodology.

A close scrutiny reveals that these models are supported with well-articulated philosophy, notions and concepts as well as distinctly defined methods, processes, procedures, rules, regulations and operational templates as well as certification and accreditation mechanisms for assessing organisational competencies.

 

Mixed Models

In this progression, it is not uncommon nowadays to discover deployment of mixed models especially software companies pursuing CMMI, PCMM and Six Sigma practices as these models complement each other well. Specifically, CMMI provides the framework for developing maturity levels in organisational processes, PCMM provides framework for attaining maturity in workforce competency and shades of Six Sigma practices come in handy as a data supported problem solving methodology or process and quality improvement processes.

Whichever model an organisation may use, they all have one common objective of getting certified based on their use of and adherence to the best practices and processes as well as quality. Indeed, certifications help greatly in branding organisations and their products and services, which is critical for market access and entry; for example, CMMI certification is one of the requirements for any company (including foreign companies) to procure software development businesses that come under the Government contract.

Some models are generic but applicable to specific situations like Carmel’s Oval Model for gauging success factors for software exports. Similarly, reviewed Kanters’ Innovation Capability model by incorporating new business streams, products and process systems, knowledge factors, end customer and market demands.

 

Capability Certification

Most of these organisational or individual capability models come with certifications, which determine competency, authority, or credibility. Capability certifications are issued either by a global institution or an individual organisational. A certificate is issued once the applying organisation attains the prescribed standards in product development or service delivery or process maturity or workforce competency as per the criteria and guidelines laid out by the certification issuing agency.

Certification agencies can be divided into two types, one operating at the global level and the other at an organisation level. For instance, SEI of Carnegie Mellon University holds the authority in issuing CMMI certification for software development maturity and PCMM Sigma certifications vary across organisations as there is no standard certification body. Similarly, ITIL Certification Management Board (ICMB) of United Kingdom certifies IT Management practices; GCI on green computing practices and IAOP on outsourcing practices.

Organisations like General Electric and Motorola, early adopters of Six Sigma for process and quality improvement activities, have developed their own certification programmes as part of their Six Sigma implementation, verifying individuals’ command of the Six Sigma methods at the relevant skill levels, namely White Belt, Green Belt, Black Belt, and others. Though started in manufacturing plants, today the Six Sigma practice has spread to transactional and services-based organisations. Unlike global institutions, criteria for Six Sigma certifications vary across organisations as there is no standard certification body.

 

Key Challenges on Capability Model Building

Not all organisations are at the same level in pursuit of organisational capabilities. Typically, the multinationals and the big corporations who aspire to remain relevant and sustainable in a fast changing business and technological world have a greater tendency to put capability models in terms of processes, procedures, methods and approaches as well as administrative and institutional support systems in place.

Such institutional best practices facilitate organisations to constantly identify gaps, distinguish business risks, conduct competitor analysis, understand market potentials and comprehend product and service development nuances.

Lacking such agility, maturity and competency may affect an organisation’s performance in terms of decision-making and undertaking timely corrective actions, which in turn becomes detrimental to revenue, growth, profitability, corporate governance, market positions and industry leadership.

Smaller organisations may lack adequate resources in pursuit of globally recognised certifications, which typically come with high expectations in terms of standards and quality and is quite costly. Such organisations are likely to depend upon Government support in building their organisation’s capabilities and workforce competencies.

The other challenge is that levels of capabilities vary across organisations and among individuals. Individuals enhance their capabilities either on their own, if it is affordable, or with their organisation’s support. Failing which, they also may become irrelevant due to lack of up to-date knowledge and competency at work.

 

Creating a Competitive and Comparative Advantage.

Having ardent practices of capability models, does not guarantee business survival in the current age of disconnectivity, as Peter Drucker once said. Models may not able to specify certain external factors and conditions as most models focuses on product or services enhancement at operational levels. For creating a competitive and comparative advantage organisation’s capability building endeavour warrant due attention to a number of factors, as follows:

Provision of Quality Leadership:

A quality leader has the cognitive and innate ability to create a vision, which the leader passionately owns, articulates, promotes at all levels within and outside organisations and more so, provides and appropriates the requisite resources. The resources include adequate financial allocation, administrative and logistics supports and ease of implementation procedures.

 

Institute Capacity for Change:

Capacity to change relates ability to address challenges depending on the nature of the problems and issues. Institute appropriate process and quality improvements strategies in addressing evolutionary changes. For instance, reduction of cycle time can be achieved by closing the gaps between the external customer and internal employees; enhance responsiveness by learning from past mistakes, lessons and experiences; align tasks, structures, processes, roles, rules, rights, regulations and systems at managerial, technical, operational and cultural levels; and ensure talents able to evolve with changing demands and time. Similarly, embark upon production of new products and services through creativity, innovation and research and development strategies in addressing revolutionary changes. Otherwise, complacency will kill the organisation business and reduce to dinosaur status in due course of time.

 

Evolving management practices:

In dealing with management practices one need to acknowledge that organisations do not think; do not make decisions and do not allocate and appropriate resources; but, people do. However, management practices determines the roles, rights, rules and regulations, which in turns shapes the behaviours and thinking levels of people. Thus, formulating management practices in view of instilling mind set change or creating a shared vision should bear in mind aspirations of the employees, not only customers or clients. For example, the Y generations entering the job market aspires buy your own device (BYOD) practices or   teleworking either from home or Starbucks or flexi work arrangements and dress codes or desire cellular phones over fixed lines connections!

 

Unison in customer and employee mind set:

As typically acknowledge shared mind sets between customers and employees as well as organisational leadership create harmony in business conduct. This can only be achieved thorough creating a common value acceptable to both customer and employees.

 

Unique value proposition:

Organisations compete for customers and thrive to maintain customer retention and loyalty. Again, this can be only achieved by offering unique value propositions in the products and services offered or differentiated product that the competitors lack and more so, offerings must be cherished by the customer; that is, creating a competitive and comparative advantage in the market space. In many instances, customer base of an organisation experienced shrinkage due to lackadaisical attitudes, demonstration of poor disciplines in work practices and absence of discretionary behaviours on the part of the employees.

 

Instituting metrics culture:

One of the reasons for weaknesses in business development efficacy is due to lack of adequate business intelligent and knowledge management system.  Both these systems duly can help to detect changes in policy, market and business dynamics. Garner defines business intelligent that spans the people, processes, applications and tools to organise information derived from data (bits and bytes), enable access to it and analyse it to improve decisions and manage performance. As the future unfolds, more business decisions will be supported by the facts that only analytics can provide. Unfortunately, many businesses still rely on basis of instinct and guess work. Traditional statistical tools can help to cull out business intelligence from structured data (rectangular array of numbers) from backend operations of an organisation. This scope is being expanded into big data analytics (BDA), which goes further extracting data not only from structured forms but also unstructured and semi-structured data coming from Internet streaming that connects whole reals of borderless phenomena such as Facebook, Twitter, You Tube et cetera. BDA tools also has capability of connecting organisation internal files with external files, without compromising on data integrity, security, authentication and privacy.

 

Harnessing change management:

Being able to meet customer and employee needs alone does not guarantee business survival but also warrants due attention in embracing and harnessing appropriately the changing economic, social, demographic and environmental factors as well as political factors. In embracing change continuous learning is critical for all.

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