What is the primary role of company leadership in markets characterised by variability, complexity, ambiguity and risk?

It is pretty simple really, building capabilities that deliver value to some part of the market. Then taking the revenues from the market and reinvesting them into building more capabilities. This is an update of the classic Peter Drucker definition that “the purpose of a business is to create a customer.”

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This leaves open the question “What are capabilities?,” “Which capabilities matter?” and “How to evolve capabilities?”

What are capabilities?

According to the Business Dictionary, ‘capability’ means the ability of an entity (department, organization, person, system) to achieve its objectives, specially in relation to its overall mission.

In a modern professional services firm these capabilities come from four things: the skills of its people, the network of connections they maintain, the software they use and the data available to them.

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What really matters is the connections between these four enablers.

Skills: We depend on our skills and the skills of the people around us. Building new skills is the foundation of capability building. Individuals, teams and organizations need to constantly develop new skills and new ways of applying them. This is at the centre of what we are doing at TeamFit.

Network (or Connections): Sometimes it is as important to connect two existing skills as it is to develop a new skill. New combinations of skills are behind most innovations. Connecting skills and connecting people are both important and the two often go together. Skill-based networks are the future of knowledge work. Of course skills in the abstract are not very interesting. It is how they are applied that matters. So we need to connect skill-based networks with purpose-based networks. Skills applied together with purpose – sounds like the definition of a team.

Software: Conversation bots, the semantic web, artificial intelligence … many skills are getting captured into software. If a skill can be converted into software it will be. This has many consequences for capability building. Skills become software, the software allows experts to perform at a higher level, the skills of the few become available to the many. Smart people and companies are trying to convert their skills into software so that they can move higher up the value chain and focus on highly differentiated and creative services.

Data: Big data, small data, data lakes, data this, data that a great deal of data is collected in the course of work. Software systems can be designed to collect data. People can collect data as part of their day-to-day work. Professional and company networks can be great sources of data that can add to the capabilities of the company. At TeamFit we are constantly gathering data about skills and the way they combine to deliver extraordinary performance.

“Which capabilities matter?”

It is very hard for many companies to know which skills to invest in. There are the core skills that many people have and are used over and over again on many different projects. There are the differentiating skills that drives positioning and profitability. Core skills and differentiating skills both require investment and are central to an individual’s or a firm’s capabilities. Then there are declining skills and emerging skills. Investment in the former should be discontinued. Emerging skills need to be investigated to see if they are future core or differentiating skills.

“How to evolve capabilities?”

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The capabilities that support your business today are not necessarily those that will matter tomorrow. Skills go through a natural evolution from Emerging to Differentiating to Core to Declining. Good skill management means tracking skills across this skill adoption cycle and making the right level of investment. Not every emerging skill will be become differentiating, and some skills will go directly from Emerging to Declining.

Emerging – explore these skills, see what new capabilities they imply and how they will fit into existing Differentiating and Core skills.

Differentiating – these are the skills that drive differentiation and profitability. They can be based on unique specializations or combinations. Individuals who lack differentiating skills will be driven into commodity markets.

Core – these are the skills applied over and over again across many projects. Project management is one such skill for many professional services companies.

Declining – these are the skills that were once differentiating or core, but that are now of declining importance, either because they have become commoditized and should now be outsourced or because they are of less and less relevance to current and future markets.

The TeamFit Skill Gap Action Plan will help you understand the capabilities, real and potential, that you can use to deliver on your vision and to achieve your goals.

Top image from Penn State course on Flowering Plants.