Several years ago, colleagues from my old consulting firm, the RBL Group, wrote about a clever way to convert business goals into a plan of action and investment. Plenty of consultancies talk about the difficulty and importance of effective implementation plans. But, these colleagues, Dave Ulrich and Norm Smallwood, in an HBR article called “capitalizing on capabilities” took a different approach.
Ulrich and Smallwood focused on organizational capability as a critical missing link between vision and outcome. Think of capability as the extension of “competency-based management” at the organizational level. Here’s how Ulrich and Smallwood described the role of capability in business performance and value:
“Capabilities—the collective skills, abilities, and expertise of an organization—form the identity and personality of the organization by defining what it is good at doing and, in the end, what it is. They are stable over time and more difficult for competitors to copy … They aren’t easy to measure … but these capabilities give investors’ confidence in future earnings.”
They pointed out research by Baruch Lev who studies capabilities from an intangible assets perspective, and who found that company valuation is forward looking based on investor’s confidence in future earnings e.g., their ability to continue to grow and thrive. That ability is what organizational capability is all about.
Lev put it this way:
“Intangible assets—a skilled workforce, patents and know-how, software, strong customer relationships, brands, unique organizational designs and processes, and the like—generate most of corporate growth and shareholder value. They account for well over half the market capitalization of public companies. They absorb a trillion dollars of corporate investment funds every year. In fact, these “soft” assets are what give today’s companies their hard competitive edge.”
I find it helpful to think of organizational capability as a bundle of skills, investments, process choices, IP, analytics, performance measures, and other resources. Aligning these activities and assets to create capability is the goal; they must work together. Different strategies, in turn, rely on different bundles of capability:
In short, different companies with different strategies means different capability bundles.
The link between strategy and capability bundles is equally important for talent marketplaces. Different platforms – marketplaces and social networks – have different strategies and, therefore, may require different capability bundles:
Naturally, if the strategy changes, capability may also need to be reprioritized. For example, Riverflex.com, a freelance platform for independent consultants, is rapidly expanding its digital transformation, digital marketing and data platform services across EU and some Asian markets. As it expands geographically, Riverflex tests the continuing importance of a hard won historic capability –expertise and deep experience in the consumer and retail space. A bigger market opportunity may lead the platform to expand more deeply in other industries. Capabilities are rarely “forever”.
Large corporations understand the role of building strategic capability. A recent McKinsey survey of executives put it this way: “The strategic importance of capabilities is apparent around the globe: half of all executive respondents this year say capability building is at least a top-three priority at their companies.”
How might a freelance platform team review their S.W.O.T. (strengths, weaknesses, opportunities, and threats) and determine the capability bundle they needs to be successful? Here are three key steps to get you started.
Step one: deciding what capabilities drive the customer experience
“What do we want to be consistently experienced by our best, most demanding, customers? What are the critical few areas where we need to be best in world to thrive.”
It’s not an easy question to answer, but it’s an essential first step.
If your platform is well regarded and regularly employed by your best, toughest, most demanding target customers, and you have more than your fair share of top talent on your platform, it means you have been very effective in building the capability bundle needed to thrive – so long as there isn’t a massive shift or black swan event (like a Pandemic!).
Here are some obvious capability bundles. What’s yours?
Each of these capability bundles – speed, deep expertise, teaming, collaboration, unique IP – relies on your effectiveness as a platform team to identify, organize and align the “bits” of capability: talent with the right set of technical and “soft” skills, the organization and roles you’ve designed, the way the matching algorithm works, the unique IP, the process choices and investments you’ve made, and reputation building assets. As someone once said about capability management, “the magic is in the mix.”
Step two: make your best customers your best advisors
No one knows the strengths, weaknesses and competitive vulnerabilities of your platform better than your best, most demanding, customers.
Put your capability to the test. Ask your best and toughest customers for feedback. Their honest perspective on what your platform does well and less well is crucial information. But remember, asking feedback implies a contract: “If you will tell me straight, what you think, I will take action where needed.”
Here’s one way to seek customer feedback:
“We believe that agility is one of the most important strengths for our platform, the ability to “move quickly and effectively to provide the right resource, solve problems, and make changes that benefit our customers and talent.” Please help us by answering four questions:
Step three: Remember, it’s a two-sided marketplace
As a two-sided marketplace, you must also satisfy a second critical stakeholder, your supply side clients: the talented freelancers that join your platform. Their success is the chief priority of the platform.
In this case, we know the supply side drivers: the Big Five Drivers that attract and retain top freelance talent:
The key to converting talent platform members into advisors is to ask and act! But don’t waste their time. Use pulse surveys and sample platform talent: That way each person is asked just a few times, but you are getting rich, ongoing, feedback.
Here’s a simple set of questions:
How well do we serve you? We’d like your assessment and, if possible specific examples and suggestions for improvement. How satisfied are you with:
Treating platform members as partners in capability building, pays significant dividends. Contra.work found freelancer feedback invaluable in building a high commitment platform. Venture L, founder Matt Mottola reserves a big chunk of his time to check in with freelancers and hear first-hand how the platform can be more responsive. OMS, a major French consulting platform, is responding to freelance feedback by developing an academy to help consultants stay up to date in “digital transformation”. Freelance feedback led Hoxby, in the UK, to engage a director of “future proofing”.
Capability is ultimately about fully investing in your vision
Think of capability as the engine powering strategy. Although capability may sound too “MBA-speak,” it’s an exceedingly practical concept. If, for example, agility is the essential capability for success, we cannot “conjure” it; instead, we must architect the capability bundle bit by bit, ensuring that skills, work processes, tech investments, performance measures, and communication activities combine and align.
When platform leadership teams reach agreement on the question – “what do we want to be known for by our target customers and talent” Ulrich and Smallwood would say they share a “unity of identity” which is, of course, the essence of organizational culture. After all, they write, “culture is what we want to be known for by our best customers made real by our daily actions.”
Viva la revolution!
HR thought leader, author, teacher and early stage investor. Writing about the freelance revolution and the future of work. Books include HR From the Outside In, HR