“However beautiful the strategy, you should occasionally look at the results.” — Sir Winston Churchill

Internal Resources and Capabilities

In last week’s article, we noted that two of the first things that need to be done in a strategic planning exercise are to review the external environment and also to critically review the internal resources and capabilities of the organisation.

We came to the point where we realised how important the resource of capabilities is. So are there tools to assist us to take inventory of these internal assets? Sure, one of them is called the VRIO framework, originally developed by Professor Jay Barney in the 1990s:

Valuable — the resource helps the organisation improve its value-added

Rare — few, if any, organisations possess this resource

Imitable — the resource cannot easily be copied or substituted

Organised — the organisation must be able/organised to take advantage of the resource.

The bottom line is, if your organisation can have or somehow acquire a resource that is valuable, rare, hard to imitate, and you also have the organisational structure and capabilities to exploit this asset — then your organisation should have a long-term competitive advantage and demonstrate performance that is above the industry average.

The corollary to this — and which should be significant food for thought — is that even if an organisation has an asset that is valuable and rare, it does not have the management know-how or the organisational capabilities to exploit this asset, then the asset is of no use to them!

Without me saying it — if you think about this for even a few seconds — several examples will come to mind, both on the micro and macro levels!

I cannot emphasise it enough — the importance of the internal resources and capabilities.

For example, in the middle of the 2008 recession when big PC makers like Dell and Lenovo were all experiencing declining sales, Hewlett Packard mustered their internal capabilities. They redesigned and repositioned the laptop into a newly differentiated product, even engaging the services of a clothing fashion designer to execute their strategy! So while the entire industry was heading south, according to the December 11, 2008

BusinessWeek, Hewlett Packard announced “fourth-quarter earnings that handily beat Wall Street expectations”!

Organisation Purpose

At some point at the beginning of the strategic planning process, the strategists need to consider the purpose of the organisation. Lynch believes that when considering this, there are five cogent questions that must be asked:

What is our area of activity — and what should it be?

What kind of organisation do we wish to be?

What is the relative importance of shareholders and stakeholders?

Do we want to grow the organisation?

What is our relationship with our immediate environment and with society in general?

The answer to these questions should then help the organisation to formulate the vision, mission and objectives of the organisation.

Organisation Vision

Lynch defines vision as “a challenging and imaginative picture of the future of the organisation”. You could say that it is when you lift up your eyes and look beyond the molehills and hills in the current environment — to seeing the possible positioning of the organisation on the mountaintop.

The vision should present a picture that is not impossible to achieve, but even though difficult, should be doable, even if it is with sweat and tears! Achieving it would then be enormously fulfilling, exhilarating and even surreal!

I would like to hastily make a point to the theorists and academicians who have little or no grounding in industry leadership. Creating a succinct and compelling vision and mission is not a “be-all and end-all” in strategy that MUST be done NOW while planning the strategy or WE ARE IN TROUBLE thing. That is why I love that sweet spot where theory intersects with reality!

Let me give a fitting example. When Lou Gerstner took over as CEO of IBM in the 1990s when IBM was teetering on the brink, he was asked what you would call a “sensible” question. Before I tell you the question, Gerstner had another issue, he had gone to IBM from Nabisco, the biscuit company. So some of the critics were asking, “what does a biscuit guy know about the computing industry, and what can he do to help IBM?”

I always contend that a leader/manager is leader/manager. So if I am managing an organisation that deals with tomatoes or repos or hamburgers, if I am a great manager I will manage! Remember — a great manager knows that two of the more critical things are to be able to lead people and manage processes! And these are common to all organisations!

MBA Forum readers know I love to digress — so here is the question that was asked of Lou Gerstner at the outset. “What will be the new vision for IBM?” It is said that Gerstner responded, “The last thing IBM needs now is a vision!”

Of course, the guy was right! If survival is the paramount objective; when one wrong move could cause the company to plunge into bankruptcy; when the company was critically short of cash, among other serious viability issues, when the day-to-day operational issues were critical, then the last thing you need is a vision!

The situation flipped some time afterward though when the company situation was stabilised. At that point Gerstner was said to have declared, “What IBM really needs now – is a vision!”

(Strategy is normally a capstone course at the end of MBA programmes…so the MBA Forum is coming to a close soon.)

Dr Kenroy Wedderburn is an MBA part-time lecturer. Send your e-mails to drkwedderburn@gmail.com.