Competency vs Capability Mindset: The Organisation

Design your organisation for the potential of its people and their capabilities, not the limits of an expertise.

I recently noticed that Capability or Competency? Mindsets matter was the second most read post on this blog. Part of the appeal of that post is that it addresses a critical shift in mindset for those grappling with the new dynamics of the future of work. We stand facing an organisational version of the personal insight Marshall Goldsmith described succinctly as “What Got Me Here Won’t Get Me There”

Competency-led Organisations

The Core Competency concept introduced by Prahalad and Hamel refined a concept that had been strong in management for decades. It is undoubtedly true that organisations compete by being better, more competent, at something than their competitors. However the mindset of being more competent differs from a competency. This subtlety was often lost as core competency flowed into the mainstream of management thinking.

The focus on core competencies created a mindset that organisation gets to choose its competencies as part of a strategic planning process and should set targets for competencies to fulfil its strategy.  While Prahalad and Hamel spoke of the need for organisations to look forward to assess and build their competencies, much of the focus in organisations has been historical. The biggest outcome of the discussion of core competency has been a narrowing of organisational ambition and a focusing of activity on historical strengths. “That’s not our core competency” is more common than “We can leverage core competencies”.

Influenced by themes that go back to the beginning of scientific management, we have turned core competencies into rigid processes, standards and policies. We have judged these competencies by what sustained competitive advantage in past markets. We have spent less time on the changing customer perceptions of value and the ongoing dynamics of the future marketplace driven by new competitors. The list is long of disrupted organisations who felt safe because a new entrant lacked their core competencies. In many cases the infrastructure to reinforce and sustain these core competencies became a burden in their ability to adapt and survive. 

Capability-led Organisations

The Big Learning mindset that pervades the future of work highlights that competitive advantage in the next century is based on the ability to build the capabilities required to compete in an environment of uncertainty. Rather than specifying a fixed goal of competency, we seek to build an open capability to fulfil our strategic intent and our customers’ needs as they arise.

Adapting organisations to foster autonomy, learning and change is what enables people to build the practical capabilities necessary to learn, grow and execute. The process you inherit is less important than the customer insight you gain in working to meet your customer needs. Prahalad and Hamel reinforced that in Competing for the Future their update of the core competencies discussion. The discussion on the need for organisations to build open capabilities that can help manage and drive adaptation.  These capabilities include openness to their networks and environment, collaboration, ability to learn, share and drive change. Critical too is the development of purpose as the new focus for organisational activity and the inherent rationale for groups of people to come together in work to benefit others.

Design for Capabilities

Responsive Organisations need to design for a capability-led response to a uncertain future. They need to develop core Big Learning practices like working out loud, personal knowledge management, adaptive leadership and experimentation. They need to design their organisations to allow individuals and the collective to focus on the realisation of purpose.

This organisational design will leverage networks, transparency, autonomy, experimentation and the inherent motivation of employees in ways that we have not yet seen. Developing a new competency in holocracy, agile, lean product development, design thinking, big data or any other single practice is not enough. An organisation must build the capability to continuously adapt to customer needs in a changing market.

Ultimately, it will also focus organisations more strongly on realising the potential of people, customers and other stakeholders. We need to design our organisations to build the capabilities that realise human potential. That can only help make work more human.