Capabilities – the power behind progress: better capabilities, better progress; lacking capabilities hinder progress. Ask yourself, what capabilities are missing, or can be improved, for a progress journey? (and only then, what resource that carry those can you create/offer that are aligned with Seeker’s vision of progress?)
What we’re thinking
We apply capabilities to make progress.
These capabilities are the skills or knowledge, or physical attributes such as strength, abstract attributes such as availability, or those from nature like power, etc. From an organisation perspective, we might talk of marketing, production, R&D, customer service, or learning capabilities.
capability: a quality of a resource that is used in making progress
Capabilities are carried by resources – people, goods, systems, departments (groups of people, systems), etc.
The better the capabilities you can draw on, and the better you can apply them, the better progress you should be able to make.
However, lacking one or more of the needed capabilities likely limits your progress (and therefore perception of value). This is the lack of capability progress hurdle…and the core opportunity for Progress Helpers (who offer supplementary capabilities in the form of progress propositions)
By focussing on identifying weaker and missing capabilities for a progress journey, leaders can help:
- make current progress in a better way
- make better progress than today
- reduce the progress hurdles
such capabilities though then need to be packaged into resource(s) that the Seeker prefers to engage with (usually driven by whether they want to be enabled or relieved of the progress-making activities)
Our clear distinction between resource and capabilities comes as a consequence of Levitt’s famous “people don’t want a 1/4 inch drill, they want a 1/4 inch hole”. Seekers need a 1/4 inch hole making capability – which can be carried by a variety of resources. An innovation lever opens up as different resources can carry the same capability: they can be exchanged.
Creating below here
What are capabilities?
Capabilities power progress.
When effectively applied, they move us toward our progress sought. When absent, they hinder the journey.
We might, for instance, draw on skills and knowledge to develop new approaches to innovation (such as the Progress Economy). We might use physical strength and technical skill to ski 100 km cross-country, or take advantage of available time to read extensively.
Organisations operate the same way. They might leverage their R&D and innovation capabilities to apply the Progress Economy in finding new ways to help Seekers make better progress. Or they might use customer service capabilities .- systems, codified knowledge, and processes – to deliver exceptional experiences.
Entities with stronger capabilities, and the ability to apply them more effectively than others, hold a distinct advantage: they can make better progress and make progress better.
We will shortly see that capabilities exist in a hierarchy, and that they are distinct from resources. Before exploring that, we first need to define what we mean by capabilities.
Defining Capabilities
As a concept, capability can be somewhat abstract.
The Oxford English Dictionary defines them as
the ability to do something
Oxford English Dictionary
Academic perspectives, such as the Resource-Based View and Teece’s dynamic capabilities, define capabilities as the resources or abilities used to achieve strategic goals. In practice, the boundary between a resource and a capability is often blurred, and terminology unhelpfully varies across different disciplines.
| Lens | Definition highlights of capabilities |
|---|---|
| Resource-based view (RBV) | an organisationally embedded, non-transferable resource developed through processes and routines that enable the firm to deploy other resources effectively for strategic advantage. It is distinct from resources – which can be bought or copied – as capabilities are firm-specific and hard to imitate. |
| Dynamic Capabilities | higher-order organisational abilities that enable firms to sense opportunities, seize them, and transform resources, competences, and structures to adapt in rapidly changing environments. They are essential for sustaining competitive advantage. |
| Enterprise Architecture | what an organisation must be able to do to achieve strategic goals. It describes what the firm does – not how it does it – and differs from functions (how work is structured) or services (value delivered). |
| Capability Management | a collectively embedded, action-oriented capacity – a reliable pattern of problem‑solving routines developed through experience. These capabilities are socially embedded, manifest in shared routines or cognitive frames, and evolve over time. |
For the progress economy, we need a definition that has a progress-first nature, that can align with all these definitions, as well as our view of service. To that end, we have:
capability: a quality of a resource that is used in making progress
These qualities are wide-ranging, and can be seen as four types:
- competences – for example: skills and knowledge, together with execution (ability to apply capabilities)
- within skills and knowledge we find learning, innovativeness/R&D, customer service, marketing etc
- physical – for example: strength, sensory, power, energy
- natural – for example: power
- abstract – availability/time, scalability etc
It is a view that aligns with our definition of service (singular) – the application of capabilities for the benefit of oneself or others.
A key characteristic of capabilities is that they are tied to resources.
Relationship to resource
In the progress economy, we say that capabilities are carried by resources – items available to the Seekers, including themselves. Here’s some examples:
| resource | example capabilities |
|---|---|
| seeker | skills, strength, time |
| car | transportation |
| generative AI system | knowledge, scalability |
| R&D department | knowledge, skills, innovativeness |
| wind | movement |
Progress is made by applying capabilities; that is, by integrating resources.
Some resources do things to other resources, and others have things done to them, to make progress. More formally, we observe operant and operand resources, defined by how they are involved in making progress:
acts on other resources resulting in progress being made
need to be acted upon for progress to be made
Here’s an example. A Seeker might travel 100 km by applying their driving skills to a car’s transportation capability; in doing so, they are integrating themselves and the car.
In everyday language, however, we are often less precise when describing this, saying simply that the Seeker applies their driving skills to the car; or even simpler, the Seeker “uses” the car.
These linguistic shortcuts can blur the distinction between resources and capabilities. They might also tempt us to wrongly think that capabilities themselves should be classified as operant or operand. We resist that temptation and draw a strong distinction between capabilities and resources.
Distinguishing between capabilities and resources
We distinguish capabilities from resources for one critical reason: it creates a lever for innovation. If two resources carry the same capability, one can be substituted for the other. An encyclopedia and a generative AI system, for example, are very different resources—yet both carry knowledge, and either can fulfil that role.
This point is even clearer when we draw on Levitt’s famous observation in Marketing Myopia:
People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!
Levitt “Marketing Myopia”
To get that hole, the Seeker must engage a resource that carries the capability to make one. A drill is one such resource. A handyman is another. In recognising this, we move beyond the unhelpful goods-versus-services mindset that still dominates traditional thinking.
The deeper question is: why does one Seeker choose the drill, while another hires the handyman? As we explore with resources, it comes down to whether they want to be enabled or relieved.
Role of capabilities in the progress economy
Seeker apply capabilities in order to make progress. At the very least they need knowledge, and skills to execute, the progress-making activities of their progress journey. Many journey’s will require additional capabilities, carried by a variety of resources.
Where a Seeker is lacking capability, they have a progress hurdle (lack of capability) which likely results in them struggling to reach their progress sought.
In such a case, they have three choices. They may decide not to make the progress attempt. Or they make a progress attempt anyway, looking to generate the needed capabilities through trial and error. Aternatively, they look to engage a progress proposition from a Progress Helper. These propositions are offers of supplementary capabilities:
- a proposed set of progress-making activities
- supplementary capabilities carried by a Seeker-facing, proposition specific, resource mix
- internal-facing capabilities
The takeaway is clear: identify the capabilities the Seeker needs, then determine the type of resource that carries them and best matches the Seeker’s preferred way of making progress.
Seekers capabilities
Our foundation of service-dominant logic naturally encourages us to see seekers as possessing skills and knowledge (competence) capabilities (confusingly, called resources).
Alves, Ferriera and Fernandes (2016) point to a broader range, including:
- physical – include sensory-motor endowment, energy, emotions and strength.
- social – made up of both personal and cultural relationships
- cultural – include specialised knowledge and skills, life expectancy and historic imagination
Alves, Ferriera and Fernandes (2016) “Customer’s operant resources effects on co-creation activities” referencing Arnould, Price and Mashe () “Towards a cultural resource-based theory of the customer”
And we’ll add availability as an abstract capability. A Seeker may, or may not, “have the time” to make a particular progress attempt.
It is the combination of this that we that we consider are Seeker’s capabilities in the progress economy:
- competences, eg skills and knowledge (which can include learning, innovative capability etc)
- physical, eg strength, speed, movement etc
- social, eg personal and cultural relationships
- cultural, eg specialised knowledge and skills, historic imagination, specialised ways
- abstract, such as availability.
Some capabilities seekers are born with but the majority they acquire, or increase, in several ways:
- observation/imitation: by observing others making progress attempts
- experience: hands-on involvement in their own progress attempts or from participating in progress attempts
- experimentation/innovation: using, or combining, capabilities in new ways (this may be more observable as using, or combining, resources in new ways)
- education and training: taking formal education and training programs to acquire specific capabilities (eg skills and knowledge from a teacher, or strength from weight training)
Some capabilities come from operand resources
- from engaging progress propositions: resources (such as goods and systems) they obtained from other progress attempts they have been involved in carry capabilities they might reuse again and elsewhere
Seekers will certainly acquire capabilities from outside your industry/market. The implication being you should look to see what seekers have when building your propositions. I often point to use of QR codes as an example of this. Originally from the auto industry, they are now widely used, and expected to be used by seekers, in many different industry/market use cases.
Helper’s Offered capabilities
The theoretical origin story of helper’s capabilities is they come from a a Seeker who lacked capabilities for a progress journey but persevered anyway. Through trial and error they developed the capabilities and succeeded. They then decided to offer those capabilities other than other Seekers (in exchange for service they need, directly, or more likely indirectly).
Whilst this may happen – particularly when we think of start-ups – there are several competing stories. All though should start with an entity deciding they wish to help with a particular defined progress journey. They can then acquire or align with other Helpers that have capabilities needed. Or they can pro-actively develop the capabilities themselves (R&D, innovation activities).
Helper’s internal capabilties
Within an organisation we talk about its capabilities, for example, R&D, production, marketing, customer service etc. but there’s also capabilities such as learning, innovativeness etc.
Hunt (2004), sees a helpers’ operant resources falling into the following categories:
- Human resources
- Organizational resources
- Informational resources
- Relational resources
Hunt, S. (2004) “On the service-centered dominant logic of marketing”
Where human resources refers to the skills and knowledge that individual employees posses (rather than a HR function)
Gaining capabilities
Applying capabilities
Capabilities need to be applied to make progress.
You apply your learning capability to learn how to play a guitar…and then apply the skills you have developed to play music on that guitar. An organisation applies its marketing and innovation capabilities to evolve its progress proposition to help a Seeker make better progress.
This application happens in resource integrations, often following a defined set of progress-making activities.
Why this matters
When thinking of making progress our question should be first: what capabilities are needed? Second should be what resources should carry those capabilities?
Let’s progress together through discussion…