By Victor L. Magdaraog
Once again, the strategic planning season is upon a majority of companies. It’s time to dust off those planning manuals and scorecards. As has been practiced for years, companies will look at the market, customers, competition and some of the usual suspects that might just jump in and grab market share.
After reviewing these external factors, companies craft their strategies, build new scorecards and plan for resources they require including that other resource called talent. In the process they continue to search for that ever elusive competitive advantage. That single element which will provide the firm the unique advantage in the market.
Unfortunately, this external view of strategy is not the best approach that will give an organization its strongest competitive strategy. In my view, the best place to begin with strategy formulation is to look internally and look intensely at the firm’s talent. Talent is the best source of competitive advantage. Jay Barney and Delwyn Clark in their book Resource-based Theory, refers to characteristics that are “imperfectly imitable” as a source of sustained competitive advantage. A talent view of strategy and the firm guarantees that the company will discover that “imperfectly imitable” dimension. To paraphrase John F. Kennedy, the talent of which I refer to is not a set of competencies, but rather a mix of individual talent – leaders, value creators and individual performers who all contribute to realize the company’s aspirations. It is this mix of talent that is imperfectly imitable.
Just how does one start with strategy formulation using talent as source of its competitive advantage? Every individual talent has his or her own unique markers in a manner of speaking. These markers are represented by the individual’s success profile – competencies, experiences, knowledge and personal attributes. These markers form the individual’s talent DNA. With detailed understanding of these success profiles, one can then understand the value that individuals are capable of creating. Paul Romer, an economist, posits that the new factors of economic growth are people, ideas and things. People develop ideas which in turn are converted into things – products, services, intellectual property. These individuals then with their unique success profiles create ideas which a firm can convert to products, services or intellectual capital.
As these individual success profiles are consolidated across the firm, the organization’s DNA appears in the shape of intellectual assets, capabilities, structural assets and relational assets. Intellectual assets are knowledge developed by individuals that the firm is able to patent or claim exclusive rights over.
Capabilities are organizational competencies that individual members have designed. Structural assets are processes and methodologies developed by employees , while relational assets are customer relationships, connections and networks established by associates over time. Relational assets include corporate culture as well.
It is this unique set of assets, assets which are the consolidation of individual success profiles that are the best source of that unique competitive advantage.
It is best to start your strategic planning process with a talent audit. A process to appraise the talent mix (leaders, value creators and individual performers) who all constitute the firm. These individuals have contributed to the firm’s accumulated wealth represented by the four assets – intellectual, capabilities, structural and relational. It is this wealth that is the source of that rare and imperfectly imitable competitive advantage.
When was the last time you took stock of your organization’s talent mix and the wealth they have accumulated? Before jumping into an external scan, take a long look at what you have inside the firm. You will be surprised with the wealth of talent that surrounds you.
Victor L. Magdaraog is a Vice President with Development Dimensions International (DDI) in the Philippines
I do agree, management can usually see employees who are loud and talk about their achievements and the things they've done. But when you really evaluate all employees, you will see there are many skilled employees that can handle higher positions. Management should keep their eyes open.
Posted by: Eric | 11/23/2010 at 05:09 AM