4.2 Foundations of resources and capabilities Illustration 4.1 Resources and capabilities Executives emphasise the importance of resources and capabilities in different organisations. The Australian Red Cross To achieve the vision of improving the lives of vulnerable people the Australian Red Cross emphasises the crucial role of capabilities in its strategic plan. 'Capabilities are integral to our overriding strategy to create one Red Cross,' writes CEO Robert Tickner. The Australian Red Cross distinguishes between technical competency and behavioural capability. The former refers to specialist skills and may include such competencies as project management, financial manage- ment, community development, social work, administrative or in information technology. Capabilities at the Red Cross refer to the behaviours they expect its people to demon- strate in order to be successful in achieving objectives. The organisation aims to increasingly invest in the capabilities and skills of Red Cross people and supporters including members, branches and units, volunteers, aid workers, staff and donors. For example, this involves investing in a diverse workforce and supporter base, with strong engagement of 'young people, Aboriginal and Torres Strait Islander people, and other culturally and linguistically diverse people'. The emphasis is on people who are engaged, dynamic, innova- tive, entrepreneurial and motivated to realise the vision and goals. AstraZeneca For AstraZeneca, a leading global pharmaceutical company, both resources and capabilities feature prominently when they describe their strategy: 'R&D resources: We have approximately 8,400 employees in our R&D organisation, working in various sites around the world. We have three strategic R&D centres: Gaithersburg, MD, US; Gothen- burg, Sweden; and Cambridge, UK'; 'We are using our distinctive scientific capabilities, as well as investing in key programmes and focused business development, to deliver life-changing medicines'; '[Our] Distinctive R&D capabilities: Small molecules, oligonucleotides and other emerging drug platforms, as well as biologic medicines, including immu- notherapies, and innovative delivery devices'; 'Co-location near bioscience clusters at three strategic centres ... helps to leverage our capabilities and foster collaboration with leading scientists and research organisations'; 'Operations 2020 was launched in 2015 to enhance supply capabilities in order to respond better to patient and market needs'; 'We will also harness our internal capabilities to develop robust strategies on data and analytics, software engineering and cloud technology-all of which will support the business and its various transformation programmes2 Infosys The Indian company Infosys is a global leader in information technology, outsourcing, system integration services and IT consulting. It is listed as one of the world's most reputable companies with close to 150,000 employees worldwide. The company's 'Infosys 3.0 strategy' is taking a further step to provide more advanced IT products and services, which requires investments in new resources and capabilities. Infosys CEO S.D. Shibulal: 'We continue to make focused investments in our organisational capabilities.' The strategy emphasises innovation and focuses on higher-value software. Innovation abilities are central for this, as stated on the website: 'The foundation of our innova- tion capability is our core lab network-Infosys Labs-and the new thinking that our team of over 600 researchers brings to the table.' The strategy thus requires human resource and training capabilities including the ability to attract, employ, educate and retain new high-quality engineers. As Srikantan Moorthy, Senior Vice President and Group Head explains: 'We are currently hiring and developing talent in the areas of cloud, mobility, sustainability, and product development. In addition, a key focus is consultative skills. All of these are in line with our Infosys 3.0 strategy. We place significant value on continuous learning and knowledge sharing. 3 Sources: (1) Australian Red Cross Capability Framework, www. redcross.org.au/files/Red_Cross_Capabiity_Framework_2015; (2) AstraZeneca Annual Report 2017, pp. 4-32; (3) Financial Times, 13 August 2012: Financial Times, 11 September 2012; www.infosys.com Infosys; www.skillingindia.com/ Questions 1 Categorise the range of resources and capabilities high- lighted by the executives above in terms of Section 4.2 and Table 4.1. 2 To what extent and why might these resources and capabilities be the basis of sustained competitive advantage? 3 Imagine you are the general manager of an organisa- tion of your choice and undertake the same exercise as in questions 1 and 2 above. Chapter 4 Resources and capabilities analysis mapping and benchmarking. The section concludes by explaining the use of SWOT analysis as a basis for pulling together the insights from the analyses of the environment (explained in Chapter 2 and 3) and of resources and capabilities in this chapter. . Finally, Section 4.5 discusses some of the key issues of dynamic capabilities and how resources and capabilities can be created, developed and managed. 4.2 Foundations of resources and capabilities Given that different writers, managers and consultants use different terms and concepts, it is important to understand how concepts relating to resources and capabilities are used in this book. The resources and capabilities of an organisation contribute to its long-term survival and potentially to competitive advantage. However, to understand and to manage resources and capabilities it is necessary to explain their components.? 4.2.1 Resources and capabilities Resources are the assets that organisations have or can call upon and capabilities are the ways in which those assets are deployed. A shorthand way of thinking of this distinction is that resources are what we have' (nouns) and capabilities are what we do' (verbs). Other terms are sometimes used, for example capabilities and competences' are often used interchangeably (earlier editions of this text used the term 'competences' for capabilities). Other writers use the term intangible assets as an umbrella term to include capabilities as well as intangible resources such as brands. Resources and capabilities are typically related, as Table 4.1 shows. Resources are certainly important, but how an organisation employs and deploys its resources in the form of capabil- ities matters at least as much for long-term survival. There would be no point in having state-of-the-art equipment if it were not used effectively. The efficiency and effectiveness of physical or financial resources, or the people in an organisation, depend not just on their exist- ence, but on the systems and processes by which they are managed. These can, for example, involve the relationships and cooperation between people, their adaptability, their innova- tive capacity, the relationship with customers and suppliers, and the experience and learning about what works well and what does not. Illustration 4.1 shows examples of how executives explain the importance of the resources and capabilities of their different organisations. 4.2.2 Threshold and distinctive resources and capabilities A distinction needs to be made between resources and capabilities that are at a threshold level and those that might help the organisation achieve competitive advantage and superior performance. Threshold resources and capabilities are those needed for an Table 4.1 Resources and capabilities Resources: what we have (nouns), e.g. Physical Financial Machines, buildings, raw materials, patents, databases, computer systems Balance sheet, cash flow, suppliers of funds Managers, employees, partners, suppliers, customers Capabilities: what we do (verbs), e.g. Ways of achieving utilisation of plant, efficiency, productivity, flexibility, marketing Ability to raise funds and manage cash flows, debtors, creditors, etc. How people gain and use experience, skills, knowledge, build relationships, motivate others and innovate Human