Covid has set new records for the number of buzz words generated. The chorus of terms like ‘capacity’ and ‘capability’ rank as highly as ‘pivot’ and ‘new normal’. But beyond using increasingly empty business jargon in our meetings and conversations, we shouldn’t miss the opportunity and importance that these words signify.
Capacity and capability are the foundation of sound business strategy. Regardless of industry, product, market or phase, understanding the relevance of capacities and capabilities in business should be a renewed focus.
Capability and capacity can be lost when businesses enter a common spiral that forgoes strategy based on reaction. The spiral goes from neglect to crisis management to replacement challenges, and as a result, businesses are unable to prioritise sound strategy that achieves their vision and objectives.
The spiral:
Neglect. For many businesses in their journey, they experience strong market growth, either domestically or internationally. As they grow, the company requires all hands on deck to manage the change to meet greater demand with their capacity.
Internal investment slows, and often market diversification strategy gets out of skew, with crucial customers or markets becoming more significant (and having more power) than they should. Many never question the goose laying the golden egg, because at this stage, profit levels often look good. As a result, contingency is not built, nor is an investment made in capacity and capability to absorb any future sudden change in business conditions.
Crisis. Enter Covid, geo-political trade issues, logistics disruptions, war, inflation; you get the point. Any considerable change or crisis requires businesses to dig deep into their kit bag. Due to neglect, businesses find them outdated or lacking the depth to respond to their challenges. At this response point, businesses lack the core skills to respond well; because they have not grown their capacity and capability as individuals or within the business. In this crisis, businesses have missed the opportunity to have pre-built the ability to respond to the changing marketplace.
Replacement challenges. Businesses still must respond to the crisis but are faced with two real replacement challenges. Firstly, their current skill set, and then, a lack of human resources.
On current skill set, many owners or executives have developed a set of capabilities and capacities that lies within their own strengths and comfort levels. Investment and priority of development are often focused on the skillset of owners. In time organisations, big or small, take on the leader’s capabilities and capacities.
Over time this creates blind spots across leadership and the organisation, resulting in a lack of skill development outside the owner’s wheelhouse of skills. These new challenges often require new thinking and new skill sets. They may require hard decisions across your team, including business leaders.
A lack of human resources makes replacement challenges more difficult, as businesses are uniquely placed coming out of the pandemic. People’s attitude to work has changed significantly. It’s an employee market due to almost full employment and a lack of migration.
Businesses are losing staff to more aggressive competitors. Competition rises now as organisations are proactive in their approach to managing teams and developing new salary initiatives that engage them in the cause and success of the business, taking an interest in their staff’s personal life and allow flexibility for the two to coexist.
Breaking the spiral:
If we’re making the conscious decision to address and prioritise capabilities and capabilities to avoid this spiral, what are they, and what actions are required to respond?
Capabilities and capacities are the ability to absorb the ebb and flow of business and market conditions. To adapt and have the skills to remain focused on achieving corporate objectives with the skills and ability of your organisation. Failing to prioritise, grow and adapt your capabilities and capacities leaves your business with little ability to counter any challenge or take on new opportunities.
Capabilities can be thought of as tools in your toolbox. A new job requires doing around the house, and you look to your toolbox to find the right tool to fix it. If you don’t have it, you will need to go to Bunnings and buy it. Non-negotiable capabilities are your decision-making process, people resources, how you connect with customers, leadership, communication, and operational and financial efficiency. The end goal of your capability development is to build resilience in your team and business to meet the changing work and market environment.
Capacity is like a sponge; pouring water on one will only absorb to a certain point, and the remaining water will run down the sink. To take on more water, you either need to let go of some or get a bigger sponge. Non-negotiable capacity is capital, scalability, production ability, time and cost management of your finite resources. The result of all capacity is to give you the resources to manage your growth opportunities well.
Businesses can respond by reviewing and measuring their current capabilities and capacities in line with their corporate objectives. Corporate objectives should be well defined and are a realistic goal for the business. Capabilities and capacities are the vehicles that allow your business to achieve these corporate objectives. Once clear on the objectives, work backwards and set out the time frame in which you need to review, measure and grow your capacity and capabilities.
Building new capacities and capabilities almost always requires further training and outside support to lift the lid on the blind spots of the business and leaders. Few companies have the insights or discernment to see their deficiencies as they’re too close to the action; especially in difficult periods.
Take time to seek independent advice, realign your corporate objectives, and complete a capacity and capability audit. We have always found going through this process with clients creates clear direction and new energy for the way forward.
To-Plate has developed a great starting point to review your current position through our interactive group learning course, Pushing through to growth: scaling your business and brand to profit. For more information, contact us info@to-plate.com