Organizational Capabilities Resources People, equipment, technologies, cash (tangible) Product designs, information, brands, relationships (intangible) Processes Patterns of interaction, coordination, communication, decision-making Transformation: resources into higher value products and services Decision-support: market research, financial projections, resource allocation Values Standards by which priorities are set Gross margins, size of opportunity (reflect cost structure and business model)

Migration of Capabilities Path: resources –>processes –>values–>culture. Some companies never move beyond tacit processes and values of the founder Processes and values constrain and shape employee behavior Migration path is fine as long as problems remain similar (e.g, develop and introduce sustaining technologies) New problems may turn this migration path into a disability (e.g., disruptive technologies)

Fitting the Tool to the Task Good Poor (sustaining innovation) (disruptive innovation) Fit with Organization’s Processes Fit with Organization’s Values Use a heavyweight team in a separate spinout organization Use a lightweight team within the existing organization Development may occur in-house through a heavyweight team, but commercialization almost always requires a spinout Use a heavyweight team within the existing organization GoodPoor

Acquisitions Why was the acquisition made? Was it resources, process or values? Be careful not to destroy what was unique about process and values of acquisitions (IBM-Rolm, Daimler-Chrysler) If its processes or values, keep new unit separate, and transfer parent’s resources into the unit (Cisco-StrataCom) If its resources, then integrate unit with the parent.