9 minutes

WTF are Capabilities?!

with Richard Doughty

Every company needs certain things if they want to operate successfully. They are often called ‘operational capabilities’ – the functions, structures, and processes you need to run an effective business, and consistently deliver your promised value.

Wyseminds capabilities business growth

There are lots of these capabilities, and they include things like project management, change management, financial management, etc. But which ones should you focus on if your goal is seamless business growth?

Wyseminds believes there are three; your organisational structure, value creation process, and decision making process… but unfortunately there is no one process or structure that will work for you forever – because your capabilities have to change and adapt as your business grows.

Moving with the times

Imagine; when your company has grown into an established and successful business, you won’t be making decisions in the same way as you did when you were just starting out. The same can be said for how your business will be structured, and for how you will develop or enhance your offering to your customer. 

These elements should all change and evolve as your business grows – and many businesses struggle because their capabilities aren’t matched with their current situation. Perhaps they have over-developed these capabilities before their time, or are holding on to ways of doing things beyond when they are useful. You need the right capabilities for the moment you are in.

We recommend aligning your capabilities with your growth phase. If you want to know more about growth phases you can take a look at this article, and if you want to know what phase you are in you can take the Wyseminds Growth Evaluation.

 So how should these capabilities develop as your business grows?

Organisational Structure

Your organisational structure is about having the right people in the right places. This is not just about having clear functions, or teams with specific responsibilities, but also about organisational governance.

Forming:

 

When first starting out, your organisational structure is just you the founder(s) – maybe with some friends or family helping out – but everything is simple and flat.

Survival:

 

As you begin to properly sell your offering you may start involving other people; all working together as one team with few systems, controls, or signs of formality.

Establishing Ground:

 

But this begins to change as you really start expanding your offer – because that’s when your structure begins to accommodate for functional expertise in different roles. At this point you begin to gradually formalise things.

Seeing Success: In Progress

 

Eventually you as the founder(s) will need to focus on strategic issues more than day-to-day operations. You might appoint a 2nd in command to manage your existing operations, and as your business grows in quantity and complexity they may establish and lead an operations board to ensure consistency, quality, and efficiency.

This often overlaps with the period when founders assemble a board to help them think about the more strategic issues they’re considering. This future-thinking board will help with deciding which growth directions to take, and what areas to (re)invest in.

Seeing Success: Consolidating

 

If you decide to embed and enhance your position in your existing market, your structure will need to adapt to balance your existing operations with dynamic project teams who are driving new opportunities in your current market.

Seeing Success: Replicating Growth

 

If you decide to branch out into new markets or territories, your organisational structure will need to adapt to balance your existing operations with dynamic project teams who are driving new opportunities in your current market.

Keeping Growth:

 

Over time this structure becomes reassuringly consistent – perhaps even comfortable. Change becomes harder to make, and well-established structures can sometimes be too sluggish or bureaucratic for swift innovation.

If your organisational structure is under-developed for your current growth phase it could mean that you don’t have the right people with the right skills in the right places. That may mean you as the founder are having to step in and do operational work when your focus should be on growth and fulfilling your purpose.

If however your organisational structure is over-developed for your current growth phase it could mean that you have introduced structures and formality before you really need it, which may take effort and attention away from some of the quick moves you need to make in earlier phases.

Decision Making Process

Your decision making process is about who has authority to make decisions for your business, and what information, evidence, or advice they take.

Forming:

 

When first starting out, you as the founder(s) are making all the decisions. You probably don’t have a lot of evidence or data at this point, so most of your decisions will be based on how you want to fulfil your purpose and meet the needs of your customer.

Survival:

 

As you first start to sell your offering it’s a bit like being in a testing phase, and you can now start adapting your offering based on customer feedback, and perhaps on the expertise of some key advisers – but it’s still you as the founder(s) making all the key decisions.

Establishing Ground:

 

By the time you have a more tested offering that you are delivering at scale you now begin to gradually delegate day-to-day decision making. In theory this should make things run more smoothly, as functional experts begin to take ownership of their areas, but in practice the time you spent as a hands-on founder can be hard to let go of.

Seeing Success: In Progress

 

By the time you have expanded you will probably have decisions being made throughout the organisation, including by a 2nd in command who is taking ownership of all things operational. Realistically though, your operational team has deepened their knowledge and experience so much that they can see things you can’t – and they may be asking for more autonomy and decision making control.

As the founder(s), if you want to grow further then you now face one of the most important strategic decisions you will ever make for your business – do you stick with your current customer market, or branch out into new ones?

Seeing Success: Consolidating

 

If you decide to embed and enhance your position in your existing market, then by this point in your growth journey the day-to-day operational decisions have long been delegated to your second in command and/or your operations board. You as the founder are probably leading a future-thinking strategic board, and your decisions are focused on fulfilling your purpose, diversification, and staying relevant for your chosen customer.

Seeing Success: Replicating Growth

 

If you decide to branch out into new markets or territories, the decision-making picture is more complex; an existing operations board for your core offering, dynamic project teams trying to break into new markets, and a future-thinking strategic board to provide leadership for the whole thing. As the founder(s), your team needs to know when a decision is higher risk and should therefore be deferred to you.

Keeping Growth:

 

Over time your decision making process becomes routine. If living your purpose in this new chapter requires a radical new growth direction for your company, then you need decision-makers who are not overly risk-averse. For you as the founder(s) you need to fund the balance between your team’s hard-won experience, and your desire for growth and change.

If your decision making process is under-developed for your current growth phase, it could mean that you as the founder(s) are trying to control things beyond when it’s helpful. This is very common for a variety of reasons; for some founders it’s because they believe (sometimes correctly) that their experience has given them insight others don’t have, but for some it is because they place their ego in being the decision-making authority.

If however your decision making process is over-developed for your current growth phase it may mean you are delegating decisions to your team too soon. Perhaps this is because you are uncomfortable with making decisions, or you find it difficult to make decisions without the input of others. An overly rigid decision-making process can hinder you in moments when you need rapid decisions to grow and fulfil your purpose – something you the founder(s) will more likely have an intuitive understanding of.

Value Creation Process

A value creation process refers to the key activities you use to make value for your customer. Imagine a company making chocolate bars; they create value by collecting and processing raw ingredients, packaging them, and distributing them in a way that is easy for resale. It’s all about your contribution, your value, in the eyes of your customer.

Forming:

 

When first starting out, you are developing your core product/service. It’s pretty basic, which is what it needs to be right now – you need to decide on your core offer that is most likely to help fulfil your purpose.

Survival:

 

Once you have begun meaningfully selling you start to update your offer based on customer feedback. Now you want to think about what you would need to do to deliver this at greater volumes, and what new partnerships may help ensure your value proposition is unique.

Establishing Ground:

 

By this phase you are providing your core product/service to a larger customer group, and with consistent quality. Now you’ve learned more about your customers and their needs, you might be thinking about adding value – through additional products/services, or added extras.

Seeing Success: In Progress

 

By the time you have expanded you will have a well-oiled value creation process; delivering quality products/services, with added value, to an established group of customers. 

So what’s next? Well that depends on if you want to move with your current market, or branch out into new ones.

Seeing Success: Consolidating

 

Creating value as you consolidate in your existing market often involves new product lines or specialised services that will meet the changing needs of your customer. You will need to find the right balance between your core offering and new initiatives as you seek to deepen your connection with your customer.

Seeing Success: Replicating Growth

 

Taking your offering into new markets (whether a different territory, or an entirely new customer group with different needs) involves new partnership and alliances, and finding the right balance between your core offering and your new initiatives as you seek to build connection with new customers. 

Keeping Growth:

 

By this time you have a well established value creation process – and you have looked for where you can make things more efficient and affordable. 

The big question is ‘where next?’ – is this the time for a radical new partnership that extends your core offering and reignites how you add value to your customer?

If your value creation process is under-developed for your current growth phase, you may struggle because your offering hasn’t been tested and refined yet, and your customer may lose the wow factor.

If however your value creation process is over-developed for your current growth phase, then you may be trying to do too much too quickly. An over-engineered offering can put strain on your organisational structure and decision-making process because they are not developed enough to support it yet. Sometimes, simpler is not just easier, but also the right thing for you and your customer.

The Goldilocks zone

Your organisational capabilities are something of a balancing act: you don’t want them to be over-developed, nor under-developed – they need to be just right.

Wyseminds PowerballBUT… the most important thing to do now is not get distracted from your purpose. It’s really tempting to dive into processes and systems – hey we’re all process geeks at heart! – but these capabilities are only ever effective if they are in service of your purpose as a business. So always begin with aligning your Powerball (the most important Drivers for growth), and then adapting and changing your capabilities becomes so much easier.

 

Wyseminds purpose and purpose-led

 

If you want to know more about how aligned your capabilities are with your company and your purpose, why not join a Wyseminds business growth workshop? See here for the next available dates.