Building Organizational Capabilities

In one of my favorite TV series, ‘The Expanse’, I came across this quote which went something like – ‘it is impossible to replicate natural systems in artificial settings. Humanity simply cannot reproduce the complexity involved.’ Intriguing concept – and one that I could immediately connect with a common challenge in business.

In today’s times, leaders and their HR partners are often thinking about ‘building capabilities’ ranging range from adapting to new channels of sales, new ways of marketing products and services, new supply chains that need to be built, new raw materials to meet quality and cost needs, and more. Organizational capability is something you do well that customers value and competitors can’t beat. It is a complex mesh of the tools, processes, incentives, skills, and culture that is extremely difficult to replicate. There are many different kinds of capabilities that find mention in research papers – operational, strategic, dynamic, context, core or non-core, behavioral, etc. Irrespective of the nature of the capability, they evolve over time, sometimes organically, sometimes with well-designed nudges. Reverse engineering these capabilities, is easier said than done. Let me share a story where an organizational capability was deployed well.

In my year-end break back home, I encountered an excellent example of premium customer service. We went to a clothing retail store to exchange a kurta and jacket that my aunt had bought earlier. Neither did we have the bill nor did we know the date on which they were purchased. The store manager welcomed us in and listened to our request attentively. She assured us with a smile that this could be resolved. She asked for the mobile number of the billing, which was my uncle’s number. With this, she checked her database and traced the purchase back to a month earlier. Since a larger size wasn’t available in the store, and we didn’t want to choose anything different, she placed a replacement order which could be collected a week later. She also gave us a duplicate invoice for us to present for the collection. When we went back after a few days, we didn’t have the invoice (yes, we were very distracted!), but she managed to trace the request, and gave us our new garments. She explained that while the policy stated that returns were only allowed within 30 days, she was confident that we were ‘genuine’ customers and knew that she would be able to convince her superiors to make an exception.

We got to chatting, and she also shared how her back-end team was extremely supportive and helped manage all such return cases. They had regular calls where the back-end operations team and store staff discussed the status of various requests, and the respective managers attended these calls. She also had a complete understanding of where the garments were produced, as well as timelines for shipping to various locations. They had regular training programs for the staff where the features of new ranges were explained, and they are even taken on tours to understand how the entire organization operated. This product knowledge was visible, as she gave me advice on how to adjust another jacket without replacing it[AI1]?. Overall, she was the perfect example of a highly engaged employee, performing at the best of her abilities, fully supported by the organization she worked for. I left the store a satisfied customer and would recommend and return without a second thought.

Let’s take a moment to think about how this ‘capability’ of premium customer service was created. The technology ERP which allowed her to trace the purchase with a phone number is a good starting point. She was also well trained on using it to manage her store’s performance and keep her superiors informed. The overall culture of focus on timelines by the back-end team is also noteworthy, since it is would have required good planning on part of the back-end team to make this happen. Additionally, the processes of regular reviews gave her opportunities to discuss and resolve issues. The managers attending the calls ensured that everyone concerned had the right incentives to attend with updates. This was probably measured through metrics which established trust and transparency in the entire system.

Naturally, this was a brief interaction with one store manager in one store – and hence the sample size is too small to generalize this as an organization-wide capability. I am also aware that it is quite likely that the store manager spoke to me about the positives and not the negatives, being an astute salesperson. Nevertheless, the conversation seemed genuine, and the customer experience was simply outstanding.

It is likely that this overall capability was the outcome of a long series of improvements, large and small, integrated well with existing processes and culture. Perhaps they introduced the calls with the back-end team as an experiment that stuck. Perhaps they took inputs from store managers while designing the ERP software. Perhaps the company-wide exposure tours only exist for key performers as a reward which was then highly appreciated. Perhaps they had gradually developed their replacement policy balancing between flexibility for ‘genuine’ customers, and ‘strictness’ for those who used the garments and came back to get a new one. Perhaps the superiors of the store managers experimented with how much to empower their store staff, and maybe even continue to do so. It is difficult to tell as an outsider. At the same time, there was a thread of ‘coherence’ or ‘strategic alignment’ in how these different elements came together, which is an essential element of organizational capabilities.

For business and P&O leaders, this search for building coherent organizational capabilities is perhaps one of our most important priorities that can create sustainable impact. Our underlying beliefs about organizational systems and change shape our choices on how we lead this. In the words of Don Norman, author of ‘Design for a Better World’ - Small steps taken at the right time can lead to the “best solution possible” at any future point — in contrast to a “big fix” when the whole situation, including the nature of the problem will have changed.

What have been your experiences around building capability through continuous improvement vs transformation? What are some examples where it has been a bit of both deployed consistently and coherently? Do share in the comments.