Build Before You Die: The Critical Need for Proactive Capability Building

In "Conan the Barbarian", a young slave spends years pushing a giant flywheel, repeatedly performing a monotonous and burdensome task. Over time, this repetitive effort sculpts his body and builds incredible strength, which allows him to dominate later in life. His quiet preparation eventually became his distinct advantage, even though the benefits weren’t immediately obvious.

Like a Spartan warrior preparing for battle, or Conan pushing the giant flywheel, companies must "sweat in times of peace" to avoid bleeding when disruption hits.

Similarly, digital-first companies have been quietly pushing their own "AI flywheel," amassing data, infrastructure, and talent while their less-prepared competitors focused on the immediate demands of their existing business models. These "digital natives" have honed implicit skills through constant experimentation and problem-solving, creating a competitive edge that's difficult to replicate.

In the modern business arena, technology, business strategy, and execution are inextricably linked, forming a Gordian Knot where organizational competencies are the key to success.

Laggards often wait for undeniable proof of disruption before scrambling to acquire these competencies, often through expensive acquisitions rather than organic development. Even when they attempt to build internally, they face resistance from a workforce entrenched in the old ways of doing things.

When a company finally enters "fight or flight" mode, with declining performance and looming disruption, decision-makers from the core business often prioritize short-term survival over long-term innovation. New initiatives are starved of resources or shut down entirely, sacrificing future potential for present stability. So, how can companies avoid becoming another cautionary tale?

Instead of relying solely on acquiring talent, organizations must proactively cultivate competencies through internal development (embracing failure as a learning opportunity), strategic acquisitions, and collaborative partnerships. The key is to act before it becomes necessary. When technological advancements disrupt the landscape, companies suddenly find themselves needing new skills – a predictable inevitability that most fail to prepare for.

Leaders often prioritize milking the cash cow of their existing business rather than investing in the pastures of tomorrow. New entrants often begin by serving customers that established companies overlook or dismiss. As Michael Raynor told us on The Innovation Show, most incumbents cede the lower part of the market and might even send the entrant a bouquet of 12 red roses and a note to say thanks.

Low-end customers are often the most demanding and least profitable so it makes sense to jettison them to an apparent "numbskull" competitor. Sales teams are (temporarily) happy because they can make larger commissions on the cash cows with existing customers. Marketing teams can message to the upper tier clients with premium campaigns. And finance like the look of the spreadsheets. Until they don't.

While incumbents could seize this opportunity by developing new competencies early on, they often hesitate, clinging to their existing successes. This allows new players to grow stronger, eventually becoming formidable competitors. The tragedy is that many within these established companies recognize this pattern, knowing they are essentially outsourcing their future to a competitor who may seem insignificant today but is building the capabilities to dominate tomorrow.

The pattern is predictable. By the time an incumbent acknowledges the shift, the disruptor has firmly established itself. Leaders often lament, "We didn't see that coming!" just as Nokia's former CEO, Stephen Elop, famously declared, "We didn't do anything wrong, but somehow we lost." While a lack of foresight contributes to these failures, the absence of crucial competencies is often a key ingredient. A company that dismisses new business models cannot become a viable competitor overnight.

Building competencies takes time and dedication.

Recognising the impending scarcity of oil, the company launched Project G21 in the mid-1990s, aiming to create a vehicle with fuel efficiency of 47.5 miles per gallon. Instead of improving existing technologies, General Manager Risuke Kubochi directed engineers to explore hybrid technology, a field Toyota had been researching for two decades. Despite the high costs, he insisted on developing a concept car capable of doubling fuel efficiency, with a deadline for the 1995 Tokyo Motor Show.

With full corporate backing, 1,000 engineers investigated 80 hybrid powertrain alternatives, narrowing the focus to four. The timeline was accelerated to deliver a full-production vehicle within 24 months—one-third less than typical. The team overcame significant challenges, such as designing a temperature-sensitive battery, ultimately unveiling the Prius in October 1997, ahead of schedule, and bringing it to market just two months later.

The Prius resonated with environmentally conscious consumers, showcasing the payoff of Toyota’s sweating in times of peace. Launching the Prius required an investment exceeding one billion dollars—a substantial amount for a company smaller than its main competitors at the time. Yet Toyota's long-term vision and commitment to capability building positioned it to seize the green vehicle market.

As Paul Nunes shares in "Jumping the S-Curve," it was only Toyota that wholeheartedly embraced this opportunity. And even though the company has scored a huge hit with Prius, a hybrid car, Toyota continued to build capabilities in electric and fuel-cell technologies. “It’s very important when you do R&D to widen the scope, to have several competing technologies or systems, and then to choose what is best,” explained Masatami Takimoto, Toyota executive vice president.

“We started our hybrid development work in 1969 and, since then, we’ve tried them all,” says Takimoto. (I gleaned this information from my friend Paul Nunes. To thrive amidst disruption, organizations must proactively build capabilities before they are needed. Waiting until challenges arise is too late to address fundamental competency gaps.

Toyota exemplifies how a forward-thinking approach to capability development not only fosters innovation but also secures a competitive edge in a rapidly changing market.

The Essence of Organizational Capability Viewing a company’s lifecycle through the lens of capability development reveals the unique advantages that contribute to its success. These include production knowledge, IP, well-worn distribution channels, customer service, domain expertise, location advantages and proprietary processes to name but a few. Together, these factors create a distinct offering that is difficult for competitors to replicate.

As you embark on any transformation, collaboration with HR leaders is essential. They play a crucial role in assessing current capabilities and identifying critical gaps. HR and L&D must have a seat at the strategy table, ensuring alignment and paving the way for future competencies.

Building organizational capability is a continuous journey—it's not a single event, workshop, or course, but an ongoing odyssey of reinvention and growth. What capabilities are you building for tomorrow?

Join us at The Reinvention Summit in April 2025 to build capability before you need it. www. The Reinvention Summit dot com.