The Foundation of Organizational Redesign II: How to Identify Needed Capabilities

In today’s volatile business landscape, most change initiatives fail not because of poor execution, but because of strategic misalignment. Companies often rush into "digital transformation" or "agile restructuring" simply because it’s a trend, rather than identifying the specific organizational capabilities they need to win.

Strategy alone isn't enough to reach market leadership; you need the practical ability to pull it off. But where do you start? Our first article in the series, 'The Foundation of Organizational Redesign I: How to Identify Your Key Challenges,' helps you pinpoint exactly what’s holding you back.

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Why You Must Identify "Needed Capabilities" First

The goal of identifying needed capabilities is to create total alignment on what the organization must excel at in the future. While many diagnostic exercises look backward at current challenges, this process looks forward.

By focusing on the business strategy, change leaders can create what John Kotter famously called a "sense of urgency." When employees understand that a change isn't just a management whim, but a necessary evolution to execute the company's vision, resistance drops and engagement rises.

4 Essential Activities to Identify Strategic Capabilities

To determine which capabilities your organization is missing, you need to engage in four specific strategic activities:

1. Articulate a Clear Vision and Strategy

It is a common mistake to assume that because a strategy exists, it is understood. Research shows that leadership teams are often misaligned on the core pillars of their plan. Even when a strategy is defined, it is frequently poorly communicated.

• Pro tip: Use Roger Martin’s “Strategy Choice Cascade” to refine your thinking. This tool forces leaders to answer five key questions, starting with "What is our winning aspiration?" and ending with "What systems and capabilities are required?"

2. Pinpoint Your Competitive Differentiators

A successful strategy is built on differentiation. To identify needed capabilities, you must understand exactly how you plan to beat the competition.

• Are you winning through innovation (speed to market)?
• Are you winning through cost leadership (operational excellence)?
• Are you winning through customer experience (data-driven personalization)? Each of these requires vastly different organizational muscles.

3. Evaluate Your Product Portfolio

Your current products and services are the "evidence" of your strategy. By analyzing your portfolio, you can see if your investments align with your goals.

• The Tool: Alex Osterwalder’s “Portfolio Map” is highly effective here. It helps you visualize which products are "Cash Cows" (funding the present) and which are "Emerging Innovations" (securing the future). If your portfolio is weighted toward aging products with no innovation pipeline, your primary needed capability is likely R&D agility.

4. Use Deep-Dive Employee Engagement Surveys

Traditional eNPS scores only tell you if people are happy; they don’t tell you how work gets done. To identify capability gaps, you must ask questions about key behaviors:

• Do employees feel empowered to take ownership?
• Is knowledge shared across silos?
• Is there a "speak-up" culture? This data highlights the cultural capabilities (or lack thereof) that leadership may be ignoring.

The "Maturity Gap": Where Are You Now?

By the end of this exercise, your leadership team should have a clear list of the organizational capabilities required to succeed. The next step is assessing current maturity. By comparing the needed state to the current state, you can pinpoint exactly where to focus your change management efforts.

The Hidden Costs of Skipping This Step

What happens if you bypass this diagnostic phase and jump straight into implementation?

1. "Cargo Cult" Management: You end up copying a "best practice" or a framework (like Spotify’s model or Six Sigma) that worked for another company but has zero relevance to your specific strategic needs.
2. Inability to Measure Success: If you don't know why you are changing or what goals you are trying to achieve, you cannot define Key Performance Indicators (KPIs).
3. High Resistance to Change: People are naturally skeptical of change. If they don't see the link between the new initiative and the organization's survival, they will treat it as a distraction rather than a priority.

Final Thoughts

Strategic change is not about doing more; it’s about doing the right things. By identifying the capabilities necessary to support your vision, you ensure that every dollar and hour spent on transformation is an investment in your company’s future.