Resources-Processes-Values (RPV) Framework
Assess organizational capability by separating what you have, how you work, and what you prioritize
The RPV framework provides a rigorous method for assessing whether an organization is capable of tackling a new challenge. Most managers instinctively assess capability by looking at resources: Do we have the right people, enough money, the right technology? But resources are only one of three factors. An organization's processes, the patterns of interaction, coordination, communication, and decision-making through which it transforms inputs into outputs, define what it can efficiently accomplish. And its values, the criteria by which employees make prioritization decisions, determine which initiatives receive energy and which languish.
The framework's critical insight is that processes and values that constitute core capabilities in one context simultaneously constitute core disabilities in another. A company with processes honed for designing customized minicomputers over two-to-three-year cycles is incapable of designing modular PCs in six-to-twelve-month cycles, even if its individual engineers could do so. A company whose values dictate that only products with 40 percent gross margins deserve investment is organizationally incapable of pursuing a 15 percent margin opportunity, even if the opportunity is strategically vital.
As organizations mature, the locus of their capabilities migrates from resources (people) to processes (ways of working) to values (prioritization criteria) and ultimately to culture (unconscious assumptions). This migration makes mature organizations increasingly powerful at their core activities but increasingly rigid when confronted with challenges that require different processes and values.
- Organizational capabilities reside in processes and values, not just in resources; two organizations with identical resources will produce very different results
- A process that defines a capability in one task simultaneously defines a disability in other tasks
- As companies mature, capabilities migrate from resources to processes to values to culture, making the organization increasingly capable at core tasks but increasingly rigid in the face of change
- Processes are meant not to change, which is why the mechanisms through which organizations create value are intrinsically hostile to change
- Audit your resourcesAssess whether you have the tangible and intangible resources needed for the new initiative: people, technology, cash, brand, relationships, and information. Resources are the most visible and most transferable factor.Pro tipResources are necessary but not sufficient. Having brilliant engineers does not mean the organization can deploy them effectively on a fundamentally different type of project.
- Evaluate your processesExamine whether the formal, informal, and cultural processes through which work gets done are appropriate for the new challenge. Focus especially on background processes like market research methods, financial projection procedures, resource allocation decision-making, and product development timelines.Pro tipThe most dangerous disabilities often reside in enabling processes like budgeting and resource allocation, not in value-adding processes like manufacturingWarningDo not assume that because your people can do something individually, your organization can do it. The patterns of interaction and decision-making that make the organization efficient at one task may make it incapable at another.
- Examine your valuesIdentify the decision rules, both explicit and implicit, that employees use to prioritize. What minimum gross margin does a project need to get funded? How big must a market opportunity be to warrant attention? These values reflect your cost structure and business model and powerfully filter which innovations get resources.Pro tipValues evolve predictably along two dimensions: acceptable gross margins tend to rise as companies add overhead, and the minimum opportunity size needed to be interesting grows as the company grows
- Determine the fit and design the responseUse a two-by-two matrix with process fit on one axis and values fit on the other. If both fit, use a lightweight team within the mainstream organization. If processes do not fit but values do, use a heavyweight team within the mainstream. If values do not fit (disruptive innovation), create an autonomous organization. If neither fits, create an autonomous organization with a heavyweight team.Pro tipHeavyweight teams are tools for creating new processes. Spin-out organizations are tools for forging new values. Match the organizational form to the specific type of capability gap.
DEC had all the resources needed to succeed in PCs: brilliant engineers, ample cash, a strong brand, and deep technology expertise. But its processes were designed for two-to-three-year minicomputer development cycles with internal component design. Its values required 50 percent gross margins. PCs required six-to-twelve-month cycles with outsourced components and 15-20 percent margins. The processes and values that made DEC a minicomputer powerhouse made it organizationally incapable of competing in PCs.
McKinsey & Company demonstrates the power of processes and values over resources. Hundreds of new MBAs join the firm every year and almost as many leave. But the company produces consistently high-quality work because its capabilities reside in its rigorous, analytical processes and its strongly held values about quality and client service.
Christensen developed the RPV framework to explain the paradox he observed in the disk drive industry: companies staffed with highly capable individuals consistently failed at tasks those individuals could personally accomplish. The framework emerged from analyzing why DEC, staffed with brilliant engineers who could easily design PCs, was organizationally incapable of building a successful PC business. It was not DEC's resources that failed; it was its processes (designed for minicomputer development cycles) and its values (requiring 50 percent margins) that made the PC business impossible within the existing organization.