Some of these complementary supporting capabilities originate in individual talents, but combining individual skills with more mundane complementary resources builds the distinctive capabilities of teams, and these assemble into combinations which represent the distinctive capabilities of organisations.

PART 6: The Corporation in the 21st Century

24: Combinations and Capabilities

“The modern firm is a community, rather than an office or a factory. It is defined not by its plant and machinery but by its capabilities. The successful business is characterised by the distinctive nature of its collection of capabilities and the match between these capabilities and the needs of its customers – and other stakeholders. The claim that George W. Bush told Tony Blair that ‘the problem with the French is that they don’t have a word for entrepreneur’ is, sadly, apocryphal.

For Penrose, the firm was defined not by the assets it owned or the contracts it made but by its capabilities and its ability to deploy those capabilities in productive services: ‘All the evidence we have indicates that the growth of firms is connected with the attempts of a particular group of people to do something.’ Perhaps that seems obvious. But her emphasis

on ‘the group’ recognises the centrally cooperative nature of business activity, and her identification of purpose – ‘to do something’ – establishes its problem-related focus.

Distinctive capabilities, such as those of Apple’s design team, are those characteristics of a firm that cannot be replicated by competitors or can only be replicated with great difficulty, even after these competitors realise the benefits which they yield for the originating company. That distinctiveness could never be true of the hierarchical organisation run in the spirit of Frederick Taylor or as a cascade of principal–agent problems formulated by reference to the solutions in leading economic journals.

Today the hallmark of successful business is access to collective intelligence that is not common property.