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overstated. Firms committed to continuously developing their people’s capabilities
seem to accept the adage that “the person who knows how will always have a job.
The person who knows why will always be his boss.” [17]
Global business leaders increasingly support the view that the knowledge

possessed by human capital is among the most significant of an organization’s
capabilities and may ultimately be at the root of all competitive advantages. But firms
must also be able to use the knowledge that they have and transfer it among their
operating businesses. [18] For example, researchers have suggested that “in the
information age, things are ancillary, knowledge is central. A company’s value
derives not from things, but from knowledge, know-how, intellectual assets,
competencies—all of it embedded in people.” [19] Given this reality, the firm’s
challenge is to create an environment that allows people to fit their individual pieces
of knowledge together so that, collectively, employees possess as much
organizational knowledge as possible. [20]
To help them develop an environment in which knowledge is widely spread
across all employees, some organizations have created the new upper-level
managerial position of chief learning officer (CLO). Establishing a CLO position
highlights a firm’s belief that “future success will depend on competencies that
traditionally have not been actively managed or measured—including creativity and
the speed with which new ideas are learned and shared.” [21] In general, the firm
should manage knowledge in ways that will support its efforts to create value for
customers. [22]

Capabilities are often developed in specific functional areas (such as
manufacturing, R&D, and marketing) or in a part of a functional area (for example,
advertising). The value chain, popularized by Michael Porter’s book Competitive
Advantage, is a useful tool for taking stock of organizational capabilities. A value
chain is a chain of activities. In the value chain, some of the activities are deemed to
be primary, in the sense that these activities add direct value. In the preceding figure,
primary activities are logistics (inbound and outbound), marketing, and service.
Support activities include how the firm is organized (infrastructure), human
resources, technology, and procurement. Products pass through all activities of the

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