Developing The Human Capital As A Differentiated Competitive Advantage Towards World Class Business

Haeryip Sihombing, Mohd Yuhazri Y.
dan Mochamad Safarudin 17

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Developing Of World Class Company's Differentiated Competitive
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!n the era of globalization, competitive advantage is a strategy of companies to survive in the hyper-
competitive market. On how the company to success in the business, they should therefore explore their
owned uniqueness of competitive advantage. The purpose of this paper is to review the challenges faced
in developing strategies of competitive advantage by adapting and finding the solution in integrating of
the human capital concepts. Based on traps in the business and what action required as well as concepts
of lean and Japanese culture to the system approaches, their relevancy as a differentiator of competitive
advantage toward human capital is reviewed. Through Fit Nanagement, the paper also review the
performance challenges and measurements systems to help the companies enhancing their capabilities by
continuously and effectively identifying and eliminating the waste regarding human capabilities, besides
the initiatives and creativities for innovation.
Keywords: Company's "3>>(,(%&3$&("A =-02(&3&3#( $"#$%&$'(A +.0$% =$23&$4 "(#(4-20(%&<

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The world's leading companies are the companies that successfully introducing the
products or services to market by providing and offering something far beyond what consumers
expectation. These companies maintain their market leadership position by continuously
operating at the 'cutting-edge' and extend their conventional parameters to attract the
consumers with creativity and innovation (as the translation of the company views to "thinking
for customer"), also by creating productsfservices that drive the market through superior value
to consumers (Kandampully, 2006). Schnberger (1986) in the book of "World Class
Nanufacturing" as also Hayes and Wheelwright (198+) described it's through on how the
Japanese and German companies (manufacturing) in order to compete in the global market and
to attain the market leadership position.
valikangas (2005), however, argued that despite the companies have been establishing
their system concerns to their customer and successful in their business, but they are often
internally trapped. This is due to the challenges and successful factors against the competition
are continually changing in the market, which therefore requires the company's reconfiguration
to their competitive strategies and performance objectives because the implementation of
strategies often poses severe problems (de Sluijs 8 Kluytmans, 199+). !n the other hand,
18 Jurnal Megadigma Vol 4 No 1 Januari 2011

Hammer and Stanton (1999) added that although many companies have been integrating their
core of processes, but combining related activities and cutting ones, in facts, do not add value.
Only a few have fundamentally changed the way they manage their organization.
Table 1 described what are the traps and strategy required, whereby the most
important factors to determine the company's competitiveness and profitability (as the extent to
which the companies have to match their strategies and capabilities to the competition) refers
to their owned-assets that influence to the business and the discovery of strategies (i.e. profit,
cutting cost, quality, and innovation) (Schuler 8 NacNillan, 198+; Schuler8 Jackson, 1987;
Booth 8 Philip,1998; Denton, 1999; Carpinetti et al., 2000;Shepherd 8 Ahmed, 2000; Datta et
al., 2003; Oracle, 2006; Parrett , 2006;Paauwe 8 Boselie, 2009). !n this sense, Carpinetti et al.,
(2000) stated about a new scenario in which industries in order to remain competitive are must
continuously implementing best practice management principles, strategies, and technologies.
First, Ciobanuet al., (2008) underlined on how a strategy towards competitive
advantage as the result that capable in helping a firm to maintain and sustain a favourable
market position (in which their position is translated into higher profits compared to those
obtained by competitors) based on the company's ability to respond against the existing threats
and opportunities. Porter (1996) underlined the root of the problem due to the failure to
distinguish between operational effectiveness and strategy. Since the quest for productivity,
quality, and speed has spawned a remarkable number of management tools and technique (i.e.
Total Quality Nanagement, Benchmarking, Time-Based Competition, Outsourcing, Partnering,
reengineering, Change Nanagement) - although the resulting operational improvements have
often been dramatic - but many companies have been frustrated by their inability to translate
those gains into sustainable profitability. Hamel (1996) added that a failure to distinguish
planning from strategizing is as the essential problem in organizations today.
Second, Bennett (1992) emphasized that the company should adopt management
approaches regards to the design strategic priority in their businesses, in which, Becker and
Huselid (2003) suggested through a new focus on strategy implementation that requires a
renewed emphasis on strategic fit. This is as reviewed by Bennett et al., (1992) in the case of
Toshiba, Fujitsu and Sony, where the symbiotic relationship between strategy and technology -
and thus between strategy and the engineering design process - has been strengthened by the
fact that design choices directly affect such aspects of product development as materials,
fabrication methods, assembly methods, inspection and test techniques.
Third,Richardo and Peluso (1990) stated about how to achieve the quality levels as
world-class companies. They suggested that the companies have to understand the roles of
each their function that need to be play. Besides, they should continuously outperform the
industry's global best practices by intimately recognizing their customers and suppliers, knowing
their competitors' performance capabilities, and conscious about their own strengths and
Haeryip Sihombing, Mohd Yuhazri Y. dan Mochamad Safarudin 19

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weaknesses (Greene, 1991) as well as increasing the integration between human resources
management and business strategy as one of the most important demand (van Sluijs 8
Kluytmans, 199+).

Fourth, Sheth and Sisodia (2002) as well as Hizon and Bronson (200+) added that as more
markets become global or are transformed through technology in coming years, the companies
may, or may not, be technology based; however, the firm must eventually employ competitive
technology in order to survive in its industry. By establishing a distinctive competence in
innovative technology (that can be important to maximizing the growth potential of a
company), the company is generally perceived as successful at using new technology as a way
of obtaining a sustainable competitive advantage in which the company can readily attract both
capital and customers.
Based on those reasons, Treen (2000) however, said that the company's core values
and changing operations to employees will help in creating the confidence to experiment and
innovate which will turn accelerate a company's drive to industry leadership. While in terms of
investing in both of people and people management systems, Huselid et al., (2005) suggested
that analysis of the HR abilities and practices are required to meet strategic business needs;
otherwise, it may be excessive and inefficient, and result in less than optimal organizational
effectiveness. Here, the governance systems in the firm, including methods of managing
managers, will be required to ensure organizations' successful in maintaining a competitive
edge through the strategy that create and renew themselves to build a viable future (Treen,
2000; Boxall, 2003).

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The companies have to response to the business competition that becoming hyper-
competitive by actively improve and enhancing themselves continuously through an effective
effort to maintain their operations. By clearly defined to the implementation of competitive
advantage, the fundamental of that company competitiveness is through design and
organization, human resource development, quality and problem solving, accounting and
control, capacity, and marketing. Carpinetti et al., (2000) stated that the competitiveness of a
company (as the world-class company) is mostly dependent on its ability to perform well in
their business. Due to the goal of their business managements (as a part of the company's
strategy) is about the response to competitive market based on what the capabilities of their
management running for and towards their capabilities' owned and explored, so the company
therefore need to conduct performance management (Table 2). Those of performances refer to
as follows:

1. The System Perspective and Nodel of Business.
Emiliani (1998) underlined that successful businesses are typically possesses the
effective systems and procedures that serve all participants well from order entry until
after-market service. By understanding the process, the companies channelled the need
to produce good products, good brand, good strategies, good partnership, good people,
and good financial resources to succeed. Besides, they should also to put andfor
compose the people (individuals) as a team to have broad process knowledge. This is
as what emphasized by Carpinetti et al., (2000) and Gottfredson et al, (2008) that
mapping and modelling business process is fundamental to understanding not isolated
processes but also the flow information and resources through operational and
supporting processes of the value chain. Here, the organization's people ultimately
determine the effectiveness of strategy development, implementation, and subsequent
competitive success (Righeimer, 2000).
Nightingale and Rhodes (200+) proposed the enterprise systems architecture as a new
strategic approach that takes a system perspective by viewing the entire enterprise as
holistic system encompassing multiple views, such as organization view, process view,
knowledge view, and enabling information technology view in an integrated framework.
This as was previously emphasized by Ackoff et al., (2003), that a system is a whole
that's defined by its function in larger system of which it is a part , where the
interaction (of a system) is also essential parts to produce the properties of the system.
Hence, when the enterprise as a system, they cannot be separated from their
environment and associated product systems because they will lose their defining
properties and its parts. Bartlett and Ghoshal (2002) stated, therefore, is need
philosophical shift to expand beyond strategy, structure, and system to a simultaneous
focus on the company's purpose, propose, and people. Noreover, Ciobanu et al., (2008)
stated that to maintain and sustain a favourable market position (reflected in higher
profits compared to those obtain by competitors), they also need to develop a
consistent system of strategic objectives and adopting a complex of coherent functional
policies. Besides, the systems of objectives and policies must be kept consistent with
external conditions of the market. Here, the firm's adaption to industrial environment
requirements has to be seen in a dynamic form in which the firm constantly adapts its
action to external and internal changes (Ciobanu et al., 2008; Dal Zotto, 2005; Poulis ,
2007; Schreygg 8 Sydow, 2010).
2. Competitive Advantage Strategy.
Gilgeous and Gilgeous (1999) stated that there were many different viewpoints on the
way of how companies to improve their functions in order to become world-class
companies. Kaplan and Norton (2000) underlined that various strategies could be

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developed through the improvement process by identifying - if and how they are can be
achieved. Here, Paauwe and Boselie (2009) stated that a real contribution to
performance (in its multidimensional meaning) will only happen once the approach of
HRN (Human Resources Nanagement) from a more holistic and balanced perspective,
including part of the organizational climate and culture, aimed at bringing about the
alignment between individual values, corporate values, and societal values. Leinwand
and Nainardi (2010) called as Coherent Companies - those that possess a capabilities
system that aligns their strategy with their productfservice portfolio to generate
superior performance over time.
Hamel (2002) stated that the current focus of business regarding competitive
advantage is on how to find the way to develop the companies through systematic and
radical innovation. This is due to innovation is a key factor for companies to survive and
growth in the long-term (Tidd et al, 2001). !nnovation is awakening, development, and
adaptation from an idea and idiosyncratic against the new required and adopted by
organization (Higgins, 1995) and catch in the understanding of management change to
response to the external environment as well as operation that influence the
environment itself (Damapour,1996). Johne (1999) identified its through competitive
advantage by product innovation, process innovation, and market innovation, while De
Jong and Hertog (2007) emphasized it through capitalized on the employees' ability to
be innovative as what had been proven by Katou (2008) through the case of
manufacturing in Greek where innovation strategy positively affect organizational
performance. (Competitiveness comes from innovative minds" - Denton, 1999).
Porter (1996) stated that the competitive advantage is about to become different
through and by strategy in doing activities differently against competitor. Kandampuly
(2002) emphasized that competitive advantage through segmentation of product and
service, in facts, giving a little influences of differentiation for competitiveness in terms
of customer perspectives. This is due to the identification of market segmented is often
influenced by response of customer against the price (Hofsteede et al., 2002) where
the individuals of customer will presents the same desired against behaviour of
relatively homogeny segmentation (Wedel 8 Kamakura, 1999). Here, scholars proposed
that the human capital as well as their relationships and motivation are leads to
competitive advantage when it is uniquefrare, scarce, inimitable, and valuable internal
resources (Barney, 1991; Allen 8 Wright, 2003; Datta et al., 2003; Howatt, 200+). To
become distinctive competencies, the company should assemble the skills and
knowledge that are built on specialized expertise for tangible 8 intangible endowments
that other competitors do not possess and cannot readily acquire or replicate (Hizon 8
Bronson, 200+ ; Zahra et al., 2009).

3. The Continuous !mprovement and Leadership.
Bessant et al., (199+) in their C!RCA project (Continuous !mprovement Research
for Competitive Advantage) identified the different issues associated with the
setting up and sustainability of a C! (continuous improvement) program. There
were some of the factors associated with the maintaining momentum of C! required
such as lack of commitment, lack of training, lack of visibility of program, lack of
sufficient resources, cultural clashes, and other factors (Bessant et al., 199+:
Harrison, 2000; Sharma, 2010). Noreover, against the sustainability as an issue of
other types of improvement program, Dale et al., (1997) identified the factors that
gave the negatively impact, such as: internalfexternal environment, management
style, policies, organizational structure and process of change due to inadequate of
leadership and failure to complete projects.
Bartlett and Ghoshal (2002) stated that the managers today must know what the
new game requires: speed, flexibility, and continuous self-renewal. The even
recognizing that skilled and motivated people are central to operations of any
company that wishes to flourish in the new age. Jorgensen et al., (2003) examined
the role of the manager or team leader in continuous improvement by identifying
the gap of perception between the senior management and team leaders in terms
of enablers that were in place. The senior managers perceived enablers to be fully
presence in the organization, whereas in reality they were in place in name only.
This is means that top management should not only demonstrate commitment and
leadership, but it must also work to create interest in implementation of continuous
improvement and communicate the change to everyone within the organization. By
encouraging and developing the workers to acquire knowledge (of which is
specialized, differentiated, and related with the industry) it will develop the human
capital directed to know-how, education, work-related competence, and
psychometric assessment (NcGregor et al., 200+; Namasivayam 8 Denizci, 2006).
Nehta (2006) stated that the roles of top management are required to support and
directing the development plan and its matrix, to support the subordinate to taking
the risk, tolerance, to change the structure, to create the innovation award system,
to enlarge the talents of design, and to influence the innovation network internally
and externally. !n this respect, people management" will not only be on a top-
down basis, but should also have a managing-up" role in advising the CEO on
people management issues with respect to the executive team (Wright, 2007).

Those are as above, especially related to the business, strategy, innovation, and
process improvements are the crucial activities for companies to undergo their transformation

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to the world-class enterprise. As what were discussed by Hammer and Stanton (1999) also
Quelch and Bloom (1999) regarding adding value, change, organization, and management
whereby global companies have to recognize now more than ever that human resources and
intellectual capital are as significant as financial assets in building sustainable competitive
advantage. By conducting more analytical study into what the sustainability of business and
innovationfimprovement made, the set of performance measures for the improvement process
(and subsequent emergent organization) should therefore aligned to the organizational aims.
(i.e. based on individuals goals, efforts, talent; strategy chosen; firm's goals and strategies;
drivers for improvement management towards business, marketing and financial strategies;
empowerment, development and commitment of all members of the organization) (Bartlett 8
Ghoshal, 2002; Carpinetti, et al., 2000; Collins et al, 2005; De Cieri 8 Boudreau, 2003; !rene et
al, 2006; Paauwe 8 Boselie, 2009; Righeimer, 2000; Wang 8 Shyu, 2008). !n effect, the supply
chain of the improvementfchange processes is becoming the strategy for transforming the
organization from its current capability to the level of performance required, that is to ensure
future organizational success, whereby Ulrich (1998) stated that the successful organizations
will be those that are able to quickly turn strategy into action; to manage processes intelligently
and efficiently; to maximize employee contribution and commitment; and to create the
condition form seamless change.
Specifically, its actions against improvement management of human capital (worker) and
everyone involvement in the organization as well as the resources required to support the
continuous improvement for business sustainability as a critical point for company's successful
and business survivor in the competition (Bhuiyan 8 Baghel, 2005; Sihombing et al., 2010)
through the following questions, such as:
Which system should the company implement to wholly optimize its resources (especially
human factors) so that make them superior towards competition?
How to measure business success towards a system and competitive advantage, and
how should human capital be used as a company differentiator and success factor?
Besides, in which the company should identify and determine what and which of owned-
assets that brings influence to the business based on as follows:
The categories of intellectual capital, such as human capital, social capital, process
capital, and intellectual property (Jackson, 2007).
Primary resources from the creation of economic value that consist of tangible assets
(such as physical, structural, raw material, and production), knowledge-based economic
assets, in addition to intangible assets refers to the resources of which its values must
be enhanced (Carson et al., 200+).

Resources that function as competitive advantage, such as physical capital,
organizational capital resources, human resources systems and human capital resources
(Barney 8 Wright, 1997).

Although, the targets of a business management system implemented towards the
organizations (capital assets, infrastructure, massftime, and humans), in facts, are limited
resources. !n such constraints, however, the strategy required by an organization to become a
competitive organization through the approaches and perspectives of a strategy established are
based on as following:
What are the challenges faced by companies towards their performances.
How to manage the performances required against the challenges (now and future),
and how to measure it through the system (i.e. Lean, !SO 9001, J!T, TQN, HRN, etc.)

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Nany factors influence the competitiveness of companies and their products. Anyhow,
due to markets become competitive, the high levels of flexibility and the ability is required to
response immediately to market requirements. Only learning companies, which are highly
innovative, can achieve a sustainable competitive advantage. This is especially against the
implementation and activities done.

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Sadri and Lees (2001) stated that culture is not the only determinant of business
success or failure. !n this sense, although culture is an intangible concept, but it clearly plays a
meaningful role in corporations, affecting employees, and organizational operations throughout
a firm. They emphasized that a positive culture can be a significant competitive advantage over
organizations with which a firm competes. This is as discussed by Beardsley et al, (2006)
through an example: Toyota Company, where engagement (between employees and activities
as tacit" interactions-the searching, coordinating, and monitoring activities required to
exchange goods, services, and information and the "tacit" activities-involving the exchange of
information, the making of judgments, and a need to draw on multifaceted forms of knowledge
in exchanges with coworkers, customers, and suppliers) are increasingly a part of the standard
model for companies in the developed world. Here, Neehan et al., (2006) clearly emphasized
that culture is the force that determines how people behave when no one is looking-is one
such competitive advantage. They added that one characteristic that distinguishes high

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performance cultures is that people inside them can recognize and often articulate the
company's authentic core-the unique soul and personality that define a company's character.
Discovering the consumer is king in the 1980s; those are as what Japanese learnt
about the expectation defined by the customer: The lean philosophy. This affecting and `create'
Japanese management and workers to passionately dedicate the customer satisfaction to their
after sales service and long-term continuity for client relationship. By long-term employment
and extensive employee training, these as important as the use of teams and a sound of
recognition and reward system where the lean practices and goals are through empowerment
of the employees, unlock their potential capabilities, and at the same time to increase quality,
safety, and employee understanding of management's goals and objectives.
Womack et al., (1990) interpreted the dedication for customer satisfaction through the
idea of lean for quantifying world class" refers to Japanese company: Toyota, in developing
their competitive advantage to become the world-class company. The lean is by using less of
everything" - half the human effort in the factory, half the manufacture space, half investment
in tools, half the engineering hours to develop a new product in half time. The key successful of
lean practice, as was underlined by Boyer (1996), is worker empowerment defined as giving
workers more responsibility and control of the manufacturing process as a successful practice
towards market demand as the culture. This is because only the employees that could identify
ways of improving the existing process of products (Forrester, 1995).
Parallel to those concepts of the pursuit towards perfection" (to meet or exceed the
internal and external requirements) refers to Japanese culture (between the individuals and
organizations and also their interaction as the factors for competitive advantage) are as follows:
1. Focus on the overall stream value of a dedication towards increase in sustenance, learning,
and waste reduction (Womack 8 Jones, 1996). On this, Liker (200+) emphasized that
unused worker creativities becomes waste and influences the effectiveness and efficiency of
operational processes. This implies that the more individuals need to be integrated in the
categories of just-in-time (J!T), total quality management (TQN), total production
maintenance (TPN), and human resources management (HRN) as the power in the
competitive market (Shah 8 Ward, 2003). This means that, should the companies fail to
unlock their workers' potentials; the companies will be forced to bear the costs of overhead
and would have much more management layers that would eventually hamper their
reactions towards the market as well as their reactions towards business opportunities.
2. Develop the successful channels for communication. !n order to reinforce groups'
interdependence, three C's": Communication, Coordination, and Consistency (JCS bvba,
2006) need to be likely invested in establishing and maintaining good relationships. Such
relationships provide the introduction toward the `desired or target' person or serve as
nakodo" (go-between). This is as reflected towards Japanese organizational efficiency and

business success that have been largely due to long-term investment in people by a
humanistic approach to management, identification, and commitment between employees
and employers. Thus, the work satisfaction, working conditions, and personal fulfillment are
greater importance than pay and stock options due to lifetime employment creates stability,
loyalty, sense of belonging and commitment, enjoy atmosphere of working in harmony and
cooperation, rationale and confidence for training capability and ability. As a long-term
focus of the company, this will be visible in lifetime employment, consensus, and
empowerment in which how to make a decision becoming more concise (immediately) and
flexible based on personal knowledge and contacts than in non-transparent environment.
3. Work with others. Although in the interpersonal relationships there are competitions, but
most Japanese tend to avoid open competition and confrontation (Adachi, 1997). Although
working with others require self-control, but it carries the rewards of pride in contributing to
the group, emotional security, and social identity. Wa", the notion of harmony within a
group requires an attitude of cooperation and recognition of social roles. Alston (1989)
stated that by understanding of each individuals in the group toward the personal
obligations and empathizes with the situations of others will make the group as a whole
benefits due to the success can come only if all put forth their best individual efforts.
Through the example about Japanese people, Li and Putterill (2007) commented that a
matter of managing groups are basically by organizing various group activities that aim to
maintain creative harmony. When top executives, middle managers, and other general staff
members all embrace Wa", the result is unparalleled trust, co-operation and loyalty, which
leads to high productivity, shared responsibility, and smooth managementflabour relations
(Enterprise !reland, 2001). !n the other hand, the style of consultative decision-making that
involves each member of the group in information exchange to make things run smoothly
and create harmony (wa) (Nakayama 8 Stucky, 200+). This is, Yoshida (2007) stated, that
an essential of the Japanese people in embracing the philosophical foundations of
innovation strategy and accept the challenges inherent in adopting a new approach to
achieve sustainable economic growth.
+. Harmoniously living and working together. Japanese company introduced the terms
kyosei" to the philosophy of harmoniously living and working together into the future
(Kaku, 1997). Some of the most important among these are such as kyosei among people,
kyosei of people and human creations, and kyosei of people and nature (Tanaka, 1995).
!ndividuals show kyosei by taking responsibility for themselves and others and treating
people with respect and kindness while they simultaneously attempt to be entrepreneurial,
add business value, and make a profit (London, 1999). Regardless of the specific label
about world-class company as a concept that do not only define the duties of business
enterprise toward societal stakeholders and natural environment, thus fortunately,

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environmental friendship products are adopted to their competitive strategy. These ideas
were then broaden the use of segmentation so that it could inform not just advertising but
also product innovation, pricing, choice of distribution channels, and the like.
5. The approach to innovation through kaizen" as the transformation of maintaining on what
has have in good forms (as sustainability), and achieving the higher level or correcting what
the `uncorrected' ones (as continuously improvement) in term of philosophy and activities
done within individuals and groups. This is as the code personnel achievement and dignity
that reflects in the business to survive in the competitive market through customer
satisfaction (!rani 8 Sharp, 1997; Nishra 8 Gupta, 2010; Kaizen Reality Partners, 2010).

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Recardo and Peluso (1992) concerning world-class manufacturing (WCN) also Sweeny
(1990) towards J!T, suggested that application of human capital development under word-class
concept is to unlock workers' potential as the basis for reducing waste through a system
framework based on people management system. However, due to business challenges that
have to be solved are complex (because of the competitive factors and human conditions in the
organization are dynamic forms), then the companies faced with individual and institutional
complexities (Gates 8 Cooksey, 1998; Heywood et. al., 2007) (Figure 1).
Liker (200+) stated that in order to become world-class, their workers, therefore, must
work in line with the guidelines of the new philosophy applied in the business approach, as well
as the processes in their system. On the other hand, the companies or organizational
businesses' challenges should be based on customer demands and requirements that depends
on how the competition takes effect and what types of competition targeted (competition as a
game) (Figure 2). Based on `Fitted Nanagement', Sihombing et al, (2010) described that a
company must be know on how to determine their focus based on its visions, missions, and
objectives regarding the performance challenges related to business competitions that require
as follows:
1.) A great degree of commitment (involvement and behavioural changes in continuous
improvement) of workers that should be prioritized and emphasized on openness, honest
communication, and delegation of authorities (Spear 8 Bowen, 1999; Gagnon 8 Nichael,
2003; Emiliani 8 Stec, 2005).
2.) A fully organization involvement to enrich the capability in quality improvement programs
and activities for achieving high quality standards towards a work environment based on
the foundations of discipline, standardization, and success (O'hEocha, 2000).
3.) The human capital development systems that enrich and enlarge the knowledge generated
through the following:

a.) The improvement of problem solving capabilities among workers in all levels, work
towards visions and missions, full commitment of workers, as well as to become agents
of change through culture and values (Flamholtz, 2001; Barnes et al., 2001;
Puvanasvaran, 2009).
b.) The development of workers with the abilities and knowledge such as to use lean
apparatus and techniques as well as to performs continuous improvement activities and
cost-competitive targets.

Those of performance challenges are then reflected into the performance measurement
and management towards the matrices of innovation, process, developments of products and
services, and experiences (Table 3). While, such as the strategies, abilities, arrangement, as
well as `the sharing space' between workers in the company business framework are
internalized as the values modes and worker modes in which their relationship (as a relational
uniqueness) acquires high value and uniqueness as differentiation focused (Figure 1).
Here, the challenges of measurement is on how to evaluate their relationship to a
competitive advantage in which the companies should understand what is needed from their
workers, what is expected from their employers, how to adapt the ideas of management and
new possibilities, worker effectiveness, management towards talent, as well as the formulation
of proposition value from the core work. All of those requires the understanding (as well as its
combination) that need to be dynamically applied towards the dimensions of product quality
according to performance, features, appropriateness, credibility, serviceability, aesthetics, and
perceived quality consistent with the views of what is given and requested by the customer
(Garvin, 1998).
For an example: towards innovation and process (in Table 3). The challenges,
measurement, and management of performance are linked to what and on how the human
capital development identified and required towards the innovation process and process
innovation as a competitive advantage and vice versa [i.e.innovation as behaviour and efforts
(de Jong and Hartog, 2007); innovation as a strategy (Booth 8 Philip, 1998; Gooderham et al.,
2006; Katou, 2008; Parrett, 2006; Schuler 8 Jackson, 1987; Sintas 8 Alvarez, 1999);
innovation as a product (Allen 8 Wright, 2006; Treen, 2000); innovation as a process (Datta et
al, 2003; Denton, 1999);etc.|. While in the managerial and operational context of business
strategy (that depends upon the roles of developing human capital towards business abilities
and competitive advantage) is against on what required through as following:
a) The understanding of the individual abilities, knowledge, expertise, and experiences from
workers or even company managers that are relevant towards the tasks that they are deal
with, or even towards the capacities to add to the reservoir of knowledge, expertise, and
experiences through individual learning (Dess 8 Picken, 1999).

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b) The shape and focus of the company's achievement in the environmental context and
consistent with the logic of competition where there are no substitute towards knowledge
and learning, creativity and innovation, competence and abilities (Rastogi, 2000).
c) The encouragement of innovation towards products and services offered in the market
through communication towards messages that delivered and related to treatment"
towards human capital and brands. !n this sense, the form used is the unification that
brands serve as the employee value proposition.
d) The opportunity interpretation in opening the challenges through required experiences
needed by the company so that it draws expectations of quality individuals of hisfher
talents to enter the organization.
e) The company improvements activities as the differentiator in the market space in the
perspective of the brand (for the sake of society perception towards the organization) that
made the company platformf position towards the prospects of recruitment.

Those are to transforms the high positions in the human capital categorizations based
on intensity (human capital) and its model (organization operations) to becoming the
differentiator of competitive advantage (Figure 1), in which the abilities of the company shifts
from physical owned-assets to human capital (based on knowledge) and from product
innovation to solutions innovation(Huselid 8 Barnes, 2003; Righeimer, 2000; Oracle, 2006;
Quelch 8 Bloom, 1999; Boxall, 2003; Gottfredson et al, 2008 ;Shepherd 8 Ahmed, 2000). This
is means that company's competitive advantage is not only developed through the
productfservice provided, but also the process and innovation towards the productfservice itself
as well as the human (employees) capabilities, process and innovation of the development the
human capitalfresources, whereby the transformation (from `Traditional Employees' and
`Alliance Partners' to become `Core Knowledge Employees') as follows:
1. !t will drive and arouse the company's awareness to explore the possession of new abilities
based on the steps related with external and internal factors as the opportunities towards
company advantages. Thus, this transformation make the company uniqueness due to the
differentiation of employees as reflection towards customers for interacting with and
engaging transaction and satisfy them (`Build Deeper Relationship') in term of high of
`Lifetime Profitability' and `Strategic value' (Gordon, 2006).
2. Against the market innovation of intended market potential (to serve the customer based
on competitive advantage), the company can use the mapping of product in their strategy
innovation in term of customer views to the differentiation of products and human capital.
Here, Emiliani (1998) stated that successful businesses typically implement the effective
strategies and procedures in sufficiently serving all concerning parties. This implies that the

companies as organizations need to create fine products, good brands, fine partnerships,
good workers, as well as good financial resources. !n Table + and 5, are listed the
company's initiatives that must be taken in dealing with the performance challenges of
competitive advantage and on what performance measured upon the aspects and functions
of business as the world-class company.
3. To achieve a sustainability of competitive advantage as well as the needs of the market, the
company will generates the continuous improvement cycle required on strategic choices
towards the organization, operations and external contexts (Heywood et. al, 2007), beside
the measurement factors on methods, objectives, and the improvement initiatives (Table
6).

!" $%&'()*+%&

Basically, the success of a business strategy towards human capital through an
operational approach are characterized as a system, rather than merely being an apparatus or
tool. This is parallel to the principles: Not through performance improvement as separate
parts, but improvement of performance as a whole" (Ackoff, 2003) as is interpreted from
Toyota strategies, whereby the Japanese companies performing their business influenced by
nakodo", wa", kyosei", and kaizen". Through the abilities of a business that lies on pull"
factors (from external forces) and the internal preparedness (as a form of push" in the terms
of competitive management towards the challenges of market competition), the development
required is focused on human capital and its related tacit" (as a competitive advantage).
Specifically, towards the core' that is continually explored for company's benefits and utilities:
employee and employers. This is mean that in the developing of business abilities and
competitive advantage, companies need to develop their corporate culture (Sadri 8 Lees, 2001;
Beardsley et al, 200 6; Neehan et al., 2006) in which especially to reinforce the business-
oriented views that unlock the employee's potential towards the business (Liker, 200+).
!n addition, a company strategic approach towards human capital development as a
competitive advantage needs to be focused on the performance management basis in order to
make them as a competitive organization based on competitive management strategies.
According to Nintzberg (1979), that system performance can serve two purposes, namely:
measurement and motivation, in which, Hauser and Katz (1998) clearly underlined that an
organization is to become anything as what their measures. Here, the measurement is
proposed based on the matrix focus (Table 3) (Sihombing et al., 2010).
Furthermore, based on the strategy of continuous improvement (so that the output of
business is customer satisfaction towards customer demand and requirements as well as
profitable towards the economicf business climate and competition), improvement management

3
1

need to be applied and interpreted as the performance challenges required and how to conduct
(also whatever are required in) the performance measurement. On human capital, this
comprises of the following:
1. The evaluation of a value that is relatively connected to key performance indicators in key
improvement indicators based on critical success factors with its main focused on humans
as workers (Setijono 8 Dahlgaard, 2007). Through a performance measurement system
towards the organization and humans, this would propel organizational and human
behaviour, as well as its abilities in achieving target strategies that are in line with long-
term targets (Cochran et al., 2000).
2. The organizational performance improvement based on leadership in the scope of business,
technique, and human factors will drive organization transformation through involvement.
The consistency becomes evident within the application of the principles of continuous
improvement and respect to people. The improvement processes activities itself will indicate
effectiveness of the most important behavioural aspects (as a dimension of understanding)
of system applied (Emiliani, 2006a; Balle, 2005). When it is focused on the improvement of
individuals and humans, the results would seem from the individual or the person that has
proper expertise.

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3
9

F. Appendix

!"#$%& () Complexity of People Nanagement System to Become Differentiator
for Competitive Advantage
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F
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m
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y

Jurnal Megadigma Vol 4 No 1 Januari 2011
42
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4
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!"#$% '( Performance Nanagement towards Business and Human Resources
(Sihombing et. al, 2010)

)*( +,-". /%0*,12%0 3*4"150 6,07.%00 8%19*1-".2%
:
;$%<7#7$73= ".5
7.57>75,"$?*1@".7A"37*."$
"#7$73= 3* "5"B3
There were lies a particular weakness between business planning and
human resources due to the traditional approaches conducted through the
establishment of human resource needs that based on reactive responses
towards business planning since the business plan was established
(Jackson 8 Schuler, 1990). As a result, demands and dynamics towards
rapidly of organizational change need to response through the form of
flexible organizations and individuals that easily adapt the change.
'
C1%"37*. ".5 @1*43D *9
7.3%$$%23,"$ 2"B73"$ "0 4%$$
"0 730 *B37-7A"37*.
Challenges of human resource planning imply the creation and growth of
intellectual capital used for competitive advantage, thus investment in
intellectual capital management should be conducted as a basis in making
decisions, determining priorities, and maximizing all company-owned
assets (Smart, 1997; Flamholtz, 2001).
E
6,7$57.@ 3D% F1@".7A"37*.
".5 !%2D.*$*@=
Since knowledgeable workers are products of their education,
technological advancement, as well as the development of modernization
from organizational practices or theories, thus theories that emerge from
values and processes and also the ideas from knowledge and human
resources serve as a key in boosting organizational performance as well
as its success. Bohlander and Snell (2007) stated that, therefore it must
include characteristics of being global, technological use, management of
change, management of talent or human capital as a response to the
market as well as charged fees.
G
H%"5%10D7B ".5
I-B*4%1-%.3
The understanding required to the forms of human resources quality is a
strategic demand related to crisis and change as a key to boost modern
organizations to attain higher achievements (Bassi 8 NcNurrer, 2007).
Therefore, management of knowledgeable workers in order to become
effective requires the following:
a) The abilities related to leaders and the organizations to construct the
proper knowledge management system against organizations'
missions and visions. The management must performs the
improvement of education and opportunities of learning, redefinition
of the knowledgeable leader's roles and responsible to construct a
participative system, share knowledge in efforts to accomplish the
organization's problems, fulfil the visions and missions, execute
critical tasks, and effectively manage change to be able to survive
crisis.
b) Discovery of critical strategic parts of learning processes and
motivational intrinsic factors that encourage knowledgeable workers
towards information gathering, internalization, as well as integration
and reproduction.

Jurnal Megadigma Vol 4 No 1 Januari 2011
44
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!"#$% '( !nitiatives towards Competitive Advantage as Performance Challenges
)*( +*,-%././0% 120"3."4% "5 " +6"$$%34% .*7"825 +*,-"39 :;5/3%55 <%8=*8,"3>%
? +8%"./34 @"$;%
Creating value is the advantage that can be achieved through resources and activities or from the choices that
result in the most profit (Besanko et.al.,2000). Therefore, companies must implement the following strategies of
creating value:
Exploring opportunities that earn value or are rarely owned by other companies or potential competitors
(rare resources),
!mperfectly imitable, and strategically irreplaceable (Lipman 8 Rumelt, 1982 ; Barney, 1991) based on the
values of the customer (Saloner et. al., 2001),
Acquire distinguished abilities in an industry or market (Kay,1993), along with added value
(Brandenberger 8 Stuart, 1996).
A <%8=*8,"3>% /3
+*,-%././*3
Competitive advantage grows from the company values that enable opportunities of creation and innovation
serves as performance indicators towards their customers. This is can be achieved by executing low cost
strategies, differentiation advantage, and product focus on specific market targets. Here, the performance
improvement refers to Ghemawat and Rivkin (1999), needs to be based on long-term strategies towards
competitors.
B CD-%8/%3>% "32
+*,-%.%3>%
Company experience becomes a competitive advantage when such business and marketing actions create
economic value (Barney, 2002). These experiences are gained through a combination of company-owned abilities
and resources. These consist of the company's unique methods in maintaining sustenance, as well as focusing on
collective learning in worker efforts towards core competence (Hoffman , 2000)
' 155%. "32
E%5*;8>%(
Competitive advantage is produced by creating expertise and superior resources (Day 8 Wesley, 1988). !n order
to do so, the company must:
Combine resources and abilities to its core competence (Prahalad 8 Hammel, 1990).
Own the rare of intangible resources and are not easily obtained from the freely sold assets in the market
(Dierickx 8 Cool, 1989; Rumelt, 2003).
Specialize resources in the financial, physical, legal, organizational, informational, and relational aspects,
above normal standards, and implemented continuously towards mobile sources (Peteraf, 1993; Hunt 8
Norgan,1995)
F +8%"./*3 *=
G*8H/34
)%.7*8H5
Development of relations requires organizational and relational resources as well as information on competitive
advantage that will become the resources in creating competitive advantage (Norgan 8 Hunt, 1996). The
relations refer to the following:
Narket-related relationships that are continuous, involve the exchange of additional organizational
working networks, and are required in the appropriate time (Webster, 1992).
Working relationships a step beyond dyadic relationships (meetings) or partnerships (!acobucci 8
Hopkins,1992 ; Anderson et. al.,199+)
!nvolves the technological transfer and information exchange (Thorelli, 1986)
Emphasize on work relations with mutual trust (Jarillo, 1988) to enable the possibilities of reinforcing core
competences (Achrol, 1997).
Part of the company's strategic planning (Gulati, 1998).
I J%0%$*-,%3. *=
K33*0"./*3
L.8".%4/%5
Competitive advantage produced from consistent innovation towards the company, either socially or
technologically, by directly and in-directly providing distinguished values between customers (Foxall, 198+; Wolfe,
199+; Rogers, 1995; Gatignon 8 Xuereb, 1997). The following actions may serve as innovative strategies:
Choose the strategy of sustained innovation or disruptive innovationto encourage technical changes in
creating productsfservices(Christensen 8 Raynor, 2003).
Consider innovations related to a productfservice that may be brought into the market (Cumming, 1998)
Create successful development and introduction of products, services and new processes (Urabe, 1988) in
order survive in the dynamic and complex market in a particular economic environment (Assink, 2006).
Construction, development, and adaptation of an idea or behaviour, as well as the adoption of something
new to the organization (Higgins,1995)
Organizational change as a response to the dynamics of the external environment, or even take actions
that influence the environment (Damanpour,1996)
Differentiate degrees of sorting in the individual level towards improvement and company functions (in
the process of improvement or adaptation) as a chain of values in the form of radical products, innovative
services, business models, as well as technological break-through industries (Edquiest, 1997).
The innovation towards individual andfor integration of product, process, and market (Johne, 1999).


!"#$% '( Performance Neasures upon the Aspects and Functions of Business as
World-Class Companies

)*( +,-%./, "01 230./4*0, *5 63,40%,, ", 7%85*89"0.% :%",38%,
; 63,40%,,
7%85*89"0.%(
Developing an operational approach that enables the sufficient achievement and
sustainability of business performance towards total productivity and quality through
continuous improvement and planning in all areas of the business organization (Sweeney,
1990).
< 63,40%,,
=,,%0.%(
Schonberger (1986) stated that the essence of fundamental change of world industry
business refers to changes in design, organization, building human resources, quality and
problem solving, accounting and control, capacity and marketing.
> ?@,/%9
A0/%B8"/4*0(
Business success factors towards change include speed and flexibility. Accordingly, change is
based on the three related and integrated systems, namely: technology management
systems, human management systems, and business management systems (Recardo 8
Peluso, 1992).
C D*9-%/4/4*0
784*84/4%,(
Construction of a business strategy that is equal and in line with core competition and
market opportunity, is one of the standard achievements of world-class companies.
Accordingly, competition priorities that serve as critical success factors towards the market
include quality, price, delivery speed, delivery reliability, flexibility and innovation.
' D3,/*9%8
E%$"/4*0,F4-
:"0"B%9%0/(
The customer relationship management (CRN) as a customer-centric business strategy. This
refers to the collective value of all consumer-related information including their activities,
and serves as an access point to information on workers and company business partners.
G :"0"B%9%0/
+//84#3/%,(
Features from an organization that are competitive, influence the area of functions and
attributes based on the organizational thought patterns, organizational abilities,
organizational structure, measurement of organizational performance, costs, and cost
management functions (Nahadevan, 1998).
H 78*13./, "01
78*.%,,(
Competitive businesses are equivalent to the combination of human integrated
manufacturing (Yamashina, 2000). There is a fundamental requirement involving fine
maintenance, and the integration of business aspects as a system in understanding the
research that is used, production engineering, improvement of abilities, and details from
know-how towards shop-floor.
I DF"$$%0B% "01
D*9-$%J4/4%,(
Businesses operated by companies (not dependent on the type of the industry, size and
location) should collectively encourage its organizations to build new abilities towards:
globalization, profits through growth, technology, intellectual capital, and change (Ulrich,
1998). However because its form is complex, therefore companies need to view it from an
institutionalforganizational systems and individual approach towards the strategic,
operational, organizational and external contexts (Gates 8 Cooksey, 1998; Heywood et.al.,
2007).


!"#$% '( Neasurement Factors towards !mprovement
)* +%,-*. "/.
0#1%2,34%
+%"567%8%/, 9"2,*75
: ;*/% ,-7*6<- 4"73*65
5,7",%<3%5 65%. 3/ ,-%
38=7*4%8%/, =7*2%55
!ts measurement according to Kaplan and Norton (2000), needs to be done
through a range of strategies that are used in improvement processes based on
performance measurement towards the QCDAC principles (quality, cost, delivery,
accountability, and continuous improvement).
> 97"8%. ,-7*6<- "/
3/,%7/"$ =%75=%2,34%
Hoffman (2000) stated that the approach must be framed through an internal
perspective, because of the following reasons:
a) Benefits from optimization as a means of providing solutionsf answers
towards the limitations of reasonable decision making.
b) Thoughts towards change are inadequate, because within it, other factors
are needed for instance speed towards modification and innovation as a
result of ideas and worker creativity that are driven by motivation, culture,
communication, and cooperation between workers.
? @%7A*783/<
8%"567%8%/, *4%7 ,38%
,*B"7.5 =%75=%2,34% "/.
5*23"$ 3/4%5,8%/,
Nurray and Haubl (2003) suggested that the application of measurement (which
is applied by learning by doing) need to be in line with time through experience
that stimulates abilities and expertise. As a consequence, the focus of the
company attention needs to be placed upon on the worker's abilities as a
competitive advantage whereby:
a) The measurement need to be applied on the operational perspective. This
means that measurement becomes a reflection of the organization's ways
in creating value.
b) The measurement need to be applied in the perspective of social
investment. This means that the company's abilities need to achieve include
developing, obtaining, and maintaining its workers as a long-term
organizational strategy.
C ;*/% "5 " 5,7",%<D
,*B"7.5 5%$A =$"2%8%/,
#"5%. 3/ #653/%55
=$"//3/< ,-7*6<- "
2*8#3/",3*/ *A "#3$3,3%5E
2**7.3/",3*/E F%D
273,%73"E "/.
3.%/,3A32",3*/ *A -68"/
7%5*672%5

Aseltine and Alletson (2006) suggested that strategic measurement can be done
on how the organization is viewed as placing themselves towards business
planning. As a result, the measurement used must be able to capture both direct
and indirect effects, processes must be simple, repeatable, directed towards
solution-based actions, and its results must be combined to the following:
a) The abilities and resources in distinct and sustainable ways (Thomas et. al,
2003).
b) How to coordinate efforts of all workers to facilitate growth from specific
competence, as channels to the customers who identify differences of the
products that are offered by the company.
c) The attributes towards products or its supplies, as a key criteria market
purchase (Coyne, 1986).
d) Architectural perspectives for identifying human resources based on work
relations towards different workers, strategic values and uniqueness
according to the used human resources configuration, expert groups, and
the natural forms of their contributions (Kang et. al, 2003).
G ;*/% "5 *=,383H",3*/
"/. %AA%2,34%/%55
Neasurement done towards individual performance needs to be interpreted as
optimization and effectiveness from the company's resources. Through an
integration of the measurement system based on critical success factors and a
matrix towards measured performance, its size will indicates a particular
firmness, consistency, and understanding of processes run based on objectives,
decision variables, and relevant shortcomings towards the organization.


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Haeryip Sihombing, Mohd Yuhazri Y.

dan Mochamad Safarudin 17

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