Dynamic capabilities

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The basic assumption of the dynamic capabilities framework is that today’s fast changing markets force firms to respond quickly and to be innovative.

[edit] Processes

The following three dynamic capabilities are necessary. First, in order to meet these challenges organisations and their employees need the capability to learn quickly and to build strategic assets. Second, new strategic assets, like knowledge, technology and customer feedback, have to be integrated within the company. Third, existing strategic assets have to be transformed or reconfigured. The processes are now described in more detail [1][2]

  1. Learning requires common codes of communication and coordinated search procedures. The organisational knowledge generated resides in new patterns of activity, in “routines”, or a new logic of organisation. Routines are patterns of interactions that represent successful solutions to particular problems. These patterns of interaction are resident in group behaviour and certain sub-routines may be resident in individual behaviour. Collaborations and partnerships can be a source for new organisational learning, helping firms to recognise dysfunctional routines, and preventing strategic blind spots. Similar to learning, building strategic assets is another dynamic capability. For example, alliance and acquisition routines can enable firms to bring new strategic assets into the firm from external sources.
  2. The effective and efficient internal coordination or integration of strategic assets may also determine a firm’s performance. According to Garvin (1988) quality performance is driven by special organisational routines for gathering and processing information, for linking customer experiences with engineering design choices and for coordinating factories and component suppliers. Increasingly, competitive advantage also requires the integration of external activities and technologies, for example in the form of alliances and the virtual corporation. Zahra and Nielsen (2002) show that internal and external human resources and technological resources are related to technology commercialisation.
  3. Fast changing markets require the ability to reconfigure the firm’s asset structure, and to accomplish the necessary internal and external transformation (Amit and Schoemaker, 1993). Change is costly and so firms must develop processes to minimise low pay-off change. The capability to change depends on the ability to scan the environment, to evaluate markets, and to quickly accomplish reconfiguration and transformation ahead of the competition. This can be supported, for example, by decentralization, local autonomy and strategic alliances.

[edit] References

  1. ^ Teece, D., G. Pisano and A. Shuen, 1997, "Dynamic capabilities and Strategic Fit", Strategic Management Journal, (18:7),pp.509-533
  2. ^ Eisenhardt, K. and J. Martin, 2000, "Dynamic capabilities:What are they?", Strategic Management Journal, (21),pp.1105-1122.

Zahra, S.A., Nielsen, A.P.(2002)Sources of capabilities, integration and technology commercialization.Strategic Management Journal, 23; 5; pp. 377-398.