Dynamic Capabilities and Strategic Management
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The document discusses the concept of dynamic capabilities, emphasizing the importance of a firm's ability to integrate, build, and reconfigure competencies to adapt to rapidly changing environments. It critiques existing paradigms of strategy and explores how firms develop unique capabilities that provide competitive advantages. The work also poses questions about the relationship between different strategic approaches and the implications for organizational adaptation.
Dynamic Capabilities and Strategic Management
- 1. 2009 INNOVATION MANAGEMENT SEMINAR 4 ON THE NATURE OF TECHNOLOGICAL KNOWLEDGE AND ITS IMPLICATIONS FOR SPECIALISATION AND INNOVATION “Never mind ! Let’s get it to market first.“ A Discussion of : Teece D., Pisano G., and Shuen A. 1997. Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18, 7, 509-534.* Prepared by Andreas Paparitsidis, Bac Hoai tran, Hsuan-Yi Wu (Jen), and Phillip C. Jackson OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 1
- 2. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. STRATEGIC MANAGEMENT DYNAMIC CAPABILITIES AND INTRODUCTION (BAC) - Models of strategy 1. emphasizing the exploitation of market power (competitive forces, strategic conflict) 2. emphasizing efficiency (resource-based perspective, dynamic capabilities approach) Teece D., Pisano G., and Shuen A. 1997. TOWARD A DYNAMIC CAPABILITIES FRAMEWORK (JEN) - Markets and strategic capabilities - Processes, positions, and paths - Replicability and imitatability of organizational processes and positions CRITIQUES (PHILLIP) CONCLUSION AND DISCUSSION (ANDREAS) OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 2
- 3. INTRODUCTION -Introduce three existing paradigms - Competitive forces - Strategic conflict - Resource-based • And an emerging new paradigm – ‘dynamic capabilities’ - Processes, positions, and paths - Replicability and imitatability of organisational processes and positions • - Are they interrelated – complementary or competitive? • - Future directions? OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 3
- 4. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Dynamic Capabilities and Strategic Management - Purpose To provide a coherent framework which can both integrate existing conceptual and David J. Teece empirical knowledge and facilitate prescription. - Assumption GARY PISANO Firms can achieve and sustain competitive advantage by developing the dynamic capabilities approach to address rapidly changing environments. AMY SHUEN OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 4
- 5. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. - Definition • The term dynamic refers to the capacity to renew competences so as to achieve congruence with the changing business environment. • The term capabilities emphasizes the key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills resources and functional competencies to match the requirements of a changing environment. OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 5
- 6. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. - Definition • The term dynamic capabilities refers to the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environment. • It reflect an organization’s ability to achieve new and innovative forms of competitive advantage given path dependencies and market positions. OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 6
- 7. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. DYNAMIC CAPABILITIES FRAMEWORK Processes the way things are done (routines, patterns of practice and learning) Positions current specific endowments (technology, IP, complementary assets, customer base, external relations) Paths strategic alternatives (presence or absence of increasing returns and attendant path dependencies) OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 7
- 8. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. The competitive advantage of firms lies with its managerial and organizational processes, shaped by its (specific) asset position, and the paths available to it. How firms Transferring or positions achieve and redeploying processes sustain competences from competitive one concrete advantage? economic setting to another paths replication A difficult-to-replicate or difficult-to-imitate imitation competence must be built Replicate by the because it cannot be bought. firm itself or its competitors OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 8
- 9. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Organizational and managerial processes The firm’s processes and Coordination/integration positions collectively encompass its competences Learning and capabilities. Reconfiguration & transformation DYNAMIC Technological assets Complementary assets Path Technological dependencies opportunities Paths CAPABILITIES Reputational assets Financial assets Organizational processes, shaped by the firm’s asset positions and Institutional assets Structural assets molded by paths, explain the essence of the firm’s dynamic Market (structure) assets capabilities and its competitive advantages. Positions
- 10. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Dynamic capabilities can be seen as an emerging and potentially integrative approach to understanding the newer sources of competitive advantage. OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 10
- 11. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Key Question to think: How some organizations first develop firm- specific capabilities and how they renew competences to respond to shifts in the business environment? (business processes, Market positions, expansion paths) Key point: To be strategic, a capability must be honed to a user need, unique and difficult to replicate. OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 11
- 12. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. CRITIQUES • Logical Conceptual Framework • Tautological • Dynamic Capabilities - the firm's ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments • Difficult to operationalize • Lack of algorithm to translate environmental factors into capabilities model • Path dependency and the reconfiguration dynamic OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 12
- 13. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. CRITIQUES • A definition of dynamic capabilities should go beyond a reference to competence and routines to include the firm’s ability to readapt established routines in order to respond to the environmental changes • It should take advantage of the four paradigms to solve complex problems OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 13
- 14. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Key to summarize: • ‘Dynamic Capabilities' approach is to stress exploiting existing internal and external firm specific competences to address rapidly changing environments. • It emphasizes the development of management capabilities, and difficult-to- imitate combinations of organizational, functional and technological skills. OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 14
- 15. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Paradigms of Strategy: Salient Characteristics OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 15
- 16. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Discussion 1. At which point should a firm decide that instead of constantly adjusting to changing environments, its time to adapt the environment to its capabilities and competences? 2. Do you believe that these four different strategic approaches are complementary or competitive?
- 17. Dynamic Capabilities and Strategic Management Teece D., Pisano G., and Shuen A. 1997. Title Dynamic capabilities: understanding strategic change in organizations Authors Constance E. Helfat, Sydney Finkelstein, Will Mitchell, David J. Teece… FURTHER READING Edition Illustrated Publisher Wiley-Blackwell, 2007 ISBN 1405159049, 9781405159043 Length 147 pages Title Dynamic Capabilities and Strategic Management: Organizing for Innovation and Growth Author David J. Teece Edition illustrated Publisher Oxford University Press US, 2009 ISBN 019954512X, 9780199545124 Length 272 pages OCT. 30, 2009 2009 INNOVATION MANAGEMENT BMAN71471 17