Operationalization of Dynamic Capabilities

How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010

How to Operationalize Dynamic Capabilities

Dr. René Rohrbeck

Vortrag auf der VHB Jahrestagung der TIE Kommission

4. November 2010


Practical relevance


De Geus, 1997

Although Kodak was aware of the risk of digital photography early, there was no timely response to discontinuous technological change to counter

the loss of competitive position.

The average life expectancy of a“Fortune 500“ company is

less than 50 years.

3

Companies struggle to adapt to (radical) changes in the environment.

Lucas and Goh, 2009

Successfully responding to external change requires often challenging dominant views of the world and top management to engage directly in

search processes

Tripsas and Gavetti, 2000


Why is it so difficult for companies to adapt to discontinuous changes?

High clock speed Ignorance Inertia

High rate of change(Sood & Tellis, 2005)

Shorter product-life cycles(Kessler & Charkabarti, 1996)

Higher innovation speed(Chen et al. 2010)

Faster diffusion of innovation(Lee et al., 2003)

Short-term orientation(Ansoff, 1980)

Internal focus(Day & Schoemaker, 2004)

Information overload(Lesca & Caron, 1995)

Filtering by middle-management(Lucas & Goh 2009; Krystek, 2007)

Complex internal structures(Godet et al., 2004)

Barriers against cannibalization of existing business(Chandy & Tellis, 1998)

Complex external structures(Gunasakaran, 2008)

4


Theoretical relevance: Dynamic capabilities


6

Proposal for operationalization of „dynamic capabilities“Helfat, E. et al. (2007) Dynamic Capabilities: Understanding Strategic Change in Organizations, Blackwell Publishing: Malden, MA, pp. 7-17

Managerial and organizational processes

Dynamic capabilities

Configuration & deployment

Decision making

Search & selection

Implementation

Performance yardstick

Value creation

Technical FitnessMeasures the performance of a dynamic capability as “quality per unit cost”

(e.g. how many relevant trends are being identified and assessed and at what cost)

The technical fitness is one of the three factors influencing the evolutionary fitness

Evolutionary fitness Survival Growth Value creation Competitive and

sustained advantage

profit

External factors influencing the evolutionary fitnessMarket demand

Competition


7





Value creation





sustained advantage

profit


Competition

Eisenhardt & Martin 2010:

Dynamic capabilities are known and distinct processes such as

Strategic decision making

New product development

Alliancing


Decision making

Search & selection

Implementation

?


8





Value creation





sustained advantage

profit


Competition

My research question:

• What capabilities are needed to respond to external discontinuous change?


Decision making

Search & selection

Implementation


Methodology


A high level of generalizability was achieved by using different corporate contexts and collection instruments.

20 case studies in 7 countries

1010

http://www.gepower.com/

http://www.manturbo.com/

http://www.manturbo.com/

http://www.telekom.de/

http://www.telekom.de/


For triangulation three informant perspectives were used, with a particular emphasis on the internal customers.

Perspectives of informants

Foresight Activity Usage

Responsibleof the foresight activity.

Activity teamworking on the foresight activity.

Internal Customerand user of the foresight insights

28

TOTAL

107

Internal customer

42

Responsible

37

Activity team Responsible

Number of interviews

Activity team

1111


Case study result presentations

2 practitioner conferences

European Conference on Corporate Foresight 2007: 16 firms European Conference on Corporate Foresight 2008: 36 firms

For validation benchmarking results were discussed with firms individually and collectively at two conferences.

1212


The Maturity Model of Organizational Future Orientation.


5 dimensions and 21 elements of Organizational Future Orientation abilitites were identified.

14

Organizational Future Orientation (OFO)

Information usage

Method sophistication

People & networks

Organization Culture

Sources

Time horizon

Scope

Reach

Communication capacity

Integration capacity

Match with goal

Match with context

External network

Characteristics of foresighters

Internal network

Accountability

Formal diffusion of insights

Mode

Integration with other processes

Incentives

Organization's attitude towards the

periphery

Willingness to share across functions

Readiness to listen to scouts and external

sources

Willingness to test and challenge basic

assumptions

i


Dimensions of the CF ability Maturity levels

Highest possible value

Optimal maturity levelgiven a certain context1

2

3

4i

Within the five capability dimensions the aspired maturity level is chosen on the basis of a context analysis.

15

What maturity level should be chosendepends on the context

of the firm

15


Reach

Scope

Time Horizon

Source

Items

Scanning only in current business

Level 1 Level 2 Level 3 Level 4

Scanning in current business and areas of

interest

Scanning in current and adjacent business

Scanning in current business, adjacent

business and in white spaces

Not usable to communication

Scanning technologies and poorly some other

areas

Scanning the areas of the environment to a different

extend

Scanning in all areas (Technology, political, competitor, customer)

Emphasis on short termShort and medium term

are taken into account (1-2 product life cycles)

Long, medium and short term are taken into

account

Pro-active scanning in long, medium and short

term in place

Use of few and easily accessible sources

Use of multiple easily accessible sources

Use of some restricted sources that provide

competitive advantage

Use of many sources that provide competitive

advantage

16

i Information usageExample

16

The maturity level has been operationalized through qualitative descriptions.


How do these capabilities unfold their transformative power?


Barriers, activities and capabilities.

18

Promote internal networks

Change is not detected by

organizational sensors

Change is not judged as relevant

by foresighter

Decision makers are not convinced about relevance of

change

Re-action strategies are not planned and/or decided

Responsible persons for acting are not convinced

and prevent change

Barriers

Scan the entire environment(All environmental areas, all time horizons, multiple sources)

Define clear responsibilities

i Use methods with high integration capacity

Use methods with high communication capacity

Integrate with follow-up processes and define formal decision-making processes

Define accountability for sensing weak signals and establish formal communication channels

Allow triggering of foresight activities top-down and bottom-up and use project-based and continuous approaches

Activities

Capabilities

Promote willingness to share across functions, readiness to listen to external sources, willingness to share across functions, and a curious organizational attitude towards the periphery

Hire and develop foresighters with ideal characteristics(Curious & receptive, open minded & passionate, broad & deep knowledge, strong internal & external network)

planassess convince actidentify1 2 3 4 5


Conclusion


Conclusion and future research

More knowledge is needed on how corporate change is occurring …over time …in which steps …driven by which actors …despite which barriers to change

Future research proposal: Strategy-as-practice approach Studying an episode from emergence of an external change to

the response of the firm (longitudinal analysis)

20


Thank you for your interest!

2121

http://futureorientation.net

Dr. René Rohrbeck

[email protected] http://www.tu-berlin.de/?id=31298

http://futureorientation.net/

mailto:[email protected]

http://www.tu-berlin.de/?id=31298

Date post:	18-Jan-2015
Category:	Education
Upload:	rene-rohrbeck
View:	4,465 times
Download:	5 times

Operationalization of Dynamic Capabilities

Education