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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Practical relevance
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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.
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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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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)
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How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Theoretical relevance: Dynamic capabilities
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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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
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
Eisenhardt & Martin 2010:
Dynamic capabilities are known and distinct processes such as
Strategic decision making
New product development
Alliancing
Configuration & deployment
Decision making
Search & selection
Implementation
?
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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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
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
My research question:
• What capabilities are needed to respond to external discontinuous change?
Configuration & deployment
Decision making
Search & selection
Implementation
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Methodology
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
A high level of generalizability was achieved by using different corporate contexts and collection instruments.
20 case studies in 7 countries
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How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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.
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How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
The Maturity Model of Organizational Future Orientation.
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
5 dimensions and 21 elements of Organizational Future Orientation abilitites were identified.
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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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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.
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What maturity level should be chosendepends on the context
of the firm
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How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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
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i Information usageExample
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The maturity level has been operationalized through qualitative descriptions.
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
How do these capabilities unfold their transformative power?
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Barriers, activities and capabilities.
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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
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Conclusion
How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
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)
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How to Operationalize Dynamic CapabilitiesRené Rohrbeck, 2010
Thank you for your interest!
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http://futureorientation.net
Dr. René Rohrbeck
[email protected] http://www.tu-berlin.de/?id=31298