Operationalization of Dynamic Capabilities

How to Operationalize Dynamic Capabilities
René 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 Fitness
Measures 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 fitness
Market demand
Competition

7
Value
creation
Technical Fitness
cost)
fitness
 Survival
 Growth
 Value creation
 Competitive and
sustained
advantage
 profit
Market 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
?

8
Value
creation
Technical Fitness
cost)
fitness
 Survival
 Growth
 Value creation
 Competitive and
sustained
advantage
 profit
Market demand
Competition
My research question:
• What capabilities are needed to
respond to external discontinuous
change?
Configuration &
deployment
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

For triangulation three informant perspectives were used,
with a particular emphasis on the internal customers.
Perspectives of informants
Foresight
Activity
Usage
Responsible
of the foresight
activity.
Activity team
working on the
foresight activity.
Internal Customer
and 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 level
given 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 chosen
depends 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 term
Short 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 usage
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 actidentify
1 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
rene.rohrbeck@tim.tu-berlin.de
http://www.tu-berlin.de/?id=31298

Operationalization of Dynamic Capabilities

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