Operationalization of Dynamic Capabilities

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  • The two main sources are: Out corporate foresight book: http://futureorientation.net/2010/07/30/our-corporate-foresight-book-is-out-now/ and our article on corporate foresight and innovation: http://futureorientation.net/2010/07/30/corporate-foresight-for-enhancing-your-innovation-capacity/
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  • it's a good article I wish I have the original resources that composed it from .I'm a student from Iraq at Phd program and search in this topic dynamic capabilities and its effects on firms performance
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Operationalization of Dynamic Capabilities

  1. 1. 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
  2. 2. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 Practical relevance
  3. 3. How to Operationalize Dynamic Capabilities René 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. 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
  4. 4. How to Operationalize Dynamic Capabilities René 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) 4
  5. 5. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 Theoretical relevance:  Dynamic capabilities
  6. 6. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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. 7. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 7 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 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 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. 8. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 8 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 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 My research question: • What capabilities are needed to respond to external discontinuous change? Configuration & deployment Decision making Search & selection Implementation
  9. 9. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 Methodology
  10. 10. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 A high level of generalizability was achieved by using different corporate contexts and collection instruments. 20 case studies in 7 countries 1010
  11. 11. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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
  12. 12. How to Operationalize Dynamic Capabilities René 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. 1212
  13. 13. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 The Maturity Model of Organizational Future Orientation.
  14. 14. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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
  15. 15. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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
  16. 16. How to Operationalize Dynamic Capabilities René 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 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.
  17. 17. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 How do these capabilities unfold their transformative power?
  18. 18. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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
  19. 19. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 Conclusion
  20. 20. How to Operationalize Dynamic Capabilities René 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) 20
  21. 21. How to Operationalize Dynamic Capabilities René Rohrbeck, 2010 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

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