Dynamic Capabilities in an Uncertain World

today's rapidly changing world can be difficult for come they need to meet the expectations of their customers develop a strong brand identity and be able to adapt quickly to radical shifts within their industries addressing new demands that are hard to anticipate the need for a company to meet all these goals simultaneously has led them to develop dynamic capabilities first proposed by David T's Gary pisano and aney Xuan this organizational concept emphasizes the capability to integrate build and reconfigure internal and external competences to address rapidly changing environments because every organization is different there is no general set of rules for an organization to build dynamic capabilities particularly in today's volatile uncertain complex and ambiguous business environments or VUCA this creates an acute challenge for management in the areas of innovation organizational structure and managing talent just to name a few according to California management reviews fall 2018 article innovation dynamic capabilities and leadership three main dynamic capabilities are becoming necessary to achieve corporate agility in the VUCA world sensing and shaping opportunities and threats that may come along seizing opportunities and maintaining competitiveness through enhancing reworking and/or protecting one's assets for example Steve Jobs an apple sense where the consumer technology industry was headed in the mid 2000s as a result Apple evolved their innovation roadmap and the iPhone became the Godfather of the smartphone era when developing the iPod several years later Apple solidified their competitive advantage by cutting deals directly with studios and recording companies this resulted in iTunes a complementary ecosystem where customers could place all of their media in a single user-friendly platform Apple shaped its own dominance through keen foresight distinctive design highly customized global supply chains and strong patents the classic concept behind dynamic capabilities stresses three main strategic stages the first stage learning requires a company to build common codes of communication and reorganised routines or patterns of interactions to create efficient solutions better interactions can also make better use of alliance and acquisition routines that enable organizations to bring new gauging assets from external sources this leads to the second stage new assets where the organization integrates new strategic assets into company processes these assets can include new capabilities technologies and perspectives from customer feedback performance is driven by more routines for gathering and processing information for linking customer experiences to design choices and for coordinating factories and component suppliers the third and final stage transformation of existing assets reconfigures asset structures and accomplishes rapid transformation in the face of fast changing markets organizations must develop low cost high payoff changes that result in reconfiguration and transformation ahead of the competition over time assets can become more valuable in combination than separately such as when physical assets human capital and intellectual properties create a synergy of complementary assets this is called Co specialization which gives an organization a sustainable competitive advantage over the competition and it's this confluence of dynamic capabilities that produces lasting competitive advantage allowing firms to grow and maintain success for the next 10 years 100 years and beyond to read more on how dynamic capabilities help navigate organizations in guca environments please visit CMR berkeley.edu to read the fall 2018 issue on management innovation in an uncertain world