Explication Dynamic Capabilities: the nature and microfoundations of (sus-

tainable) enterprise performance

David J. TeeceShinyoung KimOperations Management

What are Dynamic Capabili-ties?

Dynamic Capabilities

= Dynamic + Capabilities

Why Dynamic Capabilities?

Open Economy

High Technology

Open User Innovation

Cospecialized Asset

Enterpreneurship

….

Dynamic capabilities frame-work

Processes to Identify

Target Market Segments,

Changing Customer Needs, and Customer Innovation.

Processes to Tap Supplier

&

Complementor Innovation.

Processes to

Direct Internal R&D

&

Select New Technologies

Processes

to Tap Developments

in Exogenous Science

and Technology

Elements of an ecosystem framework for “Sensing” market and technological opportuni-ties

Analytical Systems

(and Individual Capacities)

to Learn and

to Sense, Filter, Shape,

and

Calibrate Opportunities.

Delineating the Customer Solu-tion and the Business Model

Selecting the Technology and Prod-uct Architecture;Designing Revenue Architectures; Selecting Target Customers; Design-ing Mechanisms to Capture Value.

Strategic decision skills/ executionfor “Seizing” market and technological opportuni-ties

Enterprise Structures, Proce-

dures, Designs and Incentives for

Seizing Opportunities

Selecting Enterprise Boundaries

to Manage Complements

and“Control”Platforms

Calibrating Asset Specificity;

Controlling Bottleneck Assets;

Assessing Appropriability;

Recognizing, Managing,

Capturing Cospecialization Economies

Selecting Decision-Making Protocols

Recognizing Inflexion Points and Comple-

mentarities;

Avoiding Decision Errors and Anticannibal-

ization Proclivities

Building Loyalty and Commitment

Demonstrating Leadership; Effectively

Communicating; Recognizing Non-Eco-

nomic

Factors, Values, and Culture

Continuous Alignment

and Realignment of Specific Tan-

gible and Intangible Assets.Knowledge Management

Learning; Knowledge Transfer;

Know-howIntegration;

Achieving Know-how and Intellectual

Property Protection.

Governance

Achieving Incentive Alignment; Minimiz-

ing Agency Issues;

Checking Strategic Malfeasance; Blocking

Rent Dissipation.

Decentralization and Near De-composability

Adopting Loosely Coupled Struc-tures; Embracing Open Innovation; Developing IntegrationCoordination Skills.

Cospecialization

Managing Strategic Fit

So That Asset Combinations Are Value

Enhancing.

Combination, reconfiguration, and asset protection skillsfor “Transforming” market and technological op-portunities

“Orchestration” Dynamic ca-pabilities

D. J. Teece Vs. M. E. Porter

Let’s Think about ….Conflicting views on Sustainable Competitive Advantage

Sensing Seizing Transforming ResultiPod Existing mp3 players

were too “geeky”

Create an aesthetically appealingportable device with a simple interface over an accelerated product development cycle; later: improve appropriability with exclusive Fair Play DRM in the iTunes Music Store

Port iTunes software to rival Windows platform; Expand into content distribu-tion with the iTunes Music Store; Shift company emphasis from computers to consumer electronics

Domination of the portable digital music player market; Expansion to video capabilities (playback and distribution).

iPhone

Existing smart phonesretained an awkward interface too close totheir cell phone roots.

Create a multimedia phone with alarge screen and an intuitive interface; promote complementary asset creation with the App Store infrastructure.

Develop telephony capabilities; enter the regulated telephony market

One of the only companies making money with smart phones

iPad

“Netbooks” provide an unsatisfying computing experience and “E-readers” provide limited functionality.

Scale up the iPhone interface to provide a richer multimedia platform without phone functionality.

Extend the “simple interface” aesthetic to a computing platform.

Make new demands for Tablet PC

Dynamic Capabilities at

DYNAMIC CAPABILITIES: A GUIDE FOR MANAGERS by David J. Teece (2011) 

How to build Entrepreneurship?

“Capturing value is never certain, but it can be managed.”

Thank You!