JANUARY 2016 / NO. 1
TAGS: MICHAEL PORTER, DAVID TEECE, DYNAMIC CAPABILITIES, AUTOMOTIVE, TOYOTA, SENSING, SEIZING, TRANSFORMING, NOKIA, APPLE

Ordinary and Dynamic Capabilities

“A clear strategic direction is a concise set of choices that determines what we do and what we don’t do”, Freek Vermeulen
Many years ago, Michael Porter said that strategy is about making choices differently from your rivals. It is interesting to make the connection with Professor David Teece of the University of California at Berkeley, regarding ‘dynamic capabilities’, the internal company drivers of strategy that point towards competitive positioning. Teece draws a distinction between ordinary and dynamic capabilities. Ordinary capabilities are a set of learned processes and activities that enable a company to produce a particular outcome and are similar to best practices. Automobile companies may know how to build an assembly line but it still took most of them more than 25 years to learn the ‘Toyota Way’. This means automobile companies are no longer unique. Dynamic capabilities are those capabilities unique to each company and are rooted in the company’s history, not just in routines but in business models that go back decades and are difficult to imitate, as implied for example, in the response “This is the way things are done around here”.
Three types of managerial activities make a capability dynamic:
  1. Sensing: identifying and assessing opportunities outside your company
  2. Seizing: mobilizing your resources to capture value from those opportunities
  3. Transforming: continuous renewal
This is about how to get to the future in an optimum way, about how to position today’s resources properly for tomorrow. Compare Nokia with Apple; Nokia missed the smartphone revolution because it was not well equipped for sensing. Nokia tapped heavily into the science and technology, but missed the prevailing state of mind. We can see how important competitive intelligence is because we know that one of the core objectives of competitive intelligence is to ‘sense’ what is going on in the external business environment and how future dynamics can impact the company. Can we learn from this? Yes, even more because this is the difference between traditional competitive intelligence with a short- to mid-term perspective versus strategic intelligence which has a mid- to long-term view.
“Culture eats strategy for breakfast”, Peter Drucker
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