Knowledge accumulates slowly, over time, shaped and channeled into certain directions through the nudging of hundreds of daily managerial decisions. Dorothy Leonard-Barton says, “Knowledge reservoirs in organizations are not static pools but wellsprings, constantly replenished with streams of new ideas and constituting an ever- flowing source of corporate renewal.” Her focus is on people in companies whose core capabilities are technology-based, those organizations that compete on the basis of technological advantage. Her point of view is that the management of knowledge is a skill; managers who understand and develop it will dominate competitively.
The four dimensions of core capabilities that she identifies are:
- Employee knowledge and skill;
- Physical technical systems;
- Managerial systems; and
- Values and norms.
Around these dimensions she examines the activities that create, channel, and control knowledge:
- Shared, creative problem solving;
- Implementing and integrating new methodologies and tools;
- Formal and informal experimentation;
- Pulling expertise from outside.
Leonard-Barton points out the perplexing paradox that core capabilities can also become core rigidities — a firm’s strengths are simultaneously its weaknesses. Some reasons for rigidities to occur are the tendency to overshoot, economics, and the politics of power, organizational routines become ingrained, and the system that nurtures the status of one function or discipline tends to downgrade others. Being excellent in one knowledge domain, an organization may become unreceptive to ideas from others, unless it is not truly a learning organization.
According to Peter Senge (1990), learning organizations are those places where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together. The basic rationale for such organizations is that in situations of rapid change only those that are flexible, adaptive and productive will excel. For this to happen, it is argued, that organizations need to ‘discover how to tap people’s talents to learn at all levels’.
While all people have the capacity to learn, the structures in which they have to function are often not conducive to reflection and engagement, however. Furthermore, people may lack the tools and guiding ideas to make sense of the situations they face. Organizations that are continually expanding their capacity to create their future require a fundamental shift of mind among their members. This is in fact a critical area to be dealt with in any typical organization, be it producing or servicing.
For instance, in a construction consultancy service provision, a team belonging to different professional disciplines may have different approaches, strategies, defenses or alternatives to a given issue. In order to successfully implement an operations strategy, certain core capabilities must be identified for the management to establish its competitive priorities in the market segment it operates. Core capabilities are thus defined as skills that operations management function has developed to allow their work places to differentiate itself from its competitors. This is mainly in form of human resources and largely through brainstorming sessions.
Eisenhardt and Martin define, with another term, that is dynamic capabilities as “the firm’s processes that use resources – specifically the processes to integrate, reconfigure, gain and release resources – to match and even create market change. Dynamic capabilities are the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die.” This is very close to the definitions given by Grant (1996) and Pisano (1994), who said that dynamic capabilities are antecedent (preceding) organizational and strategic routines by which managers alter their resource base – acquire and shed resources, integrate them together, and recombine them – to generate new value-creating strategies.
Eisenhardt and Martin give some attributes to dynamic capabilities: they are not vague (they are clear) or tautological, but idiosyncratic (individualized) in their details and path dependent in their emergence (learning mechanisms like repeated practice and small losses lead to accumulation of tacit and explicit knowledge and effective learning), and have significant commonalities across firms. There are multiple paths (equifinality) to the same dynamic capabilities, routines are substitutable and fungible (replaceable) across different contexts and dynamic capabilities per se are not likely to be sources of sustained competitive advantage.
Dynamic capabilities vary with the market dynamism. When markets are moderately dynamic capabilities are to be found in routines that are complicated, detailed and analytic processes (relying extensively on existing knowledge and linear execution) to produce mainly predictable outcomes, but in high-velocity markets (rapid and unpredictable change) dynamic capabilities are simple, highly experiential, unstable and fragile processes that rely on quickly created new knowledge and iterative execution to produce adaptive, but unpredictable outcomes.
Dynamic capabilities are therefore a set of specific and identifiable strategic and organizational processes that create value for firms. Eisenhardt and Martin have identified some processes that are used as samples for dynamic capabilities.
- Product Development (combining various skills in cross-functional teams),
- Strategic Decision Making (pooling of various business, functional and personal expertise),
- Transfer Processes (copy, transfer and recombine knowledge-based resources),
- Resource Allocation Routines (distribution of scare resources),
- Strategic Co-evolving (synergistic resource combinations, social bonds),
- Strategic Patching to realign the match-up of businesses and resources (add, combine and split) to changing market opportunities,
- Knowledge Creation (new thinking, linkage between local firm and outside resources),
- Alliance and acquisition routines (new resources, pre- and post-acquisition routines) and,
- Exit routines.
Dynamic capabilities improve existing resource configurations, but are used to build new resource configurations in a pursuit to gain short-term advantages (short-term view of dynamic capabilities).
In moderately dynamic markets, change occurs frequently but along roughly predictable and linear paths with clear market boundaries and known players (competitors, customers, complementaries), dynamic capabilities rely heavily on existing knowledge (tacit-silent-knowledge and rule of thumb). Efficient processes can be created, it can be learned before doing (codified detailed routines, sequence of problem solving steps).
In very dynamic markets (high velocity) change becomes non-linear and less predictable – uncertainty cannot be modeled as probabilities because it is not possible to specify a priori future states. The overall industry structure is unclear, market boundaries are blurred, successful business models are unclear, and market players like buyers, suppliers, competitors and complementers are ambiguous (difficult to define) and shifting. Effective dynamic capabilities in high velocity markets are simple, not complicated, experimental (not analytic), iterative (not linear) routines and processes (as they are in moderately dynamic markets); they rely on rapidly creating situation-specific new knowledge – the past experience might be inappropriate.
The evolution of dynamic capabilities emerges from path-dependent processes (learning mechanisms) and leads to codification, to make experience easier to apply and it accelerates the building of routines. A crucial aspect of evolution is selection, not variation, because it is difficult to figure out what experience should be generalized from the extensive situation-specific knowledge that occurs. The implementation of dynamic capabilities is consequential: they are often combinations of simpler capabilities and related routines, some of which may be foundational to others and so must be learned first.
The value of dynamic capabilities “for competitive advantage lies in their ability to alter the resource base: create, integrate, recombine, and release resources.” Effective routines are adaptive to changing circumstances, but this comes with the price of unstable processes with uncertain outcomes. The potential for long-term competitive advantage lies in using dynamic capabilities sooner, more astutely (crafty), or more fortuitously than the competition to create resource configurations that have that advantage.
Reference
Tidd, Joe (2001) Managing Innovation, Integrating Technological Market and Organizational Change (2nd Edition), NY: John Wiley and Sons.
Article Source:http://www.articlesbase.com/human-resources-articles/tapping-talents-in-an-organization-1229718.html
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