Operations Management Explication Dynamic Capabilities: the nature and microfoundations of (sustainable) enterprise performance David J. Teece Shinyoung Kim Operations Management

What are Dynamic Capabilities?

Why Dynamic Capabilities? Open Economy High Technology Open User Innovation Cospecialized Asset Enterpreneurship ….

Dynamic capabilities framework

(and Individual Capacities) to Learn and to Sense, Filter, Shape, and Elements of an ecosystem framework for “Sensing” market and technological opportunities Processes to Direct Internal R&D & Select New Technologies Processes to Tap Developments in Exogenous Science and Technology Analytical Systems (and Individual Capacities) to Learn and to Sense, Filter, Shape, and Calibrate Opportunities. Processes to Tap Supplier & Complementor Innovation. Processes to Identify Target Market Segments, Changing Customer Needs, and Customer Innovation.

Strategic decision skills/ execution for “Seizing” market and technological opportunities Delineating the Customer Solution and the Business Model Selecting the Technology and Product Architecture; Designing Revenue Architectures; Selecting Target Customers; Designing Mechanisms to Capture Value. Selecting Enterprise Boundaries to Manage Complements and“Control”Platforms Calibrating Asset Specificity; Controlling Bottleneck Assets; Assessing Appropriability; Recognizing, Managing, Capturing Cospecialization Economies Enterprise Structures, Procedures, Designs and Incentives for Seizing Opportunities Selecting Decision-Making Protocols Recognizing Inflexion Points and Complementarities; Avoiding Decision Errors and Anticannibalization Proclivities Building Loyalty and Commitment Demonstrating Leadership; Effectively Communicating; Recognizing Non-Economic Factors, Values, and Culture

Decentralization and Near Decomposability Combination, reconfiguration, and asset protection skills for “Transforming” market and technological opportunities Decentralization and Near Decomposability Adopting Loosely Coupled Structures; Embracing Open Innovation; Developing Integration Coordination Skills. Cospecialization Managing Strategic Fit So That Asset Combinations Are Value Enhancing. Continuous Alignment and Realignment of Specific Tangible and Intangible Assets. Governance Achieving Incentive Alignment; Minimizing Agency Issues; Checking Strategic Malfeasance; Blocking Rent Dissipation. Knowledge Management Learning; Knowledge Transfer; Know-howIntegration; Achieving Know-how and Intellectual Property Protection.

“Orchestration” Dynamic capabilities

D. J. Teece Vs. M. E. Porter Sustainable Competitive Advantage Let’s Think about ….Conflicting views on Sustainable Competitive Advantage D. J. Teece Vs. M. E. Porter

Dynamic Capabilities at Sensing Seizing Transforming Result iPod Existing mp3 players were too “geeky” Create an aesthetically appealing portable 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 distribution 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 phones retained an awkward interface too close to their cell phone roots. Create a multimedia phone with a large 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: A GUIDE FOR MANAGERS by David J. Teece (2011) 

How to build Entrepreneurship? “Capturing value is never certain, but it can be managed.”

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