Dynamic capabilities and innovation Flashcards
Dynamic capabilities are “the firm’s ability to… internal and external competences to address…
…integrate, build and reconfigure… rapidly changing environment…”
Leonard-Barton (1992)
DCs generate CA through… unique to…
…value-creating strategies… specific markets and customer needs.
Eisenhardt and Jeffrey (2000)
Criticised for being:
- Vague
2. Tautological
DCs exhibit… across effective firms, but have
…commonalities…. idiosyncrasy in details.
Implications of commonalities:
- Equifinality - multiple, unique paths to take
- Routines are substitutable - details can differ as long as key commonalities remain the same
- DCs are not the source of SCA - they are substitutable day to common features
In moderately dynamic markets, DCs are:
- Complicated
- Detailed
- Analytic
- Rely on existing knowledge
- Linear execution
- Predictable outcomes
In high-velocity markets, DCs are:
- Simple
- Experiential
- Unstable
- New knowledge
- Iterative execution
- Adaptive, unpredictable outcomes
Dos are causally ambiguous in:
1. Moderate markets
2. High-velocity markets
because:
- They are complex and difficult to observe
2. They are simple
Evolution of DCs:
- Repeated practice - helps understanding and development of effective routines
- Codification - of experience into technology and formal procedures
- Mistakes - contribute to learning by increasing attention
- Pacing of experience - inverted ‘U’ (Hayward, 1998)
- Extension - small variations allow application (Hayward, 2000)
VRIN DCs are not the source of SCA, the potential lies in using them:… than competitors.
- Sooner
- More astutely
- More fortuitously
The DC view explains that…, even if its coherence and rationality are observable.
…behaviour and performance are hard to replicate…
Reece et al. (1997)
Focus needs to be defined in terms of…, not products since products are…
…distinctive competences or capability… manifestations of competences.
Invention involves the conversion of…
…new knowledge into a new product, process or service
Innovation involves the conversion of… and…
…new knowledge into a new product, process or service… putting this into actual use.
Innovation can be guided by:
- Technology push
- Market pull
- The technologists or scientists push the process
2. Organisations listen to the users - sees the importance of actual use
The spectrum of market pull:
- Elitist - leader users
2. Basic - frugal innovation
Two forms of innovation:
- Product
- Process
- Relates to final product or service and its features
2. Relates to the way in which this product is produced and distributed
How does the relative importance of each innovation changes as industries evolve over time?
Initially the industry is dominated by product innovation based on new features. Once a dominant design has been established, innovation switched to process innovation, and competition shifts to producing the dominant design as efficiently as possible.
(Cycle liable to start again as some significant innovation challenges the dominant design)
At which points do the small entrants have the greatest opportunity? And at which point do large incumbents have the advantage?
Where the dominant designs are not yet established or are beginning to collapse. During periods of dominant design stability, when scale of economies and the ability to roll out process innovations matter most.
Innovation can be:
- Open
- Closed
- The deliberate import and export of knowledge by an organisation in order to accelerate and enhance its innovation i.e. collaborations with companies and universities, crowdsourcing
- Relying on the organisation’s own internal resources and keeping ideas secret to prevent free-riders
The balance between open and closed innovation is dependent on:
- Competitive rivalry - when partners are liable to behave opportunistically - closed innovation is better
- One-shot innovation - where winners are likely to be put substantially ahead so partners will act opportunistically - closed innovation is better
- Tight-linked innovation - open innovation risks introducing damaging inconsistent elements - closed innovation is better
The opposite to technological innovation is…
…business model innovation
Business model innovation involves…
reorganising the elements of a business into new combinations.
The basic areas of business model innovation:
- The product - refine it and how it is produced through; technology development, procurement, inbound logistics and operations
- The selling - change the way in which the organisation generates its revenue through; outbound logistics, service and marketing and sales
Innovation diffusion is the… by which innovations spread among users.
…process and pace…
Innovation pace is determined by:
- Supply side factors
2. Demand side factors
Supply-side factors are:
- Degree of improvement - sufficient prompts rapid switch
- Compatibility - ensure complementary products in place
- Complexity e.g. simple pricing structures accelerates adoptions
- Experimentation e.g. free initial trials
- Relationship management - assist users
Demand-side factors:
- Market awareness
- Network effects - once the critical mass have adopted it becomes necessary
- Customer propensity to adopt -the distribution of potential customers from early-adopter groups (who become the critical mass) to laggards
The stages of the diffusion S-curve:
- Tipping point
- Plateau
- Tripping point
First-mover advantages:
- Experience curve benefits
- Scale benefits
- Pre-emption of scarce resources
- Reputation
- Buyer switching costs
Later-mover advantages:
- Free-riding - imitate innovations at 65% of cost
2. Learning - from other mistakes
