Dynamic capabilities — What It Is, and Where It Belongs

What it does

Where the resource-based view asks what a firm has, this asks how it renews it — sensing change, seizing the opportunity it creates, and reconfiguring resources to suit. The point is that a strong competence can become the thing that stops a company adapting, so the lasting advantage lies less in any one capability than in the ability to replace it.

Reach for it when: When the company’s strengths are still real but the market that rewarded them is moving, and when an audit of competencies reads like a list of what used to matter.
Where it stops: It is notoriously hard to observe except in retrospect, and easy to define so that any survivor had it. It names the question rather than providing a procedure.

David J. Teece, Gary Pisano & Amy Shuen, “Dynamic Capabilities and Strategic Management”, Strategic Management Journal, 1997.

Why it sits at Core Competencies

The things the organisation does better than most, that customers value and competitors struggle to copy. Not everything it is good at — only the few that produce advantage.

A model is only useful when you reach for it at the right moment. This one answers a question that arises here — so it is filed here, and nowhere else. These are the working areas it serves:

IdentificationPrahalad and Hamel’s original three tests: access to markets, contribution to customer benefit, and difficulty of imitation.
Testing for advantageBarney’s VRIO framework, the standard instrument for separating a strength from a source of sustained advantage.
BuildingThe build-buy-partner decision in strategy and in transaction cost economics.
ProtectingWork on the distinction between individual and organisational capability, and on knowledge embedded in routines rather than in people.

All of Core Competencies

What it touches elsewhere

Nothing in a business is decided on its own. A conclusion reached with this model at Core Competencies lands in these other cores, whether or not anyone follows it there.

Goal CoreA strategic goal that requires a competency the organisation lacks is a decision to build or buy it.
Market CoreRarity is judged against competitors, not against the organisation’s own past.
Brand CoreA positioning claim unsupported by a real competency is one the operation cannot keep.
Business CoreWhat is not core is a candidate for partners or for the supply chain.

Filed at the same place

These answer questions that arise at Core Competencies too. Where they disagree with this one, the disagreement is the useful part.

Core competenceThe few things a company knows how to do that open more than one market and are hard to copy.
VRIOFour questions that decide whether something a company has is an advantage or just an expense.
The resource-based viewLook at a company as a bundle of resources rather than a set of products, and advantage comes from what it holds.

Elsewhere in Business Core

These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.

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