The capacity to compete for the future: Dynamic Capacity
At the core of Dynamic Advantage is the firm's capacity to act in preparation of the unfolding future in which it will compete, i.e. its capacity to act dynamically. The Dynamic Capacity of the firm can be understood by analogy to a sportsman or woman in a match; consider a top tennis player. Given the speed at which tennis is played, with the ball frequently traveling at over 100km/hr (the highest recorded speed is 263km/hr) the player has to begin preparing for the next shot before the ball arrives near to them. The earlier that they can identify where the ball is going, the more time they have to decide upon and to prepare for their winning response. They look at the body movement of the opposing players for clues as to where the ball may be hit towards; sometimes there are big indicators such as the positioning of the feet, sometimes for the smallest flicker of the turn of the head or eyes.
At the core of Dynamic Advantage is the firm's capacity to act in preparation of the unfolding future in which it will compete, i.e. its capacity to act dynamically. The Dynamic Capacity of the firm can be understood by analogy to a sportsman or woman in a match; consider a top tennis player. Given the speed at which tennis is played, with the ball frequently traveling at over 100km/hr (the highest recorded speed is 263km/hr) the player has to begin preparing for the next shot before the ball arrives near to them. The earlier that they can identify where the ball is going, the more time they have to decide upon and to prepare for their winning response. They look at the body movement of the opposing players for clues as to where the ball may be hit towards; sometimes there are big indicators such as the positioning of the feet, sometimes for the smallest flicker of the turn of the head or eyes.
- Players at the top of their game seem to have an ability to sense what their opponent is about to do. They also study the history of games of the opponents, the types of shots and moves in their repertoire, their areas of strength and comparative weakness. This background knowledge helps them to make-sense of the in-game signals, no matter how fleeting, obtaining early insight on where the next ball may be hit.
- Knowing where and how the next ball will be hit to helps to define the field of options that the player has for the play that they will make in return; how will they optimize their next shot to move them closer towards the win? This requires knowledge of their own and their opponent’s skills, as well as a thorough appreciation of the rules of the game and the conditions under which the game is being played; base-line rally or serve-and-volley? How best can they seize the initiative and what's the higher probability winning shot that they can confidently replicate?
- Essential as the above capabilities are, it is equally critical the player moves to the right position on the court to receive the on-coming ball and that they are also able to adjust their body, to play the shot that they have decided upon applying the power and precision required; delicate drop-shot or powerful driving backhand.
The capacity of the firm to win in the unfolding future, similar to the capacity of the top tennis player, is dependent on the product of three core capabilities:
- Sense & Make-Sense (of the future that is about to unfold),
- Seize & Replicate (selecting plays that enable them win more frequently),
- reShape & rePosition (being in the right place, bringing to bear the right alignment of resources at the moment required)
Each of these three capabilities is underpinned by management practices and processes (mechanisms), the strength of which determine a firm’s Dynamic Capacity; a firm raises its Dynamic Capacity by enhancing these mechanisms. Different firms optimize different capabilities, reflecting the characteristics and heritage of their unique organization and the strategic decision of how they wish to compete; for example, a firm with a bias to being a fast-follower may seek prowess at reShaping & rePositioning but may be less dependent on the capability to Sense & Make Sense.
- The higher the level of Dynamic Capacity of the firm, the more successful it will be in competing in the unfolding future, but just as a tennis player improves their overall prowess by developing one part of their game and then another, so too the corporation that pursues Dynamic Advantage will usually develop each of the capabilities and underpinning mechanisms at different rates.
Note, to increase understanding of the fundamentals of strategy we recommend you the works by Michael Porter (Industry Structure), Jay Barney (Resource Based VIew) and David Teece (Dynamic Capabilities).