The Essence of Ordinary vs. Dynamic Capabilities
With regard to our recent post on "Strategic Management of Firms Operating in High-Velocity Markets", we were was asked by a couple of our esteemed colleagues who teach strategy or are in a strategy role with their respective firms, what would be the best practical example that they can use to explain ordinary vs dynamic capabilities in layman terms.
The best example that springs to mind is the famous debate between (then aspiring) President Barack Obama and Mitt Romney back in Oct 2012.
Mr Romney famously claimed that:
“…our Navy is smaller now than at any time since 1917"
to which President Obama replied
"Well, Governor, we also have fewer horses and bayonets because the nature of our military's changed."
He then went on to say:
"We had these things called aircraft carriers where planes land on them. We have these ships that go underwater, nuclear submarines. So the question is not a game of battleship where we're counting ships. It's 'What are our capabilities?”
To me, that is the essence of ordinary vs dynamic capabilities.
Ordinary capabilities used to make sense in the old economy, static markets where resources not capabilities counted. That is where classic Porter frameworks (or what we call “monopoly rents” based strategies) also used to make sense. That was the era of “the balance sheet of assets”, the more the better! By that measure North Korean army in theory, would still constitute a real threat, right?
In today’s world “asset orchestration” (a dynamic capability) similar to the nuclear triad (the strategic reliance on three specific delivery “platforms” ) is essential in order to achieve superior agility.
Possessing dynamic capabilities is a condicio sine qua non for attaining competitive advantage. Ordinary capabilities are not – not any longer that is.
The asset orchestration approach (as an integral part of dynamic capabilities concept) is not a novel notion… it can be traced back to Sun Tzu’s Bing Fa.
It is only recently, that the high-velocity nature of the business ecosystem demands re-thinking how we go about formulating a coherent strategy and the type of capabilities and leadership we require to enable its successful implementation .