Dynamic capability 

is “the firm’s ability to integrate, build, and reconfigure internal and external competences to
address rapidly changing environments” (David J. Teece, Gary Pisano, and Amy Shuen).

Dynamic capabilities can be distinguished from operational capabilities, which pertain to the current operations
of an organization. Dynamic capabilities, by contrast, refer to “the capacity of an organization to purposefully
create, extend, or modify its resource base” (Helfat et al., 2007). The basic assumption of the dynamic
capabilities framework is that core competencies should be used to modify short-term competitive positions that
can be used to build longer-term competitive advantage.

Dynamic Capability can be defined as the inherent capability of the organization to optimally
and purposefully adapt and catapult the organization’s resource base. This management theory
was defined by David Teece, Gary Pisano, and Amy Shuen in their 1997 paper Dynamic
Capabilities and Strategic Management.

It focuses on the company’s ability to build, integrate, and reconfigure the internal and external
competencies to address the rapidly market environment that is always dynamic and volatile in
nature.

The main aim and objective of the theory are to provide impetus to the firm’s to achieve and
sustain the competitive advantage and carve a distinguished identity in the industry giving a
tough competition to its arch rivals in the market.

The goal is to identify the various factors and dimensions of the firm’s centric capabilities that
can optimally utilize and work as a source of advantage and to explain how the myriad
combinations of competences and resource can be developed, deployed, and protected having a
long-term approach and vision in mind.

It helps in formulating the path of strategic management and planning the company strategy that

helps in gaining the competitive advantage. The concept of Dynamic Capabilities and Strategic
Management mainly focuses on the internal strengths of the organization such as workforce and
capital investments rather than harping on the external forces such as government policies and
market trends to sustain the dynamic nature of the market and gain the competitive advantage.

Benefits of Dynamic Capabilities in Strategic Management

1. By opting and following the concept of Dynamic Capabilities and Strategic Management,
the firm is able to expand its business operations on the national and international levels
through the ways such as business alliances, mergers, and joint ventures.
2. On an internal level, the firm is able to come up with the new and innovative line
of products and services as per the latest market trends and satiating
the needs and demands of the customers. The new product line can be launched for the
existing set of loyal customers and to attract the customers in the new target market.
PROCESS OF DEVELOPING DYNAMIC CAPAPBLITIES

1) Learning

The first and foremost stage in the process of Dynamic Capabilities and Strategic Management
involves the key staff members and managers along with the management to learn and analyze
their basic routines leading healthy interactions that lead to the effective ways of problem-
solving. It also involves finding out and avoiding the strategic blind spots and any dysfunctional
activities that are posing as a threat to the growth of the business. It also involves making the
optimum and appropriate use of the strategic alliance and acquisitions to bring in new and novel
strategic assets to the firm through the external resources.

2) Acquiring New Assets

The high level of competitive advantage also requires acquiring new assets by the way of
integrating technological factors and external activities through the alliances and partnerships
formed.

3) Transforming the existing line of assets

To attain the rapid internal and external transformation adhering to the changing market
dynamics and growing competition in the market, it is important for the firm to reconfigure the
firm’s current asset structure. It is imperative for the firms to develop the processes to make the
changes in an inexpensive manner whilst attaining the reconfiguration of the assets before the
dawn of the competition. The entire procedure can be supported by decentralization, strategic
alliances, and local autonomy.

4) Co-specialization
Another facet of the Dynamic Capabilities and Strategic Management is the aspect of Co-
specialization that involves the strategic combination of physical assets, human resources, and
intellectual properties of the firm that are developed over a period of time that work more
valuable in a combination rather than using them individually or separately. It helps in giving a
firm a sustainable competitive advantage in the market.
Logical incrementalism

Logical incrementalism is a normative approach to strategic planning in organizations that combine

elements of the classic, formal strategic planning process with the power behavioural perspective

uinn's approach is based on the assumption the incremental processes are, and should be, the
prime mode used for strategy setting. Such a philosophy is also represented by Mintzberg.

James Brien Quinn describes how 10 large companies actually arrived at their most important
strategic changes. He argues that the formal "rational" planning often becomes a substitute for
control instead of a process for stimulating innovation and entrepreneurship.

Quinn suggests that the most effective strategies of major enterprises tend to emerge step by step
from an iterative process in which the organization probes the future, experiments, and learns
from a series of partial (incremental) commitments rather than through global formulations of
total strategies.

This process is both logical and incremental. He recommends that incremental processes should
be consciously used to integrate the psychological, political, and informational needs of
organizations in setting strategy.

According to Quinn, the total strategy is largely defined by the development and interaction of
certain major subsystem strategies. Each of these subsystems to a large extent has its own
peculiar timing, sequencing, informational, and power necessities. Different subsets of people
are involved in each subsystem strategy.

Moreover, each subsystem's strategy is best formulated by following a logic dictated by its own
unique needs. Because so many uncertainties are involved, no managers can predict the precise
way in which any major subsystem will ultimately evolve, much less the way all will interact to
create the enterprises's overall strategic posture. Consequently, executives manage each
subsystem incrementally in keeping with its own imperatives.

Effective strategic managers in large organizations recognize these realities and try to proactively
shape the development of both subsystem and total-enterprise strategies in a logical incremental
fashion. They do not deal with information-analysis, power-political, and organizational-
psychological processes in separate compartments. Instead they consciously and simultaneously
integrate all three of these processes into their actions at various crucial states of strategy
development.

Quinn argues that incrementalism is the most appropriate model for most strategies changes,
because it helps the strategic leader to:

1. Improve the quality of information utilized in corporate strategic decisions.

 2. Cope with the varying lead times, pacing parameters, and sequencing needs of the
subsystems through which such decisions tend to be made.
3. Deals with the personal resistance and political pressures any important strategic change
encounters.
4. Build the organizational awareness, understanding, and psychological commitment
necessary for effective implementation.
5. Decrease the uncertainty surrounding such decisions by allowing for interactive learning
between the enterprise and its various impinging environments.
6. Improve the quality of the strategic analysis and choices by involving those people
closest to the situation and by avoiding premature closure on the basic of potentially
incorrect decisions.

The strategic leader is critical in the incrementatlism process because he is either personally or
ultimately responsible for the proposed changes in strategy, and for establishing the structure and
processes within the organization.

Although each strategic issue will have its own peculiarities, a somewhat common series of
management processes seems required for most major strategic changes.

Most important among these are: sensing needs, amplifying understanding, building awareness,
creating credibility, legitimizing viewpoints, generating partial solutions, broadening support,
identifying zones of opposition and indifference, changing perceived risks, structuring needed
flexibilities, putting forward trail concepts, creating pockets of commitment, eliminating
undesired options, crystallizing focus and consensus, managing coalitions, and finally
formalizing agreed-upon commitments.