Dynamic Capability

By developing and improving internal processes, firms can reduce variability and create greater efficiency (Benner and Tushman 2003). These routines can increase the likelihood that projects will be closely linked to existing resources and capabilities. They are less effective when efforts require higher levels of innovation, such as creating new product categories, developing new technologies or entering new markets (Cooper et al. 2004). When uncertainty is high deterministic systems and procedures designed to bring order to a situation may vitiate the chaos necessary for successful innovation (Cheng and Van de Ven 1996).

Some organisations are able to innovate repeatedly, while others are not. Schreyogg and Kliesch-Eberl (2007) posited the key capability an organisation needs for innovation to occur is the dynamic ability to learn and improvise. This dynamic capability will permit the firm to respond to the need for change, regardless of the environment. Therefore, firms with practices enabling them to execute change effectively are better positioned to shift their behaviour and exploit new ideas (Zollo and Winter 2002).

Innovation requires a search for new information outside the existing knowledge base, often in areas unrelated to current operations. The process can be uncertain and is only relevant to a particular context. As a consequence, there will be a need to experiment and to cope with high variation and diversity (March 1991). Dynamic capabilities rely on quickly created, situation-specific knowledge (Eisenhardt and Martin 2000). There may be little clarity about how particular decisions lead to particular outcomes. This situation will, therefore demand ad-hoc problem solving and iterative adaptation to unpredictable outcomes (Winter 2003).

Hyunsuk and Kelley (2008) proposed managerial practices for innovation consist of deploying entrepreneurial resources, and providing relational and decision support. They conceptualised those in entrepreneurial roles as a resource of tacit knowledge held by particular individuals. While innovation projects may require different sources of knowledge depending on the particular needs of any one project, entrepreneurial resources are usually applicable across multiple projects. Hyunsuk and Kelley noted that the challenge for management is assessing those who can lead the development of innovations and providing them with adequate support.

Available evidence suggests the judgement and ability of individuals to be highly critical to the development of innovations (Leifer et al. 2000). Winter (2003) noted, however, that not everyone is able to leave their highly patterned operational roles to engage in ad-hoc problem solving involving high levels of change. Consequently, the creation of dynamic capabilities requires the presence of specialist personnel. Certain characteristics may not distinguish entrepreneurs from more conservative employees in areas such as in-depth expertise, problem-solving ability and communication skills. But other skills tend to be unique to entrepreneurs. These include a tolerance for high risk and ambiguity, and the ability to persist with and sell innovative ideas (Day 1994).

The organisational environment is highly important in enabling innovation. Project teams need to be able to interact and exchange information with others to engage in the high level of problem solving and creative action necessary for innovation (Sheremata 2000). Communications about new ideas is best fostered through strong personal relationships because innovation often requires close collaboration between those who do not typically work together. Hence in their relational support role, managers can facilitate communication by promoting collective understanding and interpersonal trust among employees (Dess et al. 2003). They must also ensure there is legitimacy and support for innovation projects by drawing on their political leverage to access and remain in control of resources (Kantner et al. 1997).

Managerial involvement may be more frequent and formal when an innovation presents a high degree of unfamiliarity for the organisation (Lewis et al. 2002). However, senior managers should avoid too much scrutiny of project leaders, which often happens to projects of high strategic importance. Kantner et al. opined that senior managers must avoid excessive autonomy, which can provide too much freedom, while also guarding against any involvement that imposes too much constraint and bureaucracy. Hence a key task is to identify entrepreneurs and facilitate decision making and relationships in a way that enables the organisation to most effectively exploit entrepreneurial capabilities.

To gain further understanding about dynamic innovation capability Hyunsuk and Kelley (2008) interviewed staff in two large, established Korean organisations. The data confirmed the importance of deploying project leaders with not only experience and technical ability, but also entrepreneurial skills and the ability to motivate others. These individuals were found to have a key role in communicating with other members of the organisation and securing commitments from them in order to meet the information and knowledge needs of the project. These findings suggested a focus on the selection of particular entrepreneurial resources is critical to supporting innovation. Empowerment of those close to the markets and the technologies underlying a particular innovation is critical to enabling a rapid respond to what is being learned and to resolve the problems encountered. Nevertheless, the study did indicate authorising autonomy is rarely sufficient for success. This is because the uncertainty of innovation outcomes and the low organisational power possessed by project leaders means they have to rely upon the intervention of more senior managers when significant resource problems are encountered.

Although innovation requires a search for specific knowledge sources generally falling outside familiar knowledge domains, Hyunsuk and Kelley’s analysis suggested that project leaders do need a base level of knowledge. While domain knowledge provides a foundation for exploring new possibilities within a field, the data reveals two key characteristics in relation to entrepreneurial resources: proactiveness and integrative skills. Proactiveness compels entrepreneurs to seek out resources and solve problems beyond what is familiar or routine. Integrative skills include multitasking and problem-solving abilities, as well as multifunctional understanding such as being aware of both the technical and market aspects of innovation.

Hyunsuk and Kelley concluded that although the fear of failure was seen in both companies, project leaders cited several insulators. These included their credibility and expertise, evidence that they did their best, the fact that failure was outside their control and the existence of shared responsibility for project outcomes with others, such as more senior managers or departmental leaders. The data did appear to suggest that fear of failure tended to weed out those lacking the drive to engage in high-risk activity. For most project leaders, the greater concern was the possible emergence of problems that could impair project progress to the point where expectations and deadlines were not met. In such cases, this can result in reducing senior managerial support for the project.

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