Winning with Dynamic Capabilities in Uncertain Times

Donga - A Business Forum
Korea

1. WINNING WITH DYNAMIC CAPABILITIES IN UNCERTAIN TIMES Professor David J. Teece Institute for Business Innovation, UC Berkeley December 5, 2018 Donga-A Business Forum 2018

2. The evolution of strategic management & “research-based” thinking 2 5 Forces I ndustry attracti v eness is the central focus External forces dominate Fate = static, purely competitive markets (low profit) Resource Base View (RB V ) VRIN as s ets dri v e value creation Barriers to competition determine longevity All 4 VRIN traits ne c essary to s ustain ad v antage Dynam ic Capa b i l it i es -Markets are dynamic and competition is often disruptive Asset orchestration & strategy drive advantage - Reshaping ecos y stems & biz mo d els is critical 1980s 1990s 2000+ Deep Uncertainty Risk 19 6 0s DONG-A BUSINESS FORUM - 12.5.18 HARVARD (Porter) UCLA (Barney-Rumelt) UC BERKELEY (Pisano-Teece)

3. The fundamental question in Strategic Management: How do firms build long-run c ompetitive advantage ? Dynamic Capabilities is critical to long-term robustness of firms facing deep uncertainty. Hallmarks of dynamic capabilities: Strong leadership Sensing & Sensemaking Asset Orchestration Agility Urgency Not about efficiency; it’s all about effectiveness, adaptability, and entrepreneurship 3 * Teece, et. al., “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18:7, p. 516 (August 1997 ). Definition of Dynamic Capabilities : “The ability of an organization and its management to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments.”* DONG-A BUSINESS FORUM - 12.5.18

4. Why are Dynamic Capabilities important today? 4 VUCA V = Volatile U = Uncertain C = Complex A = Ambiguous DONG-A BUSINESS FORUM - 12.5.18 Dynamic Capabilities ARE ESSENTIAL IN VUCA WORLDS

5. Capabilities and tools required for stable & uncertain environments are different 5 Certainty Risk Uncertainty Ambiguity Chaos/Ignorance Newer/Tools/Approaches Scenario Planning Peripheral Vision Total Risk Management Real Options Analysis Systems Thinking Idealized Design Legitimation Theory Honing Institution Complexity Theory Cost Benefit Analysis Net Present Value Linear Programming Point Forecasting Optimization Theory Utility Theory Decision Trees Bayesian Updating Monte Carlo Simulation Portfolio Theory Stochastic Modeling Insurance & hedging Known Unknown Unknowable Traditional Tools/Approaches Domain of Ordinary Capabilities Domain of Dynamic Capabilities DONG-A BUSINESS FORUM - 12.5.18

6. Strategic Management in a VUCA world requires differentiating between risk & uncertainty 6 Pr(DIA) Pr(CIB) Risk C D E F prB Pr(FIB) Pr(CIA) prA Alternative futures with known probabilities & known conditional probabilities F1 F? F? F? F? F? F? F? F2 F3 F4 F? F? F? F? Uncertainty U nknown P robabilities and Undefined Futures F 1-4 are possible futures F? are undefined futures F? V –Volatile (oil prices) U – Uncertain C – Complex A – Ambiguous Policies (ex., auto’s, retail, financial services) What’s not VUCA? DONG-A BUSINESS FORUM - 12.5.18

7. 7 Too many firms have perfected ordinary capabilities, but in the process have relegated dynamic capabilities Ordinary capabilities are about doing things right: Technical efficiency has primacy Best practices are the “be all and end all” Dynamic capabilities are about doing the right things: Innovation has primacy Best practices are of secondary importance WHY? With deep uncertainty, its more important to find the right products to provide – if you can produce them well enough you can still win. DONG-A BUSINESS FORUM - 12.5.18

8. Famous strategists agree that ordinary capabilities matter less “Numbers alone confer no advantage.” – Sun Tzu , 5 th Century B.C. Chines strategist “It does not matter who is stronger....” – Miyamato Musashi , 17 th Century S amurai warrior-philosopher 8 Having larger forces helps but it is not decisive. Strategy and culture (morale) matters. DONG-A BUSINESS FORUM - 12.5.18

9. Storytellers have known about the problem for ages: 9 Lewis Carroll, “Through the Looking Glass” Firms learn and sometimes advance, but others copy/imitate/emulate and take advantage that way Learning does not lead to a competitive advantage…imitation is the reason advantage (based on ordinary capabilities) is repeatedly lost. Corporate burnout is often caused by running fast to stand still and is often, but not always, a symptom of the absence of dynamic capabilities. “The Red Queen has to run faster and faster in order to keep still where she is.” DONG-A BUSINESS FORUM - 12.5.18

10. W. Edwards Deming, the father of quality and metrics, was aware of the conundrum from the outset: “He who would run his business with visible figures alone will soon have neither a business nor visible figures to work with.”* 10 William Edwards Deming *See “Out of The Crisis,” by W. Edwards Deming DONG-A BUSINESS FORUM - 12.5.18

11. 11 The prioritization of ordinary capabilities can weaken dynamic capabilities & vice-versa Benner and Tushman (2003) stated the tradeoff/risk as follows: “Activities focused on measurable efficiency and variance reduction drive out variance-increasing activities and, thus, affect an organization's ability to innovate and adapt outside of existing trajectories ... Core capabilities may become core rigidities” (Benner and Tushman, 2003: 242) DONG-A BUSINESS FORUM - 12.5.18

12. “Ordinary” (or normal) Capabilities: often necessary, but never sufficient in VUCA worlds 12 Ordinary capabilities reflect technical efficiency in Operations, administration and governance Routines/standard operating procedures are key to ordinary capabilities “Best practices” logic connected to strong ordinary capabilities Admittedly, not everyone gets the simple stuff right Adoption of ordinary capabilities by rivals is enabled by: More information in the pubic domain Better business school training Management consultants and footloose employees Getting ordinary capabilities right is a necessary but not sufficient condition for success in a VUCA world where best practices are rapidly disseminated and emulated. DONG-A BUSINESS FORUM - 12.5.18

13. Sun Tzu emphasized the interplay between cheng and ch’i Cheng – Ordinary (orthodox) maneuvers Forces lined up for battle with chariots on the wings (in full view of the enemy) No surprises The enemy can assess/measure strength Ch'i – Dynamic (unorthodox) maneuvers Favors unanticipated surprise elements Supports “a charge out of nowhere to strike the rear” Lawrence of Arabia was a master at ch‘i – he articulated 15 (VUCA-based) principles of guerrilla warfare (#15: make a virtue of the individuality, irregularity, and unpredictability of guerrillas.) 13 DONG-A BUSINESS FORUM - 12.5.18

14. Developing dynamic capabilities – through a sense of ch’i Musashi and Swordmandship (The Book of Five Rings) Ordinary Capabilities: Do basic exercises until the weapons become an extension of one’s own arm – technical excellence (learning to do the expected well) – but this will only allow you to win 50% of the time against an equally proficient opponent. Dynamic Capabilities: Requires a different type of training to generate ch’i and use it with cheng instinctively. 14 Exploiting the magical element in ch’i is what gives focus and direction and competitive advantage. DONG-A BUSINESS FORUM - 12.5.18

15. The right metaphor isn’t chess; it’s mixed martial arts. Markets are often occupied by scores, if not hundreds, of competitors. Wars have a much smaller number of belligerents. 15 Military conflict is simpler in the abstract than business Business Competition Military Warfare Win customers Destroy adversaries: physically, morally, mentally Rely on people working together under uncertainty Rely on people working together under uncertainty Shape the environment before the first shot is fired Hard to shape the extreme Goal: Strategy

16. From Ordinary to Dynamic Capabilities in the US Army 16 “We had a culture in our forces, of excellence. It was how good can I be at my task?”…“But that’s not as important as how well those pieces mesh together.” “ The real art is [in] cooperating with civilian agencies, it’s cooperating with conventional forces, it’s tying the pieces together . That’s the art of war, and that’s the hard part .” -Quotes from General Stanley McChrystal, Foreign Affairs (March/April 2013) DONG-A BUSINESS FORUM - 12.5.18

17. Dynamic Capabilities in a business context can be thought of as falling into three categories: 17 Sensing Identification of opportunities & threats at home and abroad Transforming Continuous renewal and periodic major strategic shifts Seizing Mobilization of resources to deliver value and shape markets DONG-A BUSINESS FORUM - 12.5.18

18. 18 Indra Nooyi on Dynamic Capabilities vs Efficiency Choices at Pepsi “I had a choice. I could have gone pedal to the metal, stripped out costs , delivered strong profit for a few years, and then said adios. But that wouldn’t have yielded long term success. So I articulated a strategy to the board focusing on the portfolio we needed to build, the muscles we needed to strengthen, the capabilities to develop …we started to implement that strategy, and we have achieved great shareholder value while strengthening the company for the long term .”* * Indra Nooyi and Adi Ignatius, “How Indra Nooyi Turned Design Thinking Into Strategy: An Interview with PepsiCo's CEO,” Harvard Business Review (September 2015). DONG-A BUSINESS FORUM - 12.5.18

19. In business, engage with cheng (ordinary) but win with ch'i (dynamic) Japanese entry and eventual success in the US car market in the 70s and 80s Oil shock of the 73/74 allowed fuel efficient Japanese cars to get a toe hold in the US market. But when the prices settled down, the Japanese imports did not fade away. They had unsurpassed quality, reliability, fit and finish, and exciting design. (e.g., Datsun [Nissan] 280z) 19 DONG-A BUSINESS FORUM - 12.5.18

20. Sensing and Sensemaking 20 The ability to foresee future opportunities and threats…what Jack Welch (former CEO of GE) once referred to as the ability to “see around corners .” Jack Welch “Sensing activities are the firm’s antennae, amplifying weak signals into data streams that are collated for diagnosing, interpreting and creating a variety of scenarios – notably including the exploration of how a restructured eco-system could increase a competitive advantage.”* * Developing Organizational Resilience: A Dynamic Model to Sustain Competitive Advantage ,” Teece, Raspin, and Cox. 2018 DONG-A BUSINESS FORUM - 12.5.18

21. Seizing/Asset Orchestration is key: 21 Tom Watson at IBM committed the financial capital and technical resources to develop and deploy the pivotal IBM 360 system while competitors acted cautiously . Leadership is very different from Managing – it usually requires making bold investments and coordinating activity inside and outside the enterprise. DONG-A BUSINESS FORUM - 12.5.18

22. Asset orchestration is central to Apple’s Dynamic Capabilities 22 “Apple still has strong growth opportunities because of its ability to work simultaneously on hardware, software and services… Apple has the ability to innovate in all three of these spheres and create magic… This isn’t something you can just write a check for. This is something you build over decades.” - Tim Cook, Apple CEO (Taipei Times, February 2013) DONG-A BUSINESS FORUM - 12.5.18

23. Transformation must occur too 23 E.g. Haier: Haier (China) has gone through multiple transformations At its core, Haier has transformed from “an executive culture to an entrepreneurial culture .” 1 23 Phase 1 The inception of Ren Dan He Yi Phase 2 Turned structure of the organization into that of an inverted pyramid Phase 3 Featured the transformation into a self-organized enterprise Phase 5 Turned the organization into a community-based ecosystem Phase 4 Broke the organization into microenterprises . RenDanHeYi 1.0/ RenDanHeYi Win-Win Model RenDanHeYi 2.0 Interview with Zhang Ruimin, June 19, 2017, MIT Sloan Management Review with Paul Michelman Strategy, urgency and learning DONG-A BUSINESS FORUM - 12.5.18

24. Dynamic Capabilities Requires Speed of Execution 24 DONG-A BUSINESS FORUM - 12.5.18

25. Failures in timely sensing can be disastrous French tanks were state of the art French had great advantage in artillery The allies knew that an attack was coming Germany had only a limited number of modern tanks (Treaty of Versailles limitations had been binding) Reasons for defeat: Allied failure in sensing – didn’t know what, when and where on the battlefield Panic and confusion followed French retreat (55 th Infantry Division) from the West Bank of the Meuse River became a rout Germans didn’t stop and consolidate – they kept pressing forward – each hour ahead is an advantage However, the British did pull off a successful withdrawal from the beaches of Dunkirk 25 German boats crossing Meuse River The Battle of Sedan (1940): The French & British Should Have Won But Didn’t DONG-A BUSINESS FORUM - 12.5.18

26. “French counter-movements were repeatedly thrown out of gear because their timing was too slow to catch up with the changing situation … The French, trained in the slow-motion methods of World War I, were mentally unfit to cope with the new tempo, and it caused a spreading paralysis among them.” * 26 * Captain B.H. Liddell Hart, Strategy (2016), Tannenberg Publishing Speed of execution (“seizing”) matters on the battlefield The blitzkrieg, and British withdrawal at Dunkirk (1940) DONG-A BUSINESS FORUM - 12.5.18

27. 27 General de Gaulle recognized the importance of urgency/agility, too “You have to be fast on your feet and adaptive or else a strategy is useless.” Charles de Gaulle, French general and statesman DONG-A BUSINESS FORUM - 12.5.18

28. Urgency/time has been recognized as fundamental to strategy in the marketplace Yamaha-Honda motorcycle “war” of the 70s Honda introduced 113 new models to replace the what it had Honda shaped the market by experimenting with new models Yamaha could only introduce 37, which were drab in comparison 28 Fast decision cycle time is an important dynamic capability See G. Stalk, “Time – the next source of competitive advantage,” Harvard Business Review, 1988 DONG-A BUSINESS FORUM - 12.5.18

29. Strategy Matters, too 29 DONG-A BUSINESS FORUM - 12.5.18

30. Failures in strategy can be disastrous, too… Crimean War, Charge of the Light Brigade – 1857 600 British cavalry charged the mass guns of the Russians and continued the attack despite tremendous losses only 150 made it back to their own side. Alfred Lord Tennyson’s line , “Someone had blundered . There’s not to reason why, theirs but to do and die into the Valley of Death rode the six hundred.” US Civil War, Battle of Gettysburg – July 3, 1863 Confederate commander Robert E. Lee ordered final attack into the center of the Union lines. 75% of the men were lost. 30 Painting of The Battle of Balaclava DONG-A BUSINESS FORUM - 12.5.18

31. 31 Dynamic capabilities is about fundamental agility – the ability to redeploy assets smoothly, quickly, and strategically (i.e., smartly) Dynamic capabilities is NOT the ability to do commonplace things faster and cheaper It is NOT the reduction in the time required to reach best practices (which are rooted in efficiency initiatives like Six Sigma or Value Engineering) It’s the ability to do things fast but also strategically (i.e., smartly), which requires good sensing and sensemaking Entrepreneurial agility is management’s ability to redeploy physical, financial and human assets into new and better commercial avenues. DONG-A BUSINESS FORUM - 12.5.18

32. Dynamic Capabilities in Action: Samsung & Smartphones 32 DONG-A BUSINESS FORUM - 12.5.18

33. Sensing: “ Samsung’s internal co-opetition is designed to enhance its sensing capabilities.” (Song, Lee, & Khanna, California Management Review , Summer 2016) Used dual sourcing (cooperation) to pick up weak signals/intelligence for supplier’s Different vendors have different information and perspectives 33 DONG-A BUSINESS FORUM - 12.5.18

34. Seizing: Used vertical integration to source application processors, DRAMs, display panels, and camera modules Internal procurement >60% of requirements Used co-opetition and dual sourcing to keep internal capabilities highly competitive Internal procurement without internal favoritism Held in-house technology forums and conferences Fast execution aided by intense inter-unit competition 34 DONG-A BUSINESS FORUM - 12.5.18 Shin Jong-Kyun, President & CEO of Samsung Electronics “Samsung Electronics can feel more like a whip than an umbrella .”

35. Transforming: Used internal competition as a means of recombining and reconfiguring Knowledge transfer to assist in capability enhancements 35 DONG-A BUSINESS FORUM - 12.5.18 Shin Jong-Kyun unveiling Smartwatch, Sept. 2013

36. Learning is critical Entrepreneurial management Codified & tacit know-how used Visionary entrepreneurial leaders Good administration Proactive constructed crises? Goal identification aided by constructed crises ORDINARY DYNAMIC 36 DONG-A BUSINESS FORUM - 12.5.18 SPECIAL ELEMENTS OF STRONG ORDINARY & DYNAMIC CAPABILTIES ARE BOTH EVIDENT AT SAMSUNG

37. 37 DONG-A BUSINESS FORUM - 12.5.18 Vertical integration ASSISTS DYNAMIC CAPABILITIES – but only if companies follow a ruthless co-opetition model . SAMSUNG Takeaway

38. Dynamic Capabilities In Action – The Global Automotive Industry 38 DONG-A BUSINESS FORUM - 12.5.18

39. From Ordinary to Dynamic Capabilities in Autos 39 ORDINARY: The operations portion of the automobile business has been thoroughly optimized over many decades, doesn’t vary much from one automobile company to another, and can be managed with a focus on repetitive process. It requires little in the way of creativity, vision or imagination. Almost all car companies do this very well, and there is little or no competitive advantage to be gained by “trying even harder” in procurement, manufacturing or wholesale DYNAMIC: Where the real work of making a car company successful suddenly turns complex, and where the winners are separated from the losers, is in the long-cycle product development process , where short-term day-to-day metrics and the tabulation of results are meaningless. - Bob Lutz, former vice chairman at General Motors, Wall Street Journal, June 11 , 2011 DONG-A BUSINESS FORUM - 12.5.18

40. VUCA Environment: T he potential impact of paradigm shifts in technology AND business models are difficult to comprehend Technology Disruption Business Model Disruption Incremental Large 0. INTERNAL COMBUSTION ENGINE 3. Maas with AV 1 . Electric Vehicles (EV) 4. Connected Car 3. Maas with AV 2 . Mobility as a Service (MaaS) Incremental can win by extending current capabilities Large -- must acquire new capabilities -- few incumbents survive the shift … most incumbents have difficulty surviving only one of these two paradigm shifts (e.g. Kodak, Blackberry, Nokia) 40 DONG-A BUSINESS FORUM - 12.5.18

41. Auto industry core capabilities are transforming from hardware to software and services… “The global auto industry thinks it sees its future, and it will require a transformation without precedent in business history.” The auto industry “has to turn itself into a nimble provider of software and services.” 41 - M. Colias, T. Higgins, and W. Boston, “Will Tech Leave Detroit in the Dust?,” The Wall Street Journal, October 20, 2018 DONG-A BUSINESS FORUM - 12.5.18

42. Incumbent Advantages : Hardware providers and system integrators with unparalleled expertise Regulatory management strength Ability to build custom, connected cars at scale – can be the backbone of MaaS offering Incumbent Auto Industry -- Capabilities inventory for the coming disruption Incumbent Challenges : Shaping software ecosystems Partnerships & Ecosystem Management Calibrated investment culture. Limited budgets for breakout initiatives ‘Not built here’ syndrome. Capital-draining business of “creating million of cars each year,” “constraints,” “not faced by tech rivals” (WSJ, October 20, 2018 ) 42 Critical Capability DONG-A BUSINESS FORUM - 12.5.18

43. Partnerships & Ecosystem management -- should be a core Dynamic Capability “Obviously, every company would like to do everything by themselves... except that we can’t ,” -- Carlos Ghosn, chief of the Renault-Nissan-Mitsubishi A lliance, WSJ, October 20, 2018 43 Mobility as a Service Volkswagen & Gett: In 2016, Volkswagen invested $300M in the Tel-Aviv-based ride-hailing start-up. General Motors & Lyft: I n 2016, GM invested $500M in Lyft. Honda & Grab: In 2016, Honda made an undisclosed investment in the Southeast Asian ride-hailing firm. Toyota & Grab: In June 2018, Toyota said it will invest $1B in the firm. Autonomous Driving Fiat Chrysler & Waymo: In 2016, Fiat Chrysler partnered with Alphabet’s driverless car unit; the car maker is providing custom minivans for tests of Waymo’s autonomous ride-hailing service. Volvo & Uber : in 2017, Uber agreed to buy self-driving Volvos for its ride-hailing network when the technology is product-ready. Toyota & Uber: In August 2018, Toyota said it would invest $500M in Uber as part of an agreement to co-develop autonomous cars. DONG-A BUSINESS FORUM - 12.5.18

44. Renault-Nissan-Mitsubishi Alliance – creating (and managing) an innovative alliance ecosystem of complementary assets 44 2016 1999 “I recommended abandoning the joint-venture approach. If you want people to work together, the last thing you need is a legal structure that gets in the way. My solution was to introduce informal cross-company teams (CCTs)” – Carlos Ghosn, Alliance Chairman, explaining the Alliance design in HBR 2002 DONG-A BUSINESS FORUM - 12.5.18

45. Capital Providers like Softbank now playing a unique role in shaping the emerging transportation / automotive ecosystem 45 Softbank has changed the playbook through these strategic stakes built methodically over the past 3-4 years. The secret sauce of ecosystem orchestrators like Softbank is in making prescient connections between affiliated disruptors (e.g. ARM and Cybereason) Uber Didi Nauto Mapbox Improbable Grab Ola Cruise Automation (GM) Nvidia ARM Holdings 99 DONG-A BUSINESS FORUM - 12.5.18

46. GM’s bold moves with Cruise Automation has the potential to transform the future of GM – and is welcomed by the capital markets 46 3. Asset Orchestration & Capital Allocation 4. Changing Corporate Culture 2. Multi-stakeholder Mentality 1 . Seeding and N urturing a Disruptive Entity – Cruise Automation GM’s recent strategic moves DONG-A BUSINESS FORUM - 12.5.18

47. THE FUNDAMENTAL TRANSFORMATION CONUNDRUM: How do you change the Organizational DNA to respond to multiple paradigm shifts in the automotive industry? 47 Do You Change the Organization from Within ? -- e.g. Implement principles of a Lean Startup Organization (through systematic change in leadership, culture and operating rhythm ) Do You Change the Organization from Without ? -- e.g. Acquire and Build a Skunkworks (and let this entity transform the core over time) Is there a viable hybrid model of doing both? If so, simultaneously or sequentially? DONG-A BUSINESS FORUM - 12.5.18

48. 48 What Undergirds Hyundai’s Remarkable Development of Dynamic Capabilities? Building ordinary capabilities was the ‘springboard’ to dynamic Linsu Kim assigns priority to the ‘state of the knowledge’ and the ‘intensity of effort’ DONG-A BUSINESS FORUM - 12.5.18

49. Capability Gaps: General Capability Gaps: State of Knowledge 49 DONG-A BUSINESS FORUM - 12.5.18

50. 50 PHASES IN HYUNDAI MOTORS REMARKABLE CAPABILITY BUILDING From assembling a Ford Cortina (1967) to designing & producing the Elantra, Sonata, Grandeur, Genesis, and Equus (2018): Assembling (and technology assimilation) Imitation assimilation Developing Korean cars under license Imitation assimilation Developing own designs (innovation) Phases 1 & 2 involved building ordinary capabilities Phase 3 involved building dynamic capabilities on top Phases 1 & 2 are more about competing on price; Phase 3 is about competing on quality/design/performance (innovation) 1 2 3 Phase 1 Phase 2 Phase 3 ~1967 - 1976 ~1973 - 1994 Today DONG-A BUSINESS FORUM - 12.5.18

51. 51 How Were Ordinary Capabilities, and then Dynamic Capabilities, Built? Edit master text Click icon to add picture Learning by doing – assembly for Ford Cortina Learning by doing – design Observation tours (factory and facility) Edit master text Click icon to add picture Licensing & technical assistance (Mitsubishi for gasoline engines, transmissions, and rear axle designs) Styling & design from Italdesign Recruiting experts from British Leyland Edit master text Click icon to add picture Independent R&D centers Increase in hiring & training of engineers Goal to develop an independent ‘state-of-the-art’ internal combustion engine (version launched in 1984 when Hyundai organized a task force for developing its own ICE) Phase 1 Ordinary Capabilities ~1967 - 1976 Phase 2 Ordinary Capabilities ~1973 - 1994 Phase 3 Dynamic Capabilities Today DONG-A BUSINESS FORUM - 12.5.18

52. CONSTRUCTED CRISIS Task Force set up in 1986 to build the new Hyundai engine Crisis constructed proactively Requires educating & persuading top and middle management Must ‘unlearn best practices’ (deprioritize ordinary capabilities) 52 DONG-A BUSINESS FORUM - 12.5.18

53. 53 Catalytic Factors That Energize Hyundai 1 Edit master text styles Edit master text styles Edit master text styles Edit master text styles 2 3 4 Edit master text styles 5 Constructed Crisis Visionary Leadership Cultural Factors Through first developing ordinary capabilities Absorption Capacity To become a global leader (Chung Ju-yung, Chairman, Hyundai Group) Audacious Goals DONG-A BUSINESS FORUM - 12.5.18

54. CONCLUSION Business success today requires innovation and change and a deep understanding of complex systems Dynamic capabilities is the only general framework in strategic management which embraces systems theory 54 DONG-A BUSINESS FORUM - 12.5.18

55. 55 Dynamic Capabilities as a Workable Systems Theory * Note: A dashed border indicates elements that are external to the firm. Arrows represent major influence. VRIN = Value, Rare, Imperfectly Imitable, and Non-Substitutable. * “ Dynamic Capabilities as (Workable) Management Systems Theory ,” Journal of Management and Organization (2017) DONG-A BUSINESS FORUM - 12.5.18

56. ABOUT DAVID J. TEECE David Teece is the Tusher Professor of Global Business at the Haas School of Business, University of California, Berkeley and Director of the Institute for Business Innovation. He received his BA and Master of Communication degrees at the University of Canterbury and his Ph.D. in economics from the University of Pennsylvania. He is also Chairman and cofounder of Berkeley Research Group, an expert services and consulting firm headquartered in Emeryville, California. His areas of interest include corporate strategy, entrepreneurship, innovation, competition policy and intellectual property. 56 DONG-A BUSINESS FORUM - 12.5.18

57. Thank You David J. Teece +1 510.285.3221 [email protected] www.thinkbrg.com