When markets are dynamic, it’s important that firms become dynamic too. Listening and understanding what's going on in the environment, outlining what the opportunities are, what the threats are is extremely important. Host Greg LaBlanc and Organizational Economist, David Teece unpack his Dynamic Capabilities Framework.

In this episode, David and Greg tackle the importance of making sense of the organization’s learning, formulating a view of what this means for your investment behavior, quickly deciding and investing behind those opportunities, or protecting against those threats. When the economic and entrepreneurial activities revolve around innovation and market power, these things will help firms pivot quickly.

Tune in to the end as they talk about the Schumpeterian model and what Neo-Brandesian can learn from an innovative and entrepreneurial-centric economy. Make sure you’re all ears to understand the basic assumptions of the dynamic capabilities framework. Pick up ideas on how your organization’s core competencies can be used to modify short-term competitive positions, later on using them to build a longer-term competitive advantage.

Episode Quotes:

What are Dynamic Capabilities?

“I've found it useful to begin describing dynamic capabilities by telling you what it's not. First of all, it's a capability but there are ordinary capabilities, which we all know: we can walk, we can talk, and organizations can do certain things. Those very important capabilities. If there are other kinds that result in you getting everyday work done, it's ordinary capabilities. When it's about change and when it's about actually figuring out what the next big thing is and effectuating change, that's a capability that I call dynamic.”

On R&D and Capturing Value Within Firms:

“If you’re really an innovative firm there’s enormous spillovers that are being produced and the capturing value approach which I’ve developed is about how do you capture the biggest share of the spillovers. Because that way, you get the rewards higher and you can continue to invest more in research and development and in discovery. And this is another area where I think economics has not paid sufficient attention. There’s a sort of assumption that if you invent something everything’s patentable and protectable when it’s not.”

Why is doing the best form of learning?

“I do think that in a world of deep uncertainty, you're never going to know the answer through market research. You never gonna know the answer with certainty at any point in time. So you've got to start and that's the whole lean startup idea. In doubt, do. Why? Because you'll learn and then you can adjust and pivot.”

Show Links:

Dynamic Capabilities: Understanding Your Firm’s Core Competencies in an Innovative Market feat. David Teece

unSILOed with Greg LaBlanc