Are you building Dynamic Capabilities?
How to create processes for innovation
There’s this fantastic academic theory that I ended up using as a central component of my research. When I was exploring how new companies create brands—how a brand is born and becomes established in international markets, I cast a wide net across academic literature to connect otherwise disparate areas of research. Through this, I discovered that building a brand involves creating and developing “dynamic capabilities.”
Dynamic capabilities are a growing area of research that helps explain how organizations function, evolve, and stay relevant in the complexity of today’s ecosystem. Interestingly, this concept isn’t widely used in professional settings (at least in my experience), but I believe it’s an excellent framework for understanding how organizations create and drive change.
If you think about it, everything we do is about enacting change. Whether it’s your work, your team, or your business, it’s all about making an impact on your organization, target market, professional development, etc.
Dynamic capabilities help explain how change happens. They are an organization’s ability to create new resources and capabilities in pursuit of its goals. Anytime someone within an organization is figuring out how to do something new, they’re creating and using dynamic capabilities—it’s essentially the sensing and learning abilities that we all have as humans. The theory suggests that these capabilities are essential to the ongoing success of an organization.
Dynamic capabilities are what allow organizations to create new capabilities. What’s exciting is that organizations that excel are those that consciously ensure they’re continuously building new resources and capabilities into their business models. The best companies make dynamic capabilities part of their core business functions. You see dynamic capabilities in action in areas like:
Learning and development: Enhancing the technological and professional skills of an organization’s people.
Customer/User (UX) research: Creating an ongoing feedback loop to learn from consumers, enhancing client experience and product development.
Change management: Developing processes to implement and support positive organizational change.
Brand development: Evolving the dialogue around a brand’s meaning, purpose, values, and influence, both internally and in the market.
Sales enablement: Continuously refining the go-to-market sales strategy and client experience through feedback loops and ongoing training for client-facing teams.
Put simply, dynamic capabilities are an organization’s ability to learn and incorporate those learnings into improved products, services, and employee/client experiences. Entrepreneurial organizations excel at this because they require continuous learning to establish product-market fit. The real danger occurs when organizations stop learning, changing, evolving, and innovating, instead settling into established processes. This inevitably leads to stagnation and decline.
Regardless of an organization’s size, taking a conscious approach to developing and supporting dynamic capabilities helps ensure continuous innovation and the ongoing development of its employees.
Here’s how you can create dynamic capabilities:
Create feedback loops. An organization needs at least three feedback loops:
Customer/Client Experience: Processes for understanding client feedback through surveys, focus groups, user experience research, product engagement data, etc.
Employee Engagement: Processes for understanding the skills, sentiment, ambitions, goals, and experiences of employees.
Sales Teams: Processes for understanding the skills, gaps, and experiences of frontline teams.
Establish a consistent process for organizing, analyzing, and reporting data from the feedback loops:
Monthly, quarterly, and yearly reviews: Regularly review OKRs, KPIs, and operational insights at all levels of the organization.
Project pre- and post-mortem: Evaluate program-specific goals and results at various checkpoints throughout project management.
Strategic planning circuits: Incorporate feedback from across the organization into strategic planning, aligning existing resources and capabilities with both short- and long-term goals.
Create a process for sharing and implementing feedback within teams and organizational operations:
Internal communications functions: Share feedback and strategic planning efforts consistently as part of an ongoing dialogue on improvement, customizing communications for different internal audiences based on their needs and goals.
Design thinking workshops: Hold cross-functional workshops to collaborate on team operational development and create solutions for change implementation.
Decentralized decision-making: Establish values that empower individuals and teams to make decisions about their work and operations, allowing the organization to implement innovations consistently throughout all levels of the organization.
Helping individuals and teams understand what dynamic capabilities are and how to use them ensures that organizations are creating opportunities for alignment, innovation, and continuous development.
Questions for reflection:
How are you incorporating continuous learning into your professional practice?
What areas of your process, operations, customer or employee experience, or product development need improvement?
Where can you build in feedback and reporting loops and cross-functional collaboration efforts to enhance alignment and innovation?
What I love about the concept of dynamic capabilities is that they exist within an organization without requiring conscious effort. Like the law of gravity, dynamic capabilities are always at play, whether we’re aware of them or not. Being able to understand dynamic capabilities, identify them, and create them within an organization means that we can create impactful alignment between our scope of work and the larger strategies of the organization. Cultivating dynamic capabilities means we’re able to create avenues for continuous innovation and impact. Here’s to that.
Onward.