Competitive Advantage Through Dynamic Capabilities

Your firm will sustain competitive advantage by performing strategically important activities better than your competitors. Michael Porter’s Value Chain Framework emphasizes that competitive advantage can come from not just great products or services, but any activity along the value chain. It may be surprising, but it is not purely about money, nor is it primarily about customer value for money; it is also about the value of innovation, and the quality and culture, more generally.

Simply, in order to retain a competitive advantage, the firm must be stronger than its competition in a key area of value. Today, we see competitive advantages being realized through strong core competencies, as well as dynamic capabilities of the team.

  • Core Competencies, which could include, but is not limited to its track record in Research & Development, the strength of its reputation, the extent of difficulties competitors have in imitating the products/services, the firm’s ability to access more readily a wide variety of markets, and its ability to influence industry to achieve its goals.
  • Dynamic capabilities – speaks to the mastery, process and speed by which the firm can adapt its resources to respond to changes in the marketplace, and to emerging opportunities. These could include exceptional technical know-how, intellectual property (Patents), business process know-how and speed, the quality of customer and business relationships, the strength of the organization’s culture and values, and the strength of its resources – human, assets and financial.

Developing an inventory of both, and assessing them against the SWOT/SCOT will help identify areas of risk and opportunity. Questions to ask include:

  • What core competencies do our firm have? (Rate against poor to strong)
  • What core competencies do we need, but do not have?
  • What core competencies do we have but will need to strengthen?
  • What dynamic competencies do we believe our firm has that provides us with a competitive advantage?
  • What do we need to do to protect/strengthen these dynamic competencies?