Hiroko Nagano: Living in an Era of Change

2022/07/08

In recent years, the environmental changes surrounding us have become increasingly intense, and companies are required to respond flexibly to them in order to survive. As a hint for this, the concept of "dynamic capabilities" is attracting attention in the field of strategic management.

According to Professor David J. Teece of the University of California, Berkeley, in addition to "ordinary capabilities" for streamlining activities based on a specific business paradigm, companies can possess higher meta-level capabilities. These are "dynamic capabilities" for modifying or updating the business paradigm itself.

If a company operates based solely on ordinary capabilities, its business paradigm will eventually be weeded out. This is because corporate decision-making becomes inward-looking, widening the gap with the environment, and the pursuit of cost reduction may lead to a deviation from the company's unique value standards. Therefore, it is necessary to critique the business paradigm itself through dynamic capabilities and to integrate, build, and reconfigure internal and external resources and competencies.

In other words, the gap between the existing business paradigm and the environment or the company's unique value standards must be clarified, and a new business paradigm must be reconstructed to fill that gap. Furthermore, when multiple business paradigms are presented as options, it is also necessary to make a choice based on the company's unique value standards.

Therefore, the framework of dynamic capability theory suggests that companies cannot respond flexibly to environmental changes without having firm value standards and making value judgments. If value standards are unclear, the company will ultimately be at the mercy of environmental changes, making long-term value creation impossible.

While establishing an identity and transformation involving self-criticism may seem contradictory at first glance, it is very interesting that the former is essential for the latter. Although dynamic capability theory is aimed at organizations, I too would like to live through this era of change while continuing to grow my knowledge without losing sight of my own identity.