Debate 2: Static Resources versus Dynamic Capabilities

Another debate stems from the relatively static nature of the resource-based logic, which essentially suggests, Lets identify S and W in a SWOT analysis and go from there. Such a snapshot of the competitive situation may be adequate for slow-moving industries (such as meatpacking), but it may be less satisfactory for dynamically fast- moving industries (such as IT). Critics, therefore, posit that the resource-based view needs to be strengthened by a heavier emphasis on dynamic capabilities. More recently, as we advance into a knowledge economy, many scholars argue for a knowledge-based view of the firm.* Tacit knowledge, probably the most valuable, unique, hard-to-imitate, and organizationally complex resource, may represent the ultimate dynamic capability a firm can have.* Such invisible assets range from knowledge about customers through years (and sometimes decades) of interaction to knowledge about product development processes and political connections. Focusing on knowledge-based dynamic capabilities, some interesting counterintuitive findings emerge. Summarized in Table 3.3, while the hallmark for resources in relatively slow-moving industries (such as hotels and railways) is complexity that is difficult to observe and results in causal ambiguity, capabilities in very dynamic high-velocity industries (such as IT) take on a different character. They are simple (not complicated), experiential (not analytic), and iterative (not linear).* In other words, while traditional resource-based analysis urges firms to rigorously analyze their strengths and weaknesses and then plot some linear application of their resources (learning before doing), firms in high-velocity industries have to engage in learning by doing. The imperative for strategic flexibility calls for simple (as opposed to complicated) routines, which help managers stay focused on broadly important issues without locking them into specific details or the use of inappropriate past experience.

Not all fast-moving industries are high-tech ones. As the pace of competition accelerates, more industries, including many traditional low-tech ones, are becoming fast moving. The end result is hypercompetition, whose hallmark is a shortened window during which a firm may command competitive advantage.* In hypercompetition, firms undertake dynamic maneuvering intended to unleash a series of small, unpredictable, but powerful actions to erode rivals competitive advantage. Overall, some research suggests that the current resource-based view may have overemphasized the role of leveraging existing resources and capabilities and underemphasized the role of developing new ones. The assumption that a firm is a tightly bundled collection of resources may break down in high-velocity environments, whereby resources are added, recombined, and dropped with regularity.* In such a world, a series of short-term unpredictable advantage propelled by dynamic capabilities centered on sensing, seizing, and reconfiguration (discussed earlier) seems to be the best a firm can hope for.

Answer the following questions according to the debate above/

What is the debate and what do you think? Is CIMC part of a Slow Moving Industry? How about Amazon? What is hyper competition?