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https://www.usnews.com/opinion/blogs/economic-intelligence/2013/07/02/apple-and-ibm-show-the-power-of-dynamic-capabilities

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This is the originator of the ideas underpinning DCs
https://www.strategy-business.com/article/00225?gko=d24f3

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In this video is David Teece and his work and thoughts briefly presented. This video is made by the Value Driven Service Innovation (VDSI) research project. For more information about VDSI please visit http://www.bi.edu/serviceinnovation. VDSI is a collaboration between BI Norwegian Business School, University of California at Berkeley and the Saïd Business School at the University of Oxford.

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In the global economy, investing in technology - and only technology - is unlikely to pay off. As this author writes wealth will flow to those that exhibit innovation in a dominant paradigm, own a strong intellectual property position in critical technologies, and have high-performance business models (Wal-Mart). Below, he describes how managers can achieve these ends. ¹

It's sometimes said that there's nothing more practical than a good theory. Whether they realize it or not, managers need a theoretical understanding of enterprise growth and development. In this article, we propose the adoption of a conceptual framework that will help executives lead their organizations in highly competitive global markets. For some, it will change frames of reference and accepted priorities in terms of what's important to build, own, and manage.

To be useful, a theoretical framework must be general enough to provide guidance in a variety of situations. This calls for judiciousness so that an overwhelming number of variables don't render analysis an impossible task. It also calls for sufficient generality and flexibility, so that the concepts can be applicable in a wide variety of circumstances. However, the theory must not be so general and academic that it has little to do with practical management problems.

Management theory is young and fragmented, and generally not much of a guide for executives, except on certain, narrow issues. The framework presented here can be helpful with the big-picture issues.

This essay presents the Dynamic Capabilities Framework (Teece et al., 1990, 1997; Teece, 2007), which is increasingly providing the intellectual infrastructure for both theoretical and applied analyses of strategic management and other issues facing business decision makers. While originated by the author of this paper, a broad panoply of scholars and executives is now contributing to its further development. ²

The growing importance of intangible assets

The Dynamic Capabilities Framework is animated by the recognition of several global megatrends that impact the contemporary business enterprise operating in hypercompetitive environments. Perhaps the most critical of these trends is that access to global transportation and information flows is so widespread that some say the world is "flat" (Friedman, 2007). In particular, intermediate goods and services that might once have been hard to access are now widely available, a reality which has created a system of global specialization. But on this "flat" landscape, characterized by hyper-competition, the capabilities required to orchestrate and deploy the available resources remain scarce and geographically isolated.

As a result of the greater ability to outsource almost anything and everything, the traditional competitive sources of differentiation based on economies of scale and scope have been eroded. If your market is too small to capture scale economies for an input or even a whole product, then you should source from companies that have achieved them already. Textbooks need to be rewritten to recognize the new reality.

Fortunately, there are other bases of competitive advantage unrelated to scale. The prime example is the generation, ownership, and management of intangible assets, which have risen to overshadow economies of scale in importance for enabling the enterprise to build and sustain a successful position.

Perhaps the most important class of intangible assets not universally available is technological know-how. Know-how and other intangibles are increasingly the "bottleneck assets" that allow innovating firms to differentiate and establish some degree of competitive advantage. They cause "hills"-and sometimes high "mountains"-to appear on otherwise flat competitive landscapes. Value can flow to the enterprise from the astute creation, combination, transfer, accumulation, and protection of intangible assets. Such assets are the new "natural resources" of the global economy. But they are not naturally occurring and depend on managerial action and, in part, on national systems of innovation (Nelson, 1993).

Intangible assets in general are a very economically interesting asset class, with powerful implications for building and maintaining competitive advantage at the enterprise level. Intangible assets are hard to "build" and difficult to manage. They are also unlikely to be traded (i.e., markets, if they exist, will be "thin") because their underlying value often derives from the presence of complementary assets, which limits the number of buyers who will be willing and able to pay the knowledge asset's full potential strategic value. Furthermore, knowledge assets are generally costly to transfer and can even be difficult to specify fully in a contract (Teece, 1981). As a result, these assets are harder to access than many other asset classes.

Ironically, even in natural resource industries, profits (for the business enterprise, but not necessarily for the nation-state) flow fundamentally from the ownership and use of intangibles, and only less so from ownership of the resource. The highest profits flow to those who develop extraction technologies, deploy them effectively and safely, and build privileged relationships with nation states and other constituencies. Accordingly, in the petroleum industry, oil in a fundamental sense is "found" in the mind, not in the ground; locating new reserves in deep water requires both (organizationally embedded) know-how and, in many jurisdictions, relationships with nation-states to secure exploitation and production rights. Table 1 summarizes the differences between intangible and physical assets along selected dimensions.

Table 1: Intangible Assets Compared With Physical Assets

Another intangible asset of central importance (besides knowhow) is a firm's business model for a given market, i.e., the structure of a firm's value proposition for its customers (Chesbrough and Rosenbloom, 2002; Teece, 2010a) and the design of the business that will deliver a solution to the customer. Business-model innovations are critical to success in unsettled markets where traditional revenue and pricing models are no longer applicable. The Internet allows and requires business model innovation.

In particular, the Internet requires new pricing structures because users are accustomed to getting information for free. Information providers are challenged to think of ways of charging for ancillary or premium services (so-called "fremium" approaches) while not running afoul of Internet users' expectations of receiving free information.

The other main classes of intangible assets are technological know-how, business process know-how, customer and business relationships, reputations, organizational culture and values, as well as formally identified intellectual property. The ability to prevent (or punish) the imitation of the key intangibles is necessary in order for the firm to capture value from its assets. Legal barriers to imitation protect some knowledge assets, although these are of limited importance in some industries due either to the pace of change or weak rights enforcement (e.g. digital music).

Because knowledge assets by themselves will not yield value, they must almost always be combined with other intangible and physical complements and bundled as a product to yield value for a customer. Ownership and/or control of complementary assets are therefore also necessary for competitive success (Teece, 1986). Textbooks are only now starting to recognize the fundamental shifts that have taken place in the basis of competitive advantage. The implications for business strategy, organization, and management education are monumental.

The growing importance of complements both inside and outside of the firm is a case in point. The vital role of complementors changes the nature of the required technology management approaches and business strategies because innovation in one product or service often increases the value of their complement(s). For example, improvements in software help drive demand for computing hardware, and vice-versa. Likewise, the development of high-octane fuels in the 1940s by oil refiners enabled the creation of high-compression engines by auto manufacturers.

It is also the case that intangible assets are rarely recorded on corporate balance sheets. As a consequence, existing accounting-based frameworks have a hard time coming to grips with them. Alan Greenspan, former chairman of the U.S. Federal Reserve Bank, once noted the challenge of "developing a framework capable of analyzing the growth of an economy increasingly dominated by conceptual products" (Greenspan, 2004). Conceptual products are steeped in intangible assets.

These changes in the economy clearly call for a new theoretical framework for understanding and guiding the growth of firms increasingly involved in creating and marketing conceptual, rather than physical, products. The Dynamic Capabilities Framework recognizes these considerations.

From knowledge assets to dynamic capabilities

As new bases of competitive advantage have gained in significance, old ways of looking at competition have been supplanted. Porter's Five Forces framework (Porter, 1980), which applied the structure-performance paradigm of industrial organization economics to strategy, focused on evaluating suppliers, customers, and the threat of new entrants and/or substitute products. This framework is not without insight, but it's not up to the task of revealing the dominant logic of value capture in most new industries, as well as many of the old.

Hence, firms need to take a more comprehensive view of the environment in which they must compete. Such a view needs to include not only buyers and suppliers but the local market for skilled workers (since they are not entirely mobile internationally), universities (for access to both highly educated talent and faculty research), financial institutions (especially venture capital), the legal system (especially intellectual property law and employment law), and the domestic political situation. Figure 1 displays these factors and their interaction.

Figure 1: The Business Ecosystem

In order to embrace these new elements of competition, the Dynamic Capabilities Framework has emerged. It offers a comprehensive, multidisciplinary approach to managerial decision-making. No other framework offers, or purports to offer, a comprehensive and multidisciplinary, research-based perspective on key strategic challenges. The Dynamic Capabilities Framework helps identify the factors likely to impact enterprise performance. It is gradually developing into a (interdisciplinary) theory of the modern corporation (Teece, 2010).

The Dynamic Capabilities perspective goes beyond a financial-statement view of assets to emphasize the "soft assets" that management needs to orchestrate resources both inside and outside the firm. This includes the external linkages that have gained in importance, as the expansion of trade has led to greater specialization. It recognizes that to make the global system of vertical specialization and co-specialization work, there is an enhanced need for the business enterprise to develop and maintain asset alignment capabilities that enable collaborating firms to develop and deliver a joint "solution" to business problems that customers will value.

Dynamic capabilities can usefully be thought of as belonging to three clusters of activities and adjustments: (1) identification and assessment of an opportunity ( sensing); (2) mobilization of resources to address an opportunity and to capture value from doing so ( seizing); and (3) continued renewal ( transforming). These activities are required if the firm is to sustain itself as markets and technologies change, although some firms will be stronger than others in performing some or all of these tasks. Performance of these activities draws on all the skills and disciplines used in the curriculum of business schools everywhere. The Dynamic Capabilities Framework helps organize and harness (academic) disciplinary knowledge so as to apply it to the task of building durable competitive advantage at the enterprise level.

Sensing is an inherently entrepreneurial set of capabilities that involves exploring technological opportunities, probing markets, and listening to customers, along with scanning the other elements of the business ecosystem. It requires management to build and "test" hypothesis about market and technological evolution, including the recognition of "latent" demand. The world wasn't clamoring for a coffeehouse on every corner, but Starbucks, under the guidance of Howard Schultz, recognized and successfully exploited the potential market. As this example implies, Sensing requires managerial insight and vision - or an analytical process that can be a proxy for it.

Seizing capabilities include designing business models to satisfy customers and capture value. They also include securing access to capital and the necessary human resources. Employee motivation is vital. Good incentive design is a necessary but not sufficient condition for superior performance in this area. Strong relationships must also be forged externally with suppliers, complementors, and customers.

Companies that successfully build and orchestrate assets within the ecosystem stand to profit handsomely. Apple retained an estimated 40 percent of the gross profits from the entirety of the value chain on its hard drive-based iPods, despite manufacturing no part of the product itself (Linden et al., 2009). This is not counting the revenue from licensing makers of iPod accessories or sales from the iTunes Music Store.

Transforming capabilities are needed most obviously when radical new opportunities are to be addressed. But they are also needed periodically to soften the rigidities that develop over time from asset accumulation, standard operating procedures, and insider misappropriation of rent streams. A firm's assets must also be kept in alignment to achieve the best strategic "fit": firm with ecosystem, structure with strategy, and assets with each other. Complementarities need to be constantly managed (reconfigured as necessary) to achieve evolutionary fitness, avoiding loss of value should market leverage shift to favor external complements.

Apple has proved to be a paradigmatic practitioner of dynamic capabilities as it has created and transformed a series of markets. Table 2 shows how each of its major product introductions reflected aspects of the major categories of dynamic capabilities. In particular, Apple's strategy implementation has created and shaped markets.

Table 2: Dynamic Capabilities at Apple

iPod
existing mp3 players were too "geeky"

create an aesthetically appealing portable device with a simple interface over an accelerated product development cycle; later: improve appropriability with exclusive FairPlay DRM in the iTunes Music Store

port iTunes software to rival Windows platform; expand into content distribution with the iTunes Music Store; shift company emphasis from computers to consumer electronics

domination of the portable digital music player market; expansion to video capabilities (playback and distribution).

iPhone
existing "smart phones" retained an awkward interface too close to their cell phone roots.

create a multimedia phone with a large screen and an intuitive interface; promote complementary asset creation with the App Store infrastructure.

develop telephony capabilities; enter the regulated telephony market

one of the only companies making money with smart phones

iPad
"netbooks" provide an unsatisfying computing experience and "E-readers" provide limited functionality.

scale up the iPhone interface to provide a richer multimedia platform without phone functionality.

extend the "simple interface" aesthetic to a computing platform.

(too early to know)

In addition to Apple's ability to identify and orchestrate new asset combinations, wealth in the global economy flows to innovation within a dominant paradigm (Intel), a strong intellectual property position in critical technologies (Qualcomm), and high-performance business models (Wal-Mart). The important lesson is that investing in technology by itself is unlikely to pay off. Entrepreneurial managers and leaders building and deploying intangible assets are critical success factors. Capturing value is never certain, but it can be managed.

References

Baranskaya, Anna, and Teece, David J. (forthcoming). "Business Model Dashboards and Design Algorithms: Lessons from Apple's iPod, iPhone, and iPad."

Friedman, Thomas L. (2007). The World is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux.

Linden, Greg, Kraemer, Kenneth L., and Dedrick, Jason (2009). "Who Captures Value in a Global Innovation System? The case of Apple's iPod." Communications of the ACM. 52(3): 140-144.

Nelson, Richard R. (ed.) (1993). National Systems of Innovation . New York: Oxford University Press.

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.

Teece, David J. (2007). "Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance," Strategic Management Journal, 28(13): 1319-1350.

Teece, David J. (2010). "Technological Innovation and the Theory of the Firm: The Role of Enterprise-level Knowledge, Complementarities, and (Dynamic) Capabilities." In N. Rosenberg and B. Hall (eds.) Handbook of the Economics of Innovation, Volume 1. Amsterdam: North-Holland.

Teece, David J., Pisano, Gary, and Shuen, Amy (1990) Firm Capabilities, Resources, and the Concept of Strategy. Center for Research in Management. University of California, Berkeley, CCC Working Paper 90-8.

_______________________________ (1997) Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18(7): 509-533.

1. This paper draws in part on Teece (2007) and on Baranskaya and Teece (forthcoming).

2. Dynamic Capabilities is now a well-established framework for guiding research and practice in the field of strategic management. Teece et al (1997) is the single most cited paper in business and economics from 1995 to 2005 according to Thomson's ScienceWatch. Since 2006, articles concerning dynamic capabilities have been published in business and management journals at a rate of more than 100 per year (Di Stefano et al., 2010). And an increasing number of these articles contain new empirical research. This work is now beginning to trickle through to management practices.

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Dynamic capabilities: A guide for managers

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In the global economy, investing in technology - and only technology - is unlikely to pay off. As this author writes wealth will flow to those that exhibit innovation in a dominant paradigm, own a strong intellectual property position in critical technologies, and have high-performance business models (Wal-Mart).

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Huawei supply chain
Useful to indicate DC

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The official site for HUAWEI developers. Provides HUAWEI appgallery service,HUAWEI Mobile Services,AI SDK,VR SDK and documentation for app developers and designers.

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Nothing to see here, etc etc

Analysis Apple has, over the past few years, quietly and successfully patented, in the US at least, various aspects of Swift.

That's the programming language the iPhone-slinging biz open sourced in 2015 under the Apache 2.0 license with a Runtime Library Exception.

In the past day or so, developers working with the language have highlighted on Swift discussion forum Cupertino's intellectual property land-grab, expressing concern that the patents - which are assigned to Apple rather than the Swift project - may expose those writing Swift applications to future legal jeopardy.

Here are two of the patents in question: 9,952,841 and 9,329,844.

Setting aside the problems with software patents - many developers, among others, believe they should not exist - and ignoring the fact that many of the features mentioned in Apple's Swift patents (eg: options chaining) can be found in other programming languages, there's no concrete cause for alarm.

The Apache 2.0 license grants users the right to use patent-encumbered code from any contributor, including Apple; these rights terminate upon attempting to bring a patent infringement claim against any entity over a Swift project. Better still, Apple has not sued anyone for violating Swift patents, so far as The Register is aware.

At the same time, Google software engineering director and open source lawyer Daniel Berlin observed in a Hacker News discussion, the patent claims Apple has made are " worrying."

Google has cause to be wary given its bruising battle with Oracle over Java patents and copyrights - the patent claims were disposed of early on but the copyright case lingers on and Google is trying to reverse Oracle's victory in the US Supreme Court, which once before refused to accept the case.

Google has taken a shine to Swift and makes a significant number of code contributions. The ad giant has made Swift available for TensorFlow, and has been trying for more than a year to add Swift support to the official compiler for its upcoming Fuchsia operating system. Apple and Google haven't always got along so it would make sense for Google to be pondering what could go wrong.

The Register asked Apple about its patent strategy, just because we enjoy the ritual of sending email and having it ignored.

Commenting in the Swift forum earlier this month, Apple software engineer John McCall attempted to allay concerns by noting that Apache license grants users the right to use any patent implicated in contributed code.

"That grant is perpetual and irrevocable with regard to both all past contributions and all current contributions," he wrote. "Apple could, in theory, publicly declare at any point that its future contributions will no longer be licensed under the Apache license, and then it could pursue patent infringement claims against any users of versions of the Swift code that incorporate those future contributions."

But McCall says that would drive people away Swift, which Apple has no intention of doing.

Ted Kremenek, Apple's senior manager of languages and runtimes, also weighed in, suggesting Apple's pursuit of patents is defensive - a plausible claim given how often patent claims get brought against Apple and other tech companies.

"Any company making a contribution to Swift is intentionally licensing implied patents to the project," he explained. "This is a business decision. Speaking on Apple's behalf, that business decision is clear and deliberate: we want Swift to be successful and to be used widely. The Apache 2 license provides a form of IP licensing as well as IP protection for the project, and thus its users."

There you have it, Apple's patent strategy is all about you: We patent for your protection.

Left unaddressed is a question posed by software developer Max Desiatov, who wonders whether a third-party open-source implementation of a Swift compiler or an open-source Swift-compatible language using patented features would be acceptable to Apple. ®

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Apple: Trust us, we've patented parts of Swift, and thus chunks of other programming languages, for your own good

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Analysis Apple has, over the past few years, quietly and successfully patented, in the US at least, various aspects of Swift. That's the programming language the iPhone-slinging biz open sourced in 2015 under the Apache 2.0 license with a Runtime Library Exception.

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The 323 Apple patents that list Steven P. Jobs among the group of inventors offer a glimpse at his legendary say over the minute details of the company's products - from the company's iconic computer cases to the glass staircases that are featured in many Apple stores. Related Article "

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The 323 Apple patents that list Steven P. Jobs among the group of inventors offer a glimpse at his legendary say over the minute details of the company's products - from the company's iconic computer cases to the glass staircases that are featured in many Apple stores. Related Article "

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future watch

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5G development is accelerating at speeds beyond imagination Leading global operators are developing 5G commercial deployment faster than ever-the industry is already prepared for various fields including 5G standards products, terminals, security, and business We will work closely with our customers and partners to grasp 5G innovation opportunities and jointly usher in a new era of 5G

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In January 2018, Chinese state-run media Xinhua first made mention of a new economic strategy with a short article that largely went unnoticed, in a report about a national conference on IT industry standards.

To dominate cutting-edge technologies-such as artificial intelligence (AI), cloud computing, internet of things (IoT), and big data-China intends to accelerate efforts to develop technical standards, eventually exporting them to the international market, the report said.

While global technical standards for these technologies have not yet been established, "this is the golden opportunity for our country's industries and standards to realize the goal of 'overtaking by changing lanes,'" the report quoted an official from China's national technical committee, the Standardization Administration, as saying.

That metaphor is commonly used in Chinese media to describe finding shortcuts to surpass other countries and become the leader, and Huawei's aggressive development of 5G technology fits exactly into the Chinese regime's ambitions.

By dominating 5G standards at international standard-setting agencies, Huawei could pocket licensing fees from mobile service providers and governments that use its 5G technology.

Today, Huawei and its domestic competitor, ZTE, own roughly 10 percent of the 1,450 5G patents filed, compared to Qualcomm's 15 percent, Nokia's 11 percent, and Ericsson's 8 percent, according to a 2018 report by the U.S.-China Economic and Security Review Commission.

Meanwhile, the entire country has filed 48,882 patents with the World Intellectual Property Organization (WIPO) in 2017, making it the second highest-ranking country behind the United States.

The year prior, ZTE and Huawei had topped the WIPO list of annual patent applications, at 4,123 and 3,692 patent filings focus on cutting-edge technologies like 5G, IoT, and cloud computing. Qualcomm came in third place.

The rush to file patents is not just about making money. The Chinese regime is keen on cutting its reliance on foreign technology and has championed the principle of "self-reliance" for its tech sector. Huawei, in turn, has stepped up to the plate.

Currently, Huawei is the only major Chinese telecoms manufacturer that is trying to make the majority of 5G components by itself.

U.S. companies still lead market share for the most advanced technologies, and Chinese firms still depend on Western firms to supply most of the advanced components.

But Chinese firms are quickly catching up. Most critically, they are resorting to underhanded tactics in order to stake their dominance in 5G.

Beating Competition

In an analysis of 5G security concerns published by the U.S. think tank Center for Strategic and International Studies, researcher James Lewis noted that both Huawei and ZTE benefit from government subsidies, giving them the ability to manufacture products and sell them at discounted prices far below international competitors.

Put simply, "the market distorting effects of government-subsidized Chinese companies reduce market share and revenue for other Western firms," Lewis wrote.

As Huawei continues to pursue overseas clients, governments will have to choose between risking security loopholes in buying cheaper Huawei 5G equipment, or paying more for secure equipment made by other firms. "Determining how to persuade countries that they should pay a premium is one problem; determining how to securely connect and communicate over telecom networks in other countries using vulnerable equipment is another," Lewis wrote.

China has also deliberately planned for Chinese technical standards to become the representative at international standards groups-pressuring tech firms to vote for Chinese standards.

One example cited in Lewis's report: Chinese tech company Lenovo had voted for a proposed standard by U.S. firm Qualcomm instead of Huawei at one of the most important standards groups, the Third Generation Partnership Project. The Chinese authorities immediately criticized Lenovo for making the move.

In another instance, the Chinese regime pressured Chinese companies to back a type of technology for which Huawei holds most of the core patents-known as polar codes-instead of more mature competing technologies pioneered by Qualcomm and other Western firms. A standoff ensued, which ultimately ended with the majority of companies voting in favor of polar codes. This means all 5G mobile cellular technology will employ the polar codes.

"China has politicized the standards-making process," the report said.

Huawei has also increasingly taken senior leadership positions at these standard-setting bodies, as part of Beijing's attempts to raise its 5G sector's influence.

This is a concerted effort by China to stake its claim. Chinese companies take leadership positions at lower-impact committees, then use them "to promote Beijing's interests through a combination of holding the top leadership slots and contributing funding," the U.S. congressional report said.

Developing Own Chips

To fulfill the Chinese regime's mandate to cut reliance on foreign technology and develop domestic advanced semiconductor chips, Huawei's chipmaking subsidiary, HiSilicon, has designed its own smartphone chips that are specially suited for 5G capabilities.

In September 2018, Huawei unveiled the world's first 5G-ready commercial chips for smartphones, equipped with artificial intelligence.

Chip development has consistently been included as part of the Chinese regime's tech development plans, providing significant state support and funding, such as state investment funds and local government funds.

HiSilicon is among a group of domestic firms that are part of a "relatively complete" industry supply chain for IoT development, providing the bulk of chips, according to the U.S. congressional report.

HiSilicon's smartphone chips are exclusive to Huawei. The company does not sell to third parties. But this pivot toward domestic production is likely to cut into Qualcomm's chip sales-and increasingly, patent royalties-as Huawei pushes for more of its standards to be developed for 5G.

In the current generations of 3G and 4G, Qualcomm had dominated ownership of patents and technical standards, allowing it to profit from the royalty fees.

To ensure that the United States maintains an edge in 5G innovation, Lewis of the CSIS think tank recommended that the U.S. government encourage private and public research and development, while working with U.S. allies to come to voluntary agreements on 5G security standards.

He also urged U.S. authorities to ensure U.S. companies don't face "unfair obstacles from antitrust or patent infringement investigations undertaken by any country to obtain competitive advantage."

He added that fair competition is crucial to 5G "because it incentivizes companies to build better products and offer better services."
Frank Fang contributed to this report.
Follow Annie on Twitter: @annieeenyc

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In January 2018, Chinese state-run media Xinhua first made mention of a new economic strategy with a short article that largely went unnoticed, in a report about a national conference on IT industry standards.

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David Teece on Dynamic Capabilities and Strategic Management

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In organizational theory, dynamic capability is the capability of an organization to purposefully adapt an organization's resource base. The concept was defined by David Teece, Gary Pisano and Amy Shuen, in their 1997 paper Dynamic Capabilities and Strategic Management, as "the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments".

The term is often used in the plural form, dynamic capabilities, emphasizing that the ability to react adequately and timely to external changes requires a combination of multiple capabilities.

The phrase "dynamic capabilities" was introduced in a working paper by David Teece, Gary Pisano, and Amy Shuen.The final, peer-reviewed version was published in 1997.

The idea of dynamic capabilities is similar in some ways to the previously existing concept of operational capabilities; the latter pertains to the current operations of an organization, whereas the former, by contrast, refers to an organization's capacity to efficiently and responsively change these operations and develop its resources.

The main assumption of this framework is that an organization's basic competencies should be used to create short-term competitive positions that can be developed into longer-term competitive advantage. Nelson and Winter, in their 1982 book An Evolutionary Theory of Economic Change, link the growth of the concept of dynamic capabilities to the resource-based view of the firm and the concept of "routines" in evolutionary theories of organization. Douma and Scheuder describe it as a bridge between the economics-based strategy literature and evolutionary approaches to organizations.

The resource-based view of the firm emphasizes sustainable competitive advantage; the dynamic capabilities view, on the other hand, focuses more on the issue of competitive survival in response to rapidly changing contemporary business conditions. Strategy scholars Gregory Ludwig and Jon Pemberton, in one of the few empirical studies on the topic, called for clarification of the specific processes of dynamic capability building in particular industries to make the concept more useful to senior managers who set directions for their firms.

Dynamic capabilities theory concerns the development of strategies for senior managers of successful companies to adapt to radical discontinuous change, while maintaining minimum capability standards to ensure competitive survival. For example, industries which have traditionally relied on a specific manufacturing process can't always change this process on short notice when a new technology arrives; when this happens, managers need to adapt their own routines to make the most of their existing resources while simultaneously planning for future process changes as the resources depreciate. Similarly, the kind of changes that the theory is emphasizing are the internal capabilities rather than only looking into the external business forces.

The New Dynamic Capabilities framework, posed by Amy Shuen in her analysis of Web 2.0, focuses on the firm's ability to quickly orchestrate and reconfigure externally sourced competences, ranging from Apple, Google Android, IBM Linux developer ecosystems to crowdsourced, crowdfunded open innovations such as the Obama08 mobile app-while leveraging internal resources such as platforms, know-how, user communities and digital, social and mobile networks. The New Dynamic Capabilities framework takes into account digital, information and network economics and the fall of the transaction costs of involved in using specialized services. According to Philip Cordes-Berszinn and Basiouni, though, more research is needed in order to measure the "capabilities" and to appropriately apply the ideas to practical management situations.

Many scholars have argued that the dynamic capability theory is vague and tautological. This is a critical issue, and while the theory remains very helpful when addressing how to respond to the business changing environment, it may fail to describe exactly how. Further, Lawson and Samson suggest that the capabilities of the theory are difficult to identify and/or operationalize, and in some cases, those very capabilities can lead to a core capability becoming core rigidity. As such, the use of the theory in its current state is difficult without being able to further specify, develop, and identify those capabilities.

Wheeler Zahra et al. proposed an operationalization of the dynamic capabilities and to be further tested across different settings and countries. To further clarify concepts related to the dynamic capability and absorptive capacity theories, Wheeler introduced an application derived from the dynamic capability theory for net-enablement. Wheeler's Net-Enabled Business Innovation Cycle facilitates understanding and predicting how firms transform dynamic capabilities associated with net-enablement into customer value using the dynamic capability theory. These net-enabled firms are able to "continually reconfigure their internal and external resources to employ digital networks to exploit business opportunities" through their "routines, knowledge, analysis and rules to create customer value from their net-enablement capability" (p. 128). Accordingly, and based on Wheeler's NEBIC model, Williams have qualitatively developed instruments to measure the dynamic capabilities and Basiouni developed the measurements quantitatively and tested them on many settings and in different countries such as Canada and Saudi Arabia.

A detailed description of processes and theoretical roots is provided by Arndt, Pierce, and Teece (2017). Teece, Pisano, and Shuen proposed three dynamic capabilities as necessary for an organization to meet new challenges: the ability of employees to learn quickly and to build new strategic assets; the integration of these new strategic assets, including capability, technology and customer feedback, into company processes; and lastly the transformation or reuse of existing assets which have depreciated. Teece refers to successful implementation of these three stages as developing "corporate agility".

The first stage, learning, requires employees and managers to reorganize their routines to promote interactions that lead to successful solutions to particular problems, to recognize and avoid dysfunctional activity and strategic blind spots, and to make appropriate use of alliance and acquisition to bring new strategic assets into the firm from external sources. A practical example of this is provided by Jean-Pierre Jeannet and Hein Schreuder, in their book From Coal to Biotech, which lays out how the Dutch company DSM transformed itself twice using 'strategic learning cycles'.

In his 1988 book Managing Quality, David A. Garvin states that quality performance depends on organisational routines for gathering and processing information, for linking customer experiences with engineering design choices and for coordinating factories and component suppliers. Increasingly competitive advantage also requires the integration of external activities and technologies through alliances and partnerships.

Economists Amit and Schoemaker pointed out in 1993 that success in fast changing markets depends on reconfiguring the firm's asset structure to accomplish rapid internal and external transformation. Firms must develop processes to make changes inexpensively while accomplishing reconfiguration and transformation ahead of the competition. This can be supported by decentralization, local autonomy and strategic alliances.

Another "dynamic capabilities" concept is co-specialization. For example, the physical assets, human resources and the intellectual property of a company, having developed together over time, are more valuable in combination than separately, and give a firm a sustainable competitive advantage.

Dynamic capabilities are closely related to the concept of ordinary capabilities as they both are organizational capabilities, yet both are distinct in nature. The resource-based view of the firm and the dynamic capabilities view (DCV) have focused on two broad categories of organizational capabilities that are essential for firm performance: zero-order ordinary capabilities needed to exploit a firm's current strategic assets through day-to-day operations (Winter, 2003) and higher-order dynamic capabilities required to alter a firm's resource base by integrating, building, and reconfiguring competences (Eisenhardt & Martin, 2000; Teece et al., 1997). Qaiyum and Wang (2018) show that ordinary and dynamic capabilities are needed in different contexts.

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In organizational theory, dynamic capability is the capability of an organization to purposefully adapt an organization's resource base. The concept was defined by David Teece, Gary Pisano and Amy Shuen, in their 1997 paper Dynamic Capabilities and Strategic Management, as "the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments".

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In its latest sustainability report Apple said it was aiming for a "closed-loop supply chain" that would eliminate the need for mining, though it has set no date for achieving this.

"Traditional supply chains are linear," said the report. "Materials are mined, manufactured as products and often end up in landfills after use. Then the process starts over and more materials are extracted from the earth for new products.

"We believe our goal should be a closed-loop supply chain, where products are built using only renewable resources or recycled material.

"It's an ambitious goal that will require many years of collaboration across multiple Apple teams, our suppliers and specialty recyclers - but our work is already under way."

Apple said it had developed lines of disassembly robots, named Liam, that could take apart 2.4m phones a year. It has created "material risk profiles" for 44 materials that identify their environmental, social and supply risks.

As a result the company is focusing on recycling materials including aluminium, tin and cobalt.

Lisa Jackson, VP of environment, policy and social initiatives, told Vice News: "We're actually doing something we rarely do, which is announce a goal before we've completely figured out how to do it.

"So we're a little nervous, but we also think it's really important, because as a sector we believe it's where technology should be going.

"We are committing as a company to not necessarily having to source from the earth for everything that we need."

Apple has also pledged to use nothing but renewable energy across its facilities worldwide and it is "helping our suppliers reduce the amount of energy they use".

Some 99% of paper in packaging is from recycled or responsibly-managed sources and the company is working to eliminate waste to landfill.

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In its latest sustainability report Apple said it was aiming for a "closed-loop supply chain" that would eliminate the need for mining, though it has set no date for achieving this. "Traditional supply chains are linear," said the report. "Materials are mined, manufactured as products and often end up in landfills after use.

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Disclaimer: This work has been submitted by a student. This is not an example of the work produced by our essay writing service.

You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Apple has been evaluated as most innovative company from 2006 to 2008 because of the development of different product such as iPhone, iMac and iPod. The production of music, video, movie and electronic records helped Apple to gain valuable brand recognition as in 2008 it was recognized as 24th most valuable brand (Basu and Wright, 2008).

According to Sliber and Kearny (2009) core competencies are the skills and capabilities of an organization which makes it unique and gives it competitive advantage over its competitors.

The core competencies of Apple were its innovative designs and technology based on software. The latest batch of Apple products includes iPhones, iPad and iPod with more innovative features and colours. (www.apple.com)

Apple is financially very strong company. From 2003 to 2008 it has tripled its sales volume from $24 million to $3.5 billion (De Wit and Meyer, 2010). Due to this factor it is possible for Apple to pay a lot of money to its highly qualified people in research and development department to develop such gadgets which are highly technological. These gadgets should be innovative in its nature, smart in its appearance, could store a lot of data and fast in its processing speed.

The core competencies of Apple are robust. It is very hard to imitate the Apple products and this gives it the edge over its competitors. It has a closed proprietary system, which makes sure for Apple that there is no evasion of its skills and its secret recipe. On the other side Apple is very consistent in its product portfolio development. If any company no matter how successful is, divert its business altogether or try to diversify too much in product line than there are chances that it will lose its core competency.

Let us take an example of Kodak the inventor of snap short photography in 1888. For the first hundred years there was monopoly of Kodak in chemical based photography. In 1990 digital photographic technology came in and instead of Kodak competing and entering the digital market, it remained focused in manufacturing of chemicals and pharmaceutical products. Kodak did not bother competing its digital photographic rivals like Apple, Sony, Cannon and Hewlett Packard. Eventually Kodak ended up losing the digital photographic market. (De Wit and Meyer, 2010)

Now if we talk about Apple, it is really strong in its core competencies as well as in dynamic capability. It has always been responsive to any changes brought in by its competitors. Let us take an example of Dell introduced its tablet in the market and Apple launched its iPad 2. As Samsung developed Galaxy S3 and Apple launched it iPhone 5.

Apple offers a complete range of its products to its customer. If we take an example of Nokia, its user has to use android market to download music, where an iPhone user doesn't need to go anywhere apart from iTunes. Similarly in Nokia you have to create your own backup where as in iPhone the iCloud is there for the backup.

According to Zolo and Winter (2002) dynamic capability is an ability of an organization of being responsive to address the changes taking place in the environment. In terms of Apple it is very dynamic in its nature as it is very responsive to any changes from its competitors. In recent days Samsung is the biggest rival of Apple in mobile technology but it is equally challenging Apple positively. Due to their competition customers are getting the best quality products from both of them. Before Steve Job's comeback, the Apple was struggling for its survival but it made its comeback after he joined, which shows a high level of dynamic capability of Apple.

Evaluation: It has been observed that Apple has been emphasizing more on developing competencies not limited to technology only. With this approach they were thriving to achieve extreme form of technical development and in doing so customer orientation was also not ignored. Every effort were made to developed their products based on differentiation which is initiated by the CEO Spilinder tenure and then the pace was accelerated in Steve Job's time in 1997. Technical expertise of their concerned staff played a vital role that was able to take to an extreme end in terms of product features, functions and specifications. This approach of developing competencies remained an area utmost importance by Steve Job's which helped to register phenomenal in sales and profitability as well. Just due to competency the customer positioned these products in their mind as ultimate unique in functions and no other competitor could produce something closer to this. As Apple's products are highly sophisticated that is why it is exercising the skimming pricing policy and people do not mind opening their valets and buying the unique feature products they are desperate for.

Core competencies and Dynamic capabilities of Dell:

Dell is known for patching business segments with customer demand as process of knowledge creation effects performance and technology level. There is an efficient and easy access to platform with common interface point and a core product with web portals manages integration. The supply chain process of Dell had been upgraded with higher turnover rate. The nearest competitors of PC industry are 10 times higher with specific assembly goods and standardized components. Dell infrastructural solutions with XPS 12 and windows 8 ultra book engages target audience with better performance. The fulfillment model of PC industry allows ten times higher up gradation of supplier process. The lower profit margins and optimized PC industry with assemble finished goods for standardized components manage environmental changes. (www.dell.com)

The delivery of short term processes and market environment with dynamic capability is higher. The changes evolved in market manage small and medium business enterprises (Chopra, 2009). The mass customization of Dell to be used by maximum number of people enhances software and hardware experience (Heizer et. al, 2009).

Evaluation: It is found out that Dell was keen to develop its core competencies which have a different sphere as compared to Apple. Dell adopted their core competency based on two factors that is customized product line and cost leadership. Dell has a unique distribution channel which did not contain any intermediary. It is evidenced that this competency achieved by Dell was contradictory with its business growth strategy where it becomes challenging to continue with customization and without intermediary for a larger size of market. Dell changed their approach towards the business and initiated their new competencies by offering customer friendly products compared to customized products previously. Further they also revised or redesigned their distribution channel by involving retailers therein.

Question No.2

Strategic Alliance

Strategic alliance is a corporative agreement between companies to maximize their eternal skills and technologies while they safeguard against the transformation of competitive advantages to the partners (Verbeke, 2009).

In most recent days we can take the example of the mobile communication networking companies that is Orange and T mobiles. They made a strategic alliance to provide the maximum benefit of network coverage to their customers. They aim to get benefit of the combined resources of both the companies but keeping the legal entities separate from each others. In case of Apple it made many strategic alliances in the past. Before Steve, Apple made the strategic alliance with IBM, Novell and Intel but unfortunately it did not work and the market share gone down. Once Steve came back in 1997, he quitted all the alliances and made a new strategic alliance with the Microsoft (De Wit and Meyer, 2010 p681, p685). According to Lim (2011) the reason Steve made this alliance was that they did not had the license for the software but they had the license for operating system. They ex-board of directors and co founder of apple said that if we had the license for the software then we would have been No. 1 and Microsoft company would not exist. Microsoft invested the $150M in the strategic alliance with Apple for producing the Microsoft office and other products for the Mac.

Merger and Acquisition

Merger and Acquisition is also a good practice to maximize the share holder's wealth. We have seen many successful mergers and acquisitions and one of the best examples is Sony and Ericsson which is called Sony Ericsson. There is a difference between strategic alliance and merger and acquisition. In merger both the companies lose their own entities and give birth to a new company. The main aim of both the companies is same, to make the most profit out of their shared or joint resources.

In relation to Apple, it had made acquisitions. The main aim of Apple is to offer the best possible products to its customers by joining hand to those companies who are the best in their own features. For the same purpose it acquired a German specialist in music software and Emagic as well as Prismo graphic, Silicon Grail and Nothing Real for professional level video creation and production. Apple was using Intel chips in 2005 and in April 2008 Apple made another acquisition with microprocessor, a highly sophisticated company PA Sami and its chips were very economical in cost (De Wit and Meyer, 2010 p688).

The corporate strategy of Apple before Steve's comeback was to outsource with IBM and Novel. As soon as Steve made his comeback he suggested that all its departments should be at one place. The main logic behind this idea was to keep its competency secret so that no one could imitate the product. Apple is a risk aversive and resource driven company which uses its heavy resources to introduce a new products and make its customers to buy that products because of the attractive features of that particular product. Apples looks into its magic box and then decides that what to create. It uses inside approach to get benefit of its research and development.

According to McMahon, (2009) the corporate strategy of Apple is to think different that is Apple's core competency, which is innovative in design and technology and this is the spirit behind its popularity. Buy different, it means if we talk about any entry level mobile phone, we all know that it is used to receive and make calls but Apple says people wants an integrated product which is used for making, receiving calls, listening music and surfing.

The corporate strategy of Apple to maximize shareholder wealth and position in market manages long term challenges (Schneider, 2003). The corporative business agreements with mutual benefits and strategic alliance engaged different countries with common understanding (Lynch, 2006). All kinds of business strategic alliance including international ones in decades optimized failure rate. It had been noted that 49 international strategic alliances all over world helped companies to gain 66% of share. The structure, partner selection and alliance with party involvement leaded to failure (Mintzberg et, al. 1998).

The shareholder wealth had been maximized through Apple industry with successful strategic alliance and partnership goals (Lynch, 2006). The higher shareholder value with partner goals managed alliance setting and development. Two companies merge together with one legal entity as 50% of acquisition continues through it. Tax benefits, lower overall cost and improved management with creation of economical values as positive growth sensing had been created (Mintzberg et, al. 1998).

The direct market access with global corporate strategy by sharing rewards and risks manages strategic alliance. The corporate strategy of company with strategic alliance provides less chance of risks including managerial and financial risks. The stickiness of company with each other through corporate strategy influence profitability margin. The influence of company to create shareholder value enhances through mergers and acquisition. The higher shareholder value with better results with alliance of good partner manages direct access of Apple to create share holder value. The cost of company lowers through market share with possible concerns and division. The long term involvement and strategic optimization gains share holder wealth. In different countries high demand of iPhone with substantial business practice with international strategic alliance gained 69% of failure. The task orientation for substantial practice organizes 69% of failures (Mintzberg et, al. 1998).

Evaluation: After going through this case study of apple it is quite obvious that Apple is very selective in making decisions regarding the mergers and acquisitions because its share holders are very important for it. Ultimately the effect of these mergers and acquisitions reflects on the value of its share holders. It is learned that Steve Job's always had its reservations to protect his technology and continuous development of competencies to leave other competitors way behind in building the abilities. With this approach Steve always opted to build alliances in a manner whereby exercise maximum of control. It is evident that out of all possible alliance of mergers acquisitions and takeovers, Apple preferred to for acquisition and takeovers and avoids mergers to avoid leakages of technical confidentialities.

Question No. 3

Strategic Leadership

Strategic leader thrives to set up direction of an organization by employing appropriate strategies and approaches in meeting the overall expectations of various stakeholders. Strategic leaders are back bones for meeting the corporate objectives by framing the vision and mission of the organization like Apple. Different individuals as strategic leaders carry an approach which is an outcome of combining different attributes like inheritance, socializing and learning through experiences. The features of strategic leaders are not limited to implementing the broader categories of autocratic, democratic or others but they are more of strategic vision, zeal and zest of different individual endeavor to take up the challenge of bringing success for the organization or company.

From 1985 to 1993 John Sculley was the CEO of Apple. He had a vision of saving costs for the Apple. His approach to Apple was not to develop a strong competency through uniqueness but he was more focused on reducing the cost of its products by arranging some alliances with other market leaders. Less emphasis was given to create some unique positioning of the company and he was more to generate a satisfactory level of profits by cutting costs. We will see here he was relying on their partners in the supply chain even for the operating systems and this leadership style proved less effective as the profit reduced to 34% from 50% (De Wit and Meyer, 2010 p681). Eventually his leadership style did not work.

From 1993 to 1996 another CEO of Apple Spindler was trying to get out of all the alliances with Intel, Novell and IBM. His focus was on international growth and most cost cutting efforts. His strategic leadership approach was a short sighted which was limited to only cost savings and not to develop in house capabilities for integrated manufacturing. With this leadership style he could not demonstrate any phenomenal growth in companies operations which were stayed at similar levels.

Gil Amelio was the CEO of Apple in 1996. He had a different strategic view of the company. With foremost aim on cost cutting he focused on product differentiation and premium prices. Though he was a visionary strategic leader but he could not sustain his market share and finally he had to leave the company. His style could not work out as the company lost 3% market share (De Wit and Meyer, 2010 p681).

Steve Job's made his comeback in 1997 as interim CEO of Apple and he was a real visionary leader with lot of devotion, clarity and determination to make Apple as unique and market leader. On continuum he was more towards autocratic with occasional adoption of democratic and parental approaches. He was able to gain confidence of his research teams with high degree of harmony and understanding where any new perceived idea is understood and implemented to its extreme end of product development. He was really a charismatic leader who could influence his subordinates for achieving the set of aims and goals. As a leader he was a perfectionist with less flexibilities and compromises on given tasks. In brief Steve Job's had a clear vision with high degree of determination to take Apple to that strategic position what he aimed for which enabled him to secure strategic positions of Apple in highly competitive market.

In the nutshell Steve Job's took the Apple as his baby. He got so involved in its cross functional activities and his deep role was recognized by all the stake holders to an extent whereby it was impossible to split them apart. This close association of Steve as leader embedded in the mind of share holders as during the time of sickness the market share went down by 2.4% (De Wit and Meyer, 2010).

Diffusion and Breakthrough:

Diffusion of innovation is a theory that seeks to explain how why and with what rate new ideas and technology spread through cultures and this approach has been well adopted and implemented at Apple. By developing new technology and taking it across to the target customers. Though the diffusion carries two different approaches of breakthrough innovation and incremental innovation but having looked into the market responses against the product of Apple, an approach of breakthrough innovation was quite appropriate in case of Apple. It has been observed that breakthroughs are developed by their research teams not rarely addressing the commercial market applications as these technologies have originated in the supply chain of Apple. For example iPod was developed as a substitute to MP3 player and it could load 1000 songs in just 10 minutes and play music for 10 hours. The integrating with the iTunes 2.0 software also made synchronizing music libraries in a few seconds (D Wit and Meyer, 2010 p687).

Break through Innovation:

The successive business practices and innovation for consumer and competitors surprised operational guidance. In 2010 Apple huge bench mark with i-pad created huge amount of profit margins. The production and development of i-pad and laptop for new feature development and innovation gained consumer attention. The competitor progress with personal computers and laptops like i-pad 2 gained positive features and attention. The digital gadgets and product innovation from 2000 provided innovative business solutions. The innovation created by Steve Job's followed by rapid business development in market provided consumer attention and competitor enhancement. The iPad introduction steered with personal computers and laptops provided innovative business features. Steve Job's product based services and leading positioning managed bankruptcy. The breakthrough and diffusion to value Apple chain with counter rapid rewarding help to accomplish good strategic leadership. The software created for effective business solutions provided positive guidance and attention.

The value chain entertainment and innovative practices of Apple helped in progress of conversion and selection. The use of product helped Apple to integrate technology with idea generation, conversion and funding. The attention of integrated diffusion and funding managed easy use of innovative procedures (Alhstrand and Lampel, 1998).

Three components identified by Apple included idea generation, conversion and selection and funding diffusion. The integrated technology with product usage before and after rapid placement regulated choices and preferences. The value chain process of Apple is as followed:

Source: http://issard.wordpress.com

The service content of mobile me technology with substantial and positive business pattern regulated business development. The aggregation content relevant to performance and relevancy managed iTunes, iBook, application store and successive solutions. The hardware and software content use Mac OS X, I Works and A4 CPU that integrates effective business pattern. The handset and appliance like Mac book, iPhone, iPod and iPad regulate business outflow. The distribution and retail sector for successful business optimization includes app store.

Apple computer moved from computer to technological advancement related to software and technological innovation. The ideas and professional business practices with diffusion implementation and regulation for customer database management and amateur managed innovative business solution (Kotter, 1995)

The product and service innovation with new venture and market development with partnership increased sustainability of business (Palmer and Kaplan, 2007). The industry entertainment and game purchasing like online music and game purchasing managed industry insight. The new idea development and innovation of Apple products with slim technology, easy to use and to provide comfortable business services to customers increased its market share. The online audio and video technology with substantial business practice and innovation leaded to on time significant business responses. The implementation of new ideas and implementation for customer database and personification broadened professional users with positive orientation of strategic leadership (Kotter, 1995).

Evaluation

Since 1977 to 1997 Apple changed its 5 CEOs as they were not successful. When Steve made his comeback in 1997 the Apple was struggling to survive and the company was going to be bankrupt. With his charismatic leadership and broad vision he lifted Apple from scrap to sky trough its breakthrough innovations like iMac, iBook, iPod, iTunes, Mac Book Pro, iPhone and iPad. It is observed that if Apple would like to be on the rollercoaster, than it will have to focus the computer market as well as consumer electronics. As the news of Steve's illness was broken in the public, the market share went down. Although the Steve is not there anymore in the Apple but his motivational factor, negotiation skills and creative vision is a code of practice for the following leaders.

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Core Competencies And Dynamic Capabilities Of Apple Business Essay

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Disclaimer: This work has been submitted by a student. This is not an example of the work produced by our essay writing service. You can view samples of our professional work here. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.