• Dynamic Capabilities reached more than 120,000 publications in Google Scholar since its beginning. It is a rising topic amongst strategy academic writings.

  In the past, companies became competitive if they were able to possess and sustain a “bundle” of resources, considered “more special” than its competitors.

  However, in today's business environment, to obtain superior performance, it is necessary to create specific integration capabilities, based on renewal and recombination of those strategic resources. This is so-called Dynamic Capabilities.

   Thought this approach seems to be new, it was first adopted by Schumpeter in 1934 with the economic theory of "creative destruction."

   Below, there are some characteristics of dynamic capabilities, and actions that should be on the menu of every good CEO (or at least of those who like to pronounce the phrase: sustainable competitive advantage) :)

  Dynamic Capabilities help the company to unleash from its historical dependencies

  Every organization has characteristics inherited along the time, through its social relations and assimilated values. For example, many companies are known for slowness in its internal processes, with a negative impact on the "core business".

  Due to the strong appeal in interactions with the external business environment, dynamic capabilities help the company to break away from path dependencies. They do this by recombining resources using transformational methods.

  They are based on "learning by doing" rather than "learning before doing"

  Considering high volatility markets, dynamic capabilities are defined as simple, experimental, based on tacit (ad-hoc), interactive (non-linear) knowledge, supported by fragile processes with low predictability potential.

  That leads to a contingency approach, depending on the type of business environment. In highly turbulent markets, dynamic capabilities are developed through recombination of resources and creation of real-time knowledge for solving a given problem.

  This change in organizational culture can be realized in agile methods, that emphasizes delivered product over extensive documentation, this latter is created only after having "ex-post" consensus.

  They strongly depend on managerial actions

  This conceptual model has a great emphasis on the role of Top Management, decisive to create mechanisms to incentive dynamic capacities development.

  The critical mass of empirical studies identifies some factors:

• create real-time information systems;
• encourage cross-functional (matrix) organizational relationships and less hierarchical structures;
• promote an intensive level of communication among people involved in technology creation process (shared physical environments and internal social networks are good examples;
• create continuous improvement mechanisms to reward employees who discover optimization in business processes, say a better manner to have the same outcome (I miss the total quality programs of the 1990s, and their champions who seemed more like preachers, even quoted the Bible);
• establish mechanisms for exchanging experiences transforming tacit knowledge to explicit; 
• Promote at all costs a corporate mentality based on transparency, and openness for changes (be hot or cold, but not lukewarm, said that quality master). :)

A good example is a cultivation of emerging technologies that are not immediately applicable and may not even be effectively applied in the long term. The point here is to create an environment conducive to the evolution of organizational capabilities, and the market dictates the pace.

Finally, extremely volatile markets tend to promote more intensively development of strategic organizational capacities. For markets with moderate dynamism, it is necessary to impose a greater managerial incentive to their formation and growth.

To learn more:

A framework for sustainable ERP value. Jain, V. (2008) Faculty of School of Business of The George Washington University - Doctoral Dissertation Degree of Philosophy

Explicating dynamic capabilities: the nature and micro-foundations of (sustainable) enterprise performance. Teece, D. J. (2007). Strategic management journal, 28(13), 1319-1350.

They are leveraged by complementarity and co-creation/co-specialization

In its dimension of recombining existing resources to face the threats of the external environment, there is value creation through the co-creation and complementarity of these assets. For example, multidisciplinary teams working together in a Scrum DevTeam.

They are fostered by mission-critical clusters

Meanwhile, it is difficult to change the organizational culture as a whole, that is possible when mission-critical clusters are created. Those structures are aimed to promote changes from the inside out. As good examples, digital transformation areas, created by several companies, managed by agile methods.

We can think about a large circle representing the company and its traditional form, and within this, small circles representing the "clusters".

They have strong relationship with market research/shaping

Dynamic capabilities are developed when the company encourages its internal groups in market research and development.