How can companies remain competitive in the long term?

Cars, dishwashers, bicycles - many manufacturers are currently unable to deliver because important parts are missing. How can companies ensure that their procurement processes remain efficient under such competitive conditions? One answer comes from Prof Dr Hendrik Wilhelm from Witten/Herdecke University (UW/H): "Dynamic capabilities help to keep operational processes - such as procurement processes - competitive. We have identified four ideal types of such capabilities, each of which only works under very specific conditions," says Prof. Wilhelm, who holds the Professorship of Strategic Organisation at the Reinhard Mohn Institute of Management (RMI), summarising the results of a study he co-authored with Prof. Dr Indre Maurer (Georg August University of Göttingen) and Prof. Dr Mark Ebers (University of Cologne). It has now been published under the title "(When) are dynamic capabilities routine? A mixed-methods configurational analysis" in the leading international journal Journal of Management Studies, available at https://doi.org/10.1111/joms.12789. The study is based on a comparative analysis of 103 companies from three industries in Germany; in a second step, 16 of these companies were analysed in more detail.

Recognising and acting on important changes in the environment

Companies have dynamic capabilities when they regularly carry out activities to identify important changes in the environment, analyse the impact on their own company and then, if necessary, trigger targeted changes to existing operating processes. Not all companies have such capabilities, and there are significant differences in how companies organise the underlying activities. "Some companies carry out these activities like a programme, with a high frequency - almost weekly - and strict procedural guidelines, while other companies do this much less frequently and have hardly any guidelines. All of these approaches can work. But the question is, under what circumstances?" says Prof Wilhelm. Together with Prof. Maurer and Prof. Ebers, the following three factors were identified that are decisive for how the processes should be organised:

1. Is the competition in the market dynamic or calm?
2. Is the corporate culture more wait-and-see or proactive and action-orientated?
3. How many resources (money and labour) are available?

"Company managers are often well placed to assess how their company is positioned with regard to these three questions. Our study provides decision-makers with a basis for finding the right type of dynamic capabilities for their company," says Wilhelm, describing the added value of the study for corporate practice.

Corporate culture plays a decisive role

Those who assess themselves correctly can follow the relatively simple rules from the study: Entscheider:innen, whose companies operate in dynamic markets, should examine what company culture and how many resources are available. An entrepreneurial culture and many resources speak in favour of the programmed type: "There are usually elaborate rule books on which trade fairs to attend, which competitors and which social media channels to monitor. Here, too, we find that the implementation of changes is synchronised," says Wilhelm. If there is a lack of resources, an experimental type is more suitable: "In such companies, there is a lot of trial and error, changes are made 'on demand' and there are few written guidelines. These companies test which changes are necessary in order to remain competitive," he explains. If the company is not characterised by an entrepreneurial culture, but rather a problem-driven one, decision-makers should choose the adaptive type: The competitive position is reviewed less frequently, but necessary changes are implemented in a more structured manner. Finally, if companies operate in a calm market environment, they can take their time and enter into a reflection process about once a year. However, the company must also have good financial resources to compensate for the lack of routine in the execution of the processes.

"Our study shows that there is no one type of dynamic capability that fits all companies. Rather, it is the task and qualification of managers to choose the type that suits the corporate culture, resources and competitive dynamics in each case," concludes Wilhelm.