Dynamic Capabilities Framework
The Dynamic Capabilities Framework argues that lasting advantage comes not from the resources a firm holds but from its ability to sense change, seize opportunity, and reconfigure itself faster than rivals can copy or catch up.
Three capacities sit in a ring, each one feeding into the next without ever stopping.
Reach for this when…
- Your resource-based advantages keep getting matched within a couple of years.
- You're deciding whether to build a capability internally or defend a static asset.
- The market is shifting fast enough that this year's winning setup won't survive next year unchanged.
How to run it
- Build sensing: mechanisms that surface change before it's obvious to everyone.
- Build seizing: the authority and speed to commit resources once change is spotted.
- Build reconfiguring: the willingness to restructure assets, skills and processes, repeatedly.
- Treat all three as ongoing capabilities to maintain, not a project to finish.
- Accept that the specific advantage will erode; the capability to rebuild it is what compounds.
A worked example
Situation. Li Wei ran Li Electronics, a components distributor in Chengdu, China, whose main advantage, an exclusive supplier deal, was about to expire with no replacement in sight.
Applied. Rather than scrambling for a new exclusive deal, he built the underlying capability: a standing process for sensing new suppliers early, and a seizing budget that didn't need board sign-off.
Result. The exclusive deal still ended, but the business had already reconfigured around three smaller supplier relationships before the old one lapsed, so revenue barely dipped.
The catch
The framework explains why some firms stay ahead better than it tells you how to build the capability, and 'sense, seize, reconfigure' can become a slogan repeated without anything concrete underneath it. It's also genuinely hard to build reconfiguring capability in a business that punishes people for the failed pilots that capability requires.
A one-off pivot is not a dynamic capability. The capability is what lets you pivot again next year, and the year after.
Origin: David Teece, Gary Pisano, Amy Shuen