Building dynamic capabilities in a new venture Networks and partnerships can be a source of dynamic capabilities and learning forfirms and for…

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1.    Building dynamic capabilities in a new venture

Networks and partnerships can be a source of dynamic capabilities and learning forfirms and for managers.

HMD Clinical is an Edinburgh-based clinicaltechnological new venture that seeks to make largescaleclinical trials more efficient for drug developmentcompanies. HMD initially provided bespoke servicesusing telephony technology (for example, interactivevoice recognition) to monitor clinical trials. However,this was problematic, principally due to human error.HMD therefore sought to develop a product based onanother technology – radiofrequency identification.HMD felt this would also offer the prospect of marketdiversification, especially through internationalexpansion. However, making changes to thecompany’s product market domain called forcapabilities to expand or modify HMD’s currentconfiguration of resources and capabilities – in otherwords, for dynamic capabilities.

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HMD decided to partner with a large establishedfirm, which HMD saw as a potential source oflegitimacy, resources and opportunities: SunMicrosystems, a multinational corporation with asignificant presence in Scotland. Co-founder IanDavison commented, ‘There’s a certain cache inbeing associated with a big company.’ Sun wasinterested in HMD’s product idea and within monthsthere was progress in establishing the alliance.Davison believes that considerable benefit wasderived by HMD: ‘We got what we wanted out ofthe relationship because we managed to build aprototype using the Sun technology.’ HMD’sexperience also illustrates the building of dynamiccapabilities at various levels.

Opportunities arose for mutual learning. FromHMD’s perspective, the venture benefited fromexposure to new technological ideas. Of particularadvantage was Sun’s ability to tap into its widespreadresources and capabilities elsewhere in the UK andbeyond (for example, Western Europe). Also, Sun’sreputation opened doors for HMD. When the prototypewas built, HMD made a joint sales call with Sunto a prospective international customer and ademonstration was subsequently held on Sun’sScottish premises. Such activities facilitatedexperiential learning about processes such asproduct development and sales.

There were also further benefits for HMD:

● Product development. In developing a prototypewith Sun, HMD engaged in integrating resourcesand capabilities to achieve synergies; for example,its own customer-centric technological knowledgein the clinical trials domain was combined withSun’s hardware technology architecture.

● Alliancing. Through inputs from a public sectorintermediary, HMD gained vital knowledge aboutformal aspects of alliancing, such as the legalitiesof sharing intellectual property; equally, HMD cameto appreciate the utility of informal social networkingin ensuring the smooth progress of joint activity.

● Strategic decision making. HMD was able to buildnew thinking within the firm in terms of, forexample, the identification of external knowledgesources as evident from subsequent decisions toexpand the alliance to include a third partner.

At the individual level within HMD managers alsolearned ‘new tricks’ by engaging in informal routinessuch as brainstorming sessions and everydayactivities such as negotiating. Managers claimed thatsuch learning would help HMD approach its nextalliance by replicating certain aspects while modifyingothers. Davison commented: ‘In future we wouldapproach this sort of relationship in a broadly similarmanner [but] I think we would attempt to set someclearer company goals and boundaries at the outset.’Prepared by Shameen Prashantham, Department of Management,University of Glasgow.


At what levels could dynamic capabilities benefit organisations?


How do network relationships, such asstrategic partnerships, potentially contributeto dynamic capability development?


What other joint activity within, and across,organisations could give rise to dynamiccapabilities? How?


Can dynamic capability development bedeliberately planned? How?

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