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 engage in adapting, integrating, and reconfiguring internal and external organizational skills, resources, and functional competences to match the requirements of a changing environment.
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.
[8] 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.
[9][10] The New Dynamic Capabilities framework takes into account digital, information and network economics[11] and the fall of the transaction costs of involved in using specialized services.
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).
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'.
[26] 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.
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.