How does dynamic capability shape company growth in change ?
1.
APDSI-ICOSCM-ISOMS 2014
How does dynamic capability
shape company growth in change?
-Case in Japanese social networking game companies -
2014/7/19
Akimasa TANAKA
@Graduate School of International Social Sciences
Yokohama National University
Ryo SATO
@Department of Business Administration Yokohama
National University
Keywords:
Dynamic Capability, Social Networking Game, Strategic Management
2. ¥138
¥282
¥307
¥547
¥0
¥100
¥200
¥300
¥400
¥500
¥600
2010
2011
2012
2013
Social networking game industry has been growing in Japan.
Following figure shows how fast it grew.
Overview-What is social networking game
2
SOURCE : http://www.yano.co.jp/press/pdf/1053.pdf
SOURCE : http://cyber-z.co.jp/news/pressreleases/2014/0325_1497.html
Unit: Billion Yen
Total sales figure of
social networking game
In this industry,GREE,Inc.(hereunder,GREE) providing social
network infrastructure (hereunder,SNI) is one of leaders.
3. 35.2
64.2
158.2
152.2
10.3
13.3
12.6
12.2
0
50
100
150
200
2010
2011
2012
2013
To know how large GREE grew, here we compared mixi,Inc.
(hereunder,mixi). Because mixi is pioneer of SNS in Japan.
(※)DeNA is also leader. But they are more diversified than GREE and mixi
(A.Tanaka 2013). So,we selected companies focusing on social network
service as core business for research reason.
3
Billion Yen
174
592
1,730
2,364
351
472
477
364
0
500
1,000
1,500
2,000
2,500
2010
2011
2012
2013
Sales # of employee
48.5%
52.3%
31.9%
25.5%
16.5%
20.4%
4.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2010
2011
2012
2013
Sale profit rate
Overview-GREE growth
4. 7.1
8.1
13.1
11.8
8.5
8.0
4.7
1.5
0
5
10
15
2010
2011
2012
2013
4
Sales of social service
Sales of item
Sale of Ad
As we see,all SNI has not achieved growth like GREE.This
means that just being in this industry does not promise
growth. So,we assume GREE did something for growth.
35.2
64.2
158.2
152.2
9.7
12.3
11.6
9.7
0
20
40
60
80
100
120
140
160
180
2010
2011
2012
2013
28.2
56.1
145.1
140.5
1.2
4.4
6.9
8.2
0
50
100
150
200
2010
2011
2012
2013
Billion Yen
Billion Yen
Billion Yen
Overview-GREE growth
5. 5
GREE drastically expanded their business in SNI industry.
However,
【1】 The change of this industry is rapid and difficult to analyze
what is coming next.
So How did GREE do that ?
To explain 【1】, first we see existing strategic theories.
Overview-GREE growth
6. 6
1. Industry forces
A positioning theory by Porter (1985) proposed that
company profitability is decided with industry. And he also
proposed the power balance between company and
competitors,suppliers,buyers and threat from substitutes and
new comers (called 5 forces) decided current and future
profitability. So,companies need to find charming industry,
then enter there,then make strategy of cost leadership or
differentiation or niche to sustain advantage.
When to use of this theory
If industry can be analyzed or predicted,industry forces is
useful. But for constantly changing industry like IT service,
it is difficult to define the players in industry.
Strategic theories
7. 7
2. Resource based theory
The resource based theory by Barney(2002) proposed even
companies in same industry was different.Because some
resources have immobility and heterogeneity. Additionally, if
the resource has value and rarity and imperfectly imitable and
non-substitutes (called VRIN),it leads sustained competitive
advantage.
When
to
use
of
this
theory
This is focused on current resource set company has. So
this is hard to guarantee future success. Because the
current resource might cause program durability bias,due
to overconfidence to the resource. So,this is difficult to use
for constantly changing industry or situation.
Strategic theories
8. 8
Strategic theories
3. Dynamic capability
Dynamic capability (hereunder,DC) was proposed by Teece
and others in 1997. DC focused on how company coped with
change. To do this,Teece proposes company has to sense
opportunities and threats in environment. And seize/re-
configure resources for it. And importantly, DC is consisted of
organizational process made with company’s past/resource
position.
When to use of this theory
DC has possibility to explain how company can grow
under change. However, according to Teece (2009),
the micro foundation of DC is still under development. It
means that using DC to practice has still problems.
9. 9
Comparison of strategic theories
Industry
forces
Resource
based
theory
Emergent
strategy(※)
Dynamic
capability
For change
No
No
Yes
Yes
Focus
Industry
Resource
Pattern Organization
al capabilities
Tool to use
5 forces
VRIN
n/a
In Progress
From a review of strategic theories we saw,
which can explain company like GREE the most ?
DC seems suitable to explain growth under constantly
changing industry like SNI. However,DC is still difficult to use
in practice.
(※)
We
also
inves;gated
emergent
strategy
(Mintzberg
(1988),
But
this
theory
explained
why
ini;al
planning
or
strategy
had
changed
during
prac;ce.
So
we
assumed
this
theory
was
not
suitable
with
explaining
how
company
was
able
to
cope
with
change
inten;onally
.
10. Why is DC difficult?
10
Change BLACK BOX Performance
DC talks this area
Reason is that DC is trying to open following black box area.
This area contains following perspectives.
• Planning - Emergence
• Capability - Meta capability
• Strategy - Operation
DC seems to come from several levels such as above.
So,to define what DC should be was difficult issue.
11. DC micro foundation
11
Change
Performa
nce
Micro foundation
Sensing Seizing
Reconfigu
ration
Teece refined the black box like below. His DC is consisted of
Ø Sensing/Seizing/Reconfiguration of resource as top
management skill
And these are constrained of
Ø Path/Position/Process
Process Path Position
Constraints
DC as Top management skill
12. 12
Our try and goal
However,the micro foundation of DC has not verified well in
practice such as IT industry. Also,according to Teece,the micro
foundation is still under development.
So if DC is still under development and difficult to use,
why don’t we just try to verify and refine it ?
A (long) goal of our study is
1. Refining DC theory
2. Implement DC to practice like SNI
3. Find and fill gap between theory and practice
4. Develop DC more
First, we investigate how path/position/process of DC are
related with company’s performance under change. This time
we try to implement this to SNI industry.
13. 13
1. To do our research, we compared GREE and mixi to
know how their path/position/process affected
performance.
1.1. The reason to compare is in early 2011,the scale of
GREE made a big difference with mixi(Page3-4).
Research method
2. So we investigated their path/position/process of prior
to 2011 to know how they had differed in 2011.
2.1. This time,we selected their history and service as path/
position.
2.2. This time,we selected their organization diagram and # of
top management as some aspects of organizational process.
15. Position 〜2009
2010
GREE
mixi
GREE
SNS
Game
Game
Game
Platform
On the other hand,GREE had only SNS service which became
good complement for game. No wonder they started game soon.
mixi
SNS
Job
Match SNS
Platform
Weak complement
(As business model)
Strong complement
(As business model)
GREE complemented existing service,but mix did not.
Their Job match service was weak complement for SNS
business model. And also game business was different.That’s
why they were not able to start game business soon.
15
SNS
Platform
16. mixi
16
Year
# of Service
Operation officers(Age)(※)
# of
employee(B)
Rate(A/B)
09 3
• SNS
• Job Matching
• SNS Platform
3
• CEO
• Vice President as mixi business of
general manager
• Management General Manager
304
1.1%
10
262
0.9%
Process( # of top management)
GREE
Year
# of Service
Operation officers(Age)(※※)
# of
employee(B)
Rate(A/B)
09 3
• SNS
• Social Game
• Game Platform
4
• CEO Vice President as Media
General Manager
• CTO as Platform General Manager
• CFO as Business development
General Manager
102
3.9%
10
174
2.3%
# of employees of GREE is less than mixi.
But # of operation officers of GREE is more than mixi.
18. What we found from path/position/process
Internet service
Communication
on web
Game on
smartphone
Job match
SNS
Job match+
the business
SNS+
the business
Game+
the Business
SNS platform
+the
business
SNS
as
platform
Game platform
Game
mixi had path/position as job match.So,due to difference of
business model with game,they were not able to cope with it
soon. And their centralization of organization also might have
caused negatively for new market.
Game platform
for global
18
Bias
Late
(Due to bias)
mixi Capability
Strategy
Market
19. Communication
on web
Game on
smartphone
SNS
as
platform
SNS
+platform+
the business
Game+
the business
Game
Globally
On the other hand,GREE had path/position as SNS and game
before 2010. Much easier than mixi to expand game globally in
2011. And the decentralization of organization also might have
helped it.
Game platform
Game platform
for global
Game
platform
+ the
business
Game
as
platform
What we found from path/position/process
19
Good
Complement
Good
Complement
GREE Capability
Strategy
Market
20. 20
DC was said to difficult to explain the company performance
(Ambrosini & Bowman 2009).But we could verify DC with SNS.
1. Company’s path/position/process are strongly related with
how company copes with change and future growth. With
this research,we made small step DC could explain IT
industry in Japan.
1. As theory
2. As practice
Besides theory adaptation we tried,we could find following also.
1. Decentralization might make a sensing capability more
flexible than centralization.
Ø Decentralization may be able to avoid old process caused by
bias from past experience more than centralization.
Ø Additionally,to sense opportunity with decentralization,
assignment balance of top management in organization is
also related.
Conclusion
21. 21
1. GREE and mixi was analyzed with only their public data.
We admit especially their process needs to be investigated
more.
1. We will investigate path/position/process more to know
how these are related with sensing capability.
2. We will undertake seizing/reconfiguration after 1. Then try
to understand entire DC micro foundation for practice.
Issue of this research
Next research
22. 22
References
1. Ambrosini, Véronique; Bowman, Cliff (2009), “What are dynamic capabilities
and are they a useful construct in strategic management”, International Journal
of Management Reviews, Vol. 11 Issue 1.
2. Barney,J.B.(2002) Gaining and Sustaining Competitive Advantage,Second
Edition,Pearson Education.
3. Helfat,C.E., Finkelstein,S., Mitchell,W., Peteraf,M.A., Singh,H., Teece,D.J.and
Winter,S.G.(2007)Dynamic Capabilities: Understanding Strategic Change in
Organizations, Blackwell Publishing.
4. GREE,Inc.WEBSITE (http://corp.gree.net/jp/ja/corporate/)
5. Mintzberg, Henry(1988) Crafting strategy , McKinsey Quarterly. Summer88,
Issue 3, p71-90.
6. mixi,Inc.WEBSITE (http://mixi.co.jp/#cISUiHome)
7. Numagami Tsuyoshi and Hitotsubashi MBA Senryaku Workshop (2012)
Strategic Analysis Vol.2,Casebook Chapter 3, Toyo Keizai Shiposha.(in
Japanese)
8. Porter,Michael E.(1985) Competitive Advantage, Free Press.
9. Teece,D.J.(2009) Dynamic Capabilities and Strategic Management:
Organization and Growth ,OxfordUniversity Press.
10. Teece,D.J.,Pisano,G.and Shuen,A.(1997) "Dynamic Capabilities and
Strategic Management,”Strategic Management Journal, Vol.18,No.7,pp509-533