We know that the business environment is changing, and organizations need dynamic capabilities to achieve and maintain a sustainable competitive advantage. A dynamic capability is an ability to sense opportunities, make investments to take advantage of those opportunities, and reconfigure the resources to adapt to the changes in the marketplace. Dynamic capabilities influence resource management, learning mechanisms, and leadership approach.

Resources

Based on the resource-advantage theory of competition, companies with a relative advantage in resources have a competitive advantage and superior financial performance. Resources that lead to a long-term competitive advantage are culture, competencies, and processes. Indicators of sustained competitive advantage are resources that generate value, and resources that are rare, imperfectly imitable, and not substitutable. Once a company has a competitive advantage, it is critical to continue reinvesting in the resources that produced a competitive advantage in order to maintain its position in the marketplace.

Learning

Learning is a process of using knowledge resources by focusing on improving the organization’s ability to adapt to change. Organizational learning occurs when employees explore new knowledge resources and internalize their experiences into the organization. Zollo and Winter, the seminal authors, who differentiated the learning mechanisms between passive experiential processes of learning and deliberate cognitive processes, identified three learning mechanisms.

1. Organizational routines and experience accumulation – Routines are a series of predictable and interrelated steps. Traditionally, organizational routines were developed through the process of experience accumulation. However, in a dynamic changing environment following operating routines can be hazardous.

2. Knowledge articulation – It is a process through which organizations articulate collective discussions, performance evaluation processes, and debriefing sessions. Knowledge articulation enables all parties to gain a greater level of understanding of what is needed to execute tasks in order to achieve the desired outcome.

3. Knowledge codification - It is a process of writing or developing manuals, blueprints, spreadsheets, project management software, and other documents and systems.

Transformational Leadership

Transformational leadership consists of idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration. Transformational leaders can facilitate an effective knowledge-creation process by articulating a compelling vision that helps employees understand the benefits of sharing unique skills, knowledge, abilities, and experiences. Leaders can also recognize the efforts employees exhibit in creating knowledge to elevate employees’ self-esteem and self-worth, especially for employees who have expressed doubt in their abilities to create knowledge. The third thing the transformational leaders can do is display intellectual stimulation through constructive feedback, questioning basic assumptions and acting as role models to show how to think creatively about complex problems and challenge the status quo. Finally, transformational leaders can develop strong interpersonal relationships with their employees to provide support in knowledge sharing and integration.

Conclusion

Transformational leaders will be in high demand in the future. These individuals are critical to organizations when companies need to strengthen their culture, strategy, and structure. Transformational leaders focus on the efficiency of the existing operations and know when companies need to reconfigure their resources. All of this will contribute to the future of work where organizations have a work culture mutually beneficial to organizations and people who work there, an inclusive work environment of social support that values authenticity, and a place that fairly rewards employees for their hard work.