Dynamic Capabilities

adapt to these external alterations. In order to remain competitive and preferably exceed competitors in the music industry an equivalent internal development has to be present.

Digitalization can be designated as an overriding and industry altering change within the music industry where companies have been forced to reevaluate entire work processes in order to comply with the current shift in demand. This change could be observed as being the shift from the physical CD to digital distribution in terms of downloads and streaming. What once provided the music industry with dominant marketing measures now needs complete revision.

‘Dynamic’ can in this connection refer to the change in the resource base, to the renewal of resources pivotal for the music industry. It relates to how the resource base is changed in a dynamic environment by the use of dynamic capabilities. Meaning, that the dynamism consists in the interaction of the dynamic capability and resource base and allowing for the modification of this resource base (Ambrosini & Bowman, 2009). “Resources form the basis of unique value-creating strategies and their related activity systems that address specific markets and customers in distinctive ways, and so lead to competitive advantage” (Eisenhardt

& Martin, 2000, p. 1107).

4.2.1 Future Orientation and Applicability

Eisenhardt and Martin (2000) take their point of departure in Teece et. al (1997), who initially brought forth the theory of dynamic capabilities due to markets being dynamic and employment of the resources further developed were pivotal for companies to implement.

Internal factors of the company rather than external factors are emphasized as sources of competitive advantage (Ambrosini & Bowman, 2009). This can be exemplified by UMD’s ability to develop talent and follow the trend in terms of the sound or genre popular at a given time. Furthermore, dynamic capabilities can be termed as an efficient approach to firm performance because a dynamic capability is a process that affects resources.

Dynamic capabilities concern the development of the most adequate resource base. They are future oriented, whereas company capabilities are concerned with competing today and if no dynamic capabilities are deployed to alter them they are ‘static’ (Ambrosini & Bowman, 2009). Related to the statement just made, emphasis is put on the difficulty of the music

industry being future oriented. Digitalization has brought forth numerous possibilities, which have to be taken advantage of by the music industry as a whole. With new knowledge and tools provided, it needs to capitalize on what has been introduced and utilize these measures to extend the knowledge already retained. Marketing measures can in this connection be introduced in terms of UMD developing its skills and broadening its marketing abilities online e.g. through the currently popular social media platforms, such as Facebook.

Eisenhardt and Martin (2000) further argue, “since the functionality of dynamic capabilities can be duplicated across firms, their value for competitive advantage lies in the resource configurations that they create, not in the capabilities themselves” (Eisenhardt & Martin, 2000, p. 1106).

Following this value creation is important in that it is not derived from the possession of the resources, but from their use and to what extent value is created depends on how these resources are deployed, i.e. how they are combined within the company (Ambrosini &

Bowman, 2009). Collaborations are a perfect example of how the music industry draws upon the artists retaining uniqueness not retrievable elsewhere alongside incorporating companies into the equation. “Dynamic capabilities can be used to enhance existing resource configurations in the pursuit of long-term competitive advantage” (Eisenhardt & Martin, 2000, p. 1106). Teece et al. (1997) highlight the importance of path dependencies, and the need to reconfigure a company’s resources to enable the firm to change and evolve. The dynamic capability perspective is ultimately about understanding a company’s survival and growth (Ambrosini & Bowman, 2009).

Eisenhardt and Martin (2000) speak of effective patterns of dynamic capabilities varying within market dynamism. In this connection, two types of markets are introduced, moderately dynamic markets and high-velocity markets. The prior implies change occurring frequently, however along more or less anticipated paths. Industry structure is relatively stable in terms of market boundaries being clear and the players established. Existing knowledge is the core of effective dynamic capabilities. The latter refers to the fact that when speaking of high-velocity or very dynamic markets less predictable and nonlinear change occur. Contrary to the former, this type of market consists of boundaries being blurred, business models deemed successful are unclear as well as ambiguous, and shifting market players are prevalent. What can furthermore be perceived, as a potential disadvantage, is existing knowledge in terms of overgeneralization from past situations.

The music industry structure as well as the steady development observed implies that one can speak of it being categorized as a moderately dynamic market setting. As the music industry contains extremely creative elements a naturally frequent change is present, however in order to maintain a secure business path unique knowledge retained is the foundation for continuous development. The routines for a moderately dynamic market are termed as “complicated, detailed, analytic processes that rely extensively on existing knowledge and linear execution to produce predictable outcomes” (Eisenhardt & Martin, 2000, p. 1106). This essentially extends what defines the music industry as a whole and furthermore, if boundaries are not set stability quickly disappears, thereby destroying the profitability and a secure environment.

“Although dynamic capabilities are developed in order to realize strategic advantages, their development does not ensure organizational success” (Ambrosini & Bowman, 2009, p. 39). It is largely a question of how the dynamic capabilities are employed and in what context.

If the music industry and the players within it manage to implement these capabilities with what is deemed pivotal, to gain competitive advantage then success is reached. “Dynamic capabilities are the drivers behind the creation, evolution, and recombination of other resources into new sources of competitive advantage“ (Eisenhardt & Martin, 2000, p. 1107).

It is also argued that if a company’s dynamic capabilities are misused it will lead to misperception of the competitive landscape. In turn, the consequence will be both the costs of the dynamic capabilities and the negative outcome of their deployment (Ambrosini &

Bowman, 2009).

In collaborative processes, if the parties do not manage to implement the correct measures and gain a basic perception of the project, even more pivotal, the parties’ involved, fatal consequences could follow. Collaborations are in many instances composed of extremely distinct entities, which are what constitutes the uniqueness sought and the competitive advantage gained from this. However, the collaboration could altogether fail if compliance with the process is not followed and a detrimental result would be a permanent negative stamp or a complete misperception of the particular artist or company. “Dynamic capabilities are necessary, but not sufficient, conditions for competitive advantage” (Eisenhardt & Martin, 2000, p. 1106).