Journal of Strategic Management Studies Vol. 10, No. 1, 53–63 (October 2018) doi: 10.24760/iasme.10.1_53 Dynamic Capability and Technology Evolution in the IoT Environment JUN NAKAMURA Professor, Graduate School of Engineering, Shibaura Institute of Technology Abstract Markets change dramatically as technology improves. For example, the smartphone was originally launched as a communication device, not as a camera, but it is now possible to take high-quality pho- tographs with its embedded image sensor. Similarly, borders between industries have become increas- ingly vague. How can a company adapt to such dynamic circumstances using its own technology and resources? To achieve this adaptation, the author considers two approaches: the first examines solu- tions that depend on the external environment such as the Internet of Things (IoT) and deregulation. The second inspects the activity level of the company. This paper introduces a ‘Technology Deploy- ment Map’ (TDM) that extracts the activity levels and concludes with a perspective on dynamic capa- bility through applications of the map. Keywords: dynamic capability, technology deployment map (TDM), semantic diagram, business strategy, transformation INTRODUCTION 30 companies/organizations from seven countries, including Japanese corporations such as Toshiba, Approximately 20 years have passed since the Fujitsu, Sakura Internet and NTT Communications, emergence of the Internet in the early 1990s. Today, are participants (OpenFog Consortium Architecture technology development connecting various devices Working Group, 2017). is greatly improved and we are currently experienc- There is an enormous amount of information ing the Internet of Things (IoT) era. accessible in the IoT era. So why do we not pay at- tention to how human beings psychologically feel “Internet of things devices likely will be ubiqui- about the world with such abundant information tous soon—in the home, offices, grocery stores available? Simon (1997) claimed that the decision- and hospitals—with many applications designed making processes of human beings are not the out- to improve our quality of life and make the ser- come of data analysis. People make decisions even vices we use more efficient” (Pretz, 2018). when the amount of information is limited, and they pick the most satisfying of the available choices The IoT is the movement that digitalizes the (Simon, 1997). Research on artificial intelligence analog world to which people have adapted with (AI) considers that the decision-making processes experience and intuition (Morikawa, 2017). Next- of human beings is to exploit fully the vast amount generation technologies, looking ahead to IoT of available data and knowledge. To illustrate this, prevalence, include thin client of cloud comput- the Internet provides services such as information ing and fog computing, which takes place between search engines, customer relationship management the cloud and a device. The OpenFog Consortium, (CRM) and social networking services (SNS); ma- which promotes fog computing, was founded in No- chine learning has played an important role in these vember 2015 by Cisco, ARM, Dell, Intel, Microsoft advances. The prevalence and practical use of sen- and Princeton University. Currently, approximately sor technology will be crucial to realizing the IoT Copyright © 2018 by International Academy of Strategic Management 53 Vol. 10, No. 1 (October 2018) (Ikeda, Shimazu, Odawara, & Sakata, 2016). By ies on dynamic capabilities and focuses on those connecting sophisticated and flexible technologies aspects that provide the ability to apply the original such as AI’s core technology of inference, the IoT, technology to the new market. Then, other previous Robotech, and personalization, community build- studies are used to construct the TDM, demonstrat- ing and other combined technologies will be used in ing the relationships between the original technology various activities and services in our day-to-day life. of a company and the products/services that actually Self-driving and medical systems are good examples entered the new market. The third section constructs (Aso & Motomura, 2018; Koehler, 2017). Moreover, a TDM, noting how it differs from previous studies. changes in product-design are evident. The auto- A case study applying the TDM to Panasonic, one mobile industry tries to lower the cost of testing as of the largest appliance companies in Japan, is then much as possible, and has developed a model-based discussed. The TDM helps to visualize how new development technology to accomplish this (Fritz- products/services in the new market make the most son, 2015). of the original technology and know-how. Finally, There are endless examples of technology ad- the authors conclude with an analysis of the dynamic vancement. But what matters most from the corpo- capabilities of Panasonic based on its TDM. rate management perspective is how the company can adapt to environmental changes and execute re- ENVIRONMENTTAL CHANGE AND distribution and rearrangement of available resourc- DYNAMIC CAPABILITIES es. To survive in this competitive and rapidly chang- ing world, there must be continuous innovation. The As noted above, technological improvements are author believes that a company must now simultane- increasing competitiveness and driving the need for ously follow two avenues: a strategic approach with a business to rapidly adapt to environmental changes which a company identifies the market and kind of in technologies, markets and competition. Under business in which to compete, and a resource-based such circumstances, contingency theory (Nystrom view whereby the capability of a corporation adapts & Starbuck, 1981) is applicable to organization ad- to the changing environment. Additionally, the for- aptation. Treating an organization as a living system mer approach is not achieved until a new market has (Laloux, 2014) in the rapidly changing world uses been exploited and novel products or services have a maturity model of a company that varies with cir- been provided. However, the resources of a com- cumstance. pany are limited. Hence, there is often no choice but However, adapting to a new environment is not to collaborate or ally with the technologies of other so simple. Investments in the development of new companies when entering a new market. Brand new products without leveraging the strengths of a com- ideas that are totally different from current concepts pany may lead to debt. What enables a company to are essential when considering market strategies maintain an edge against competitors is its “core that leverage the company’s original technology and competence,” and not the products themselves (Pra- know-how. halad & Hamel, 1990, 1994). The author believes This paper explores one aspect of dynamic ca- that core competence derives from management pability on the premise that strategic and resource capabilities that integrate various technologies and theories can be combined in a dynamic environment production capacity and can rapidly adapt existing into a framework that allows a company’s original businesses to potential business opportunities. What technology to develop in a market. The author calls features characterize such management capabilities? this framework the “Technology Deployment Map” When a market and technology increasingly (TDM). This map reveals relationships between new develop, inevitably, a situation arises in which the products or services and the company’s own technol- technology of a company becomes insufficient. ogy; these relationships are essential to achieving Open-minded projects achieved by collaborating improved strategies. and allying with external factors can help (Ches- This article begins by reviewing previous stud- brough, 2003). For example, the automobile industry 54 Dynamic Capability and Technology Evolution in the IoT Environment is working on realizing a “linked-automotive soci- equate by itself. ety” to link their industry with other industries such Helfat et al. (2007: p. 4) more recently made the as networking, insurance, security, entertainment following definition: and road-assistance (Wada, 2018). Entering an open, collaborated, new field is “A dynamic capability is the capacity of an orga- easier said than done, and comes with major hurdles nization to purposefully create, extend or modify to overcome. Since reformation within a com- its resource base.” pany cannot be conducted overnight, organizational memory needs to be considered (Govindarajan & This means that among the definition of capa- Trimble, 2010). That provides warnings based on bilities noted above, the capability of reconfiguring the execution of grounded theory (Glaser, Barney, & resources would fit this definition. This idea is now Anselm, 1967; Eisenhardt, 1989; Eisenhardt & Me- widely accepted. Moreover, Helfat et al. (2007) lissa, 2003) and the noting of obstacles in practice. A claimed that dynamic capability is developed by warning, for example, means as having a bias for in- means of a process. There are three aspects to this siders such as familiarity, comfort and expedience in process: 1) sensing: realizing the environmental op- the field of operation. Expedience means that finding portunity and recognizing threats, 2) seizing: making the best person for the job can demand a great deal the most of the opportunity, and 3) reconfiguring: of personal networking, or it may require building executing a rearrangement of a company’s resources a good relationship with an