Building and Managing Dynamic Capability through Innovation at Tesco

This report provides a comprehensive analysis of innovation management and dynamic capabilities within Tesco, a leading British multinational groceries retailer. It explores the importance of managing innovation to maintain competitiveness, expand business operations, and shape opportunities and threats. The report delves into the methodology, focusing on secondary research and the application of disruptive and open innovation models. It highlights key findings regarding the role of innovation in managing competition, the significance of workforce competence, and the challenges organizations face when implementing innovation. The report examines how Tesco can leverage dynamic capabilities to reconfigure resources, adapt to market changes, and commercialize innovations effectively. Ultimately, the report underscores the crucial role of innovation in achieving sustainable growth and competitive advantage in the retail industry, emphasizing the need for strategic resource management and employee development.

INNOVATION
MANAGEMENT

Contents
INTRODUCTION...............................................................................................................................3
METHODOLOGY..............................................................................................................................4
Findings................................................................................................................................................6
Commercially viable solution.............................................................................................................9
CONCLUSION..................................................................................................................................10
References..........................................................................................................................................11

INTRODUCTION
Innovation management is a business process that helps in process and manages
changes in an organisation. One specific term of managing innovation is to introduce
something new with the help of new ideas (Biemans, 2018). This process required handling
all the activities which are needed at the time of introducing new idea and product in the
target market. Management of innovation takes another place in an organisation that coming
up with unique ideas which are required to developing, prioritizing and implementing. The
aspects of innovation management enable an organisation to aggressively place their brand in
order to attain sustainable growth opportunity in competitive market. Therefore, it is required
for an organisation to implement innovative idea in their process through which they can
attain maximum competitive advantages over its rivalries. In an economy, managing
innovation can be an effective mode for small and large firms because it will assist in
providing uniqueness with the help of business strategic procedure.
This report is wholly based on Building and managing dynamic capability within an
organisation. Therefore, this report is structured on Tesco which is British multinational
groceries retailer which was founded in the year of 1919 by jack Cohen. This is a leading
organisation in UK that render its products and services in the maximum part of the world.
Tesco already implement several innovation in their business process as in the product
development, market analysis, development of customer base, product promotion and so on.
Now Tesco has more than 2200 stores at different location in which approx. 80000
employees are working. Therefore, it is required for firm to manage innovation in the
business process in order to managing and building dynamic capabilities of their employees.
Dynamic capability is a term that stand for the ability of an organisation to
incorporate, develop and reconfigure external as well as internal skills to meet rapidly
changing environment (Clauss, 2017).This is a required process in each and every
organisation to implement new idea through which they can improve productivity of their
workforce. As the world is evolving rapidly, thus businesses need to develop new skills, not
just to cope with the variations but also to succeed in changing market circumstances. In this
regard sustainability play an essential role in order to set new standards for several businesses
in order to look beyond the present and short-term growth opportunities. By managing
innovation Tesco can easily develop capability by making possible changes in its resources
capacity as well as by improving manpower.

Importance of managing and building dynamic capability in a business:
 To maintain competitiveness: In an organisation, dynamic capabilities play an
essential role by adopting discontinuous changes on the basis of market variations. In
this process, innovation provides its contribution in order to managing changes by
analysing requirements of customers (Peñalvo, Blanco and Echaluce, 2015).
Capability of analysing customer’s need or providing them desired services assist an
organisation to attain competitiveness in target market. The major importance of
maintain dynamic capabilities is that it helps in identifying and escaping strategic
bling spots as well as any dysfunctional movement which pose any threat in business
growth. By managing such change in firm, manager and higher authorities can
manage effectiveness in firm.
 To expand business operations: Dynamic capability has a significant and direct
impact on the reconfiguration as well as accumulation of the organizational resources
and competencies. Thus, by building and maintaining dynamic capabilities an
organisation nourish its internal capabilities that help them in enhancing operational
competences effectively. In this process management needs to pay their maximum
attention towards improving skills and capabilities of their employees in order to
managing desired changes in business activities.
 To shape opportunity and threat: One major effectiveness of managing business
dynamic capabilities is analyse growth opportunities in competitive market. On the
other hand, an organisation can discover major threats for a firm in order to reduce its
negative impact by strategic process. In this process innovation play an essential role
that enrich the overall performance of functional activities by developing manpower
towards accomplishment of an organisation’s target goals and objectives.
Furthermore, it will also assist in enhancing capabilities of resources in order to
providing competitive services that helps in managing threat of rivals.
In context of Tesco, all these elements of business dynamics will assist in developing
business capability to render desired services to customers by analysing trends and their
requirements.
METHODOLOGY
In the marketplace, there is huge amount of competition between different companies
that allow them to bring creativity and concept in functional as well as operational unit

(Gerlitz, 2016). This is only reason that organisation’s now a days looking for managing
innovation in business practices that assist them enhance capabilities in order to maximise
option for growth opportunities as well as coping with existing and new threats easily.
Innovation practices assist in delivering aggressive position by managing desired changes in
various internal and external activities of firm.
In order to analysing effectiveness of role of innovation in managing and building
dynamic capability secondary sources of information will be more beneficial for Tesco.
Secondary research assists in determining information on the basis of previous facts and
figure. By analysing information from such sources, Tesco can implement changes in their
business process that will assist them to enhance organisational overall capabilities to attain
desired sustainability. Secondary source of information assist in denoting views of different
researcher who already experience such situation in which the firm now have. Information
from these kind of sources are based on historical events, object and ideas which are
represent in the form of books, articles, research paper and so on. In context of analysing
effectiveness of innovation in building and managing dynamic changes, Tesco requires to
analyse theories of innovation that will denoting how it will be effective in business process.
Thus, the theories of innovation are determined below as:
Disruptive innovation theory
This theory predict when new entrants approaches incumbent competition by offering
quality of goods and services that would speed up their invention in defence of their market
(Vivanco, Bernardo and Cruz-Cázares, 2016). Main objective of this theory is to developing
new market share and a nonreplicable market value by leading alliances on the basis of
product and services features. This innovation take a place while an organisation develops
and innovate their products in order to appeal their most profitable customer by ignoring
requirements and demand of downmarket. When an organisation implements these type of
innovation they needs to reduce cost of their services as much as compared to existing rivals.
Because this is an only method that helps in capturing eyes of customers towards their
services. In this regard, an organisation required to implement advancement in their business
process that assist in maximising productivity of business by minimising additional
cost.Possibility of successfully implementing disruptive innovation is by not responding to
the new entrants and by continuing to focus on more demanding segment. Therefore, a
desired research on target market is required at a time of introducing disruption innovation in

market. The entrants of these kind of innovating is take a place by eventually move to
upmarket by offering solution to customer by analysing existing business strategy of market
competitions. When a new entrants with disruptive innovation begun to attract target segment
by making them sure to quit existing services, disruption has occurred.
Open innovation model:
This model determined as utilisation of knowledge which was accelerated internal
innovation as well as market expansion for the effective uses of innovation (Inkinen, Kianto
and Vanhala, 2015). Basically this is more participatory, distributed and decentralized
approach of innovation which is based on observed facts that is helpful for capable, small or
large organisation. This model determines that a firm can choose internal or external idea into
the system whose requirements are defined by the business model. In this process technology
play an essential role that determine how an organisation can implement innovation by
analysing requirement and need of firm by investigating ideas of outsiders and current
operations. Open innovation can be used as an alternative to this traditional innovation
approach where knowledge must stay within predetermined confines. Now a day’s numerous
organisations implement these kind of innovation by altering their existing way of working or
by producing new product that aid in establishing new market image. With the help of this, an
organisation can introduce some unique ideas in the market by analysing their knowledge and
capabilities and make it expertise that is beyond the capabilities of any other resources
(Inkinen, Kianto and Vanhala, 2015). These kind of capabilities aid an organisation to bring
desired changes in their overall operations which provide out of the box advantages.
In context of Tesco, both the innovation practices can be effective because in terms of
building and managing dynamic capabilities, firm needs to implement new changes in their
business process that will assist them to gain new success opportunities. By implementing
innovation, firm can improve capabilities of their existing resources and manpower that can
maximise market share of firm by offering desired services in market. All these approaches
will aid them to generate desired opportunity of growth by rending services beyond the
market expectation.
Findings
On the basis of the understanding so developed it can be identified that innovation
plays crucial role in managing the level of competition which is being faced by the

organisation. The incorporation of innovation enables the organisation in minimising the
impact of various policies and procedures adopted by the competitors. To facilitates this
organisation such as Tesco need to take into consideration the level of competence of their
workforce and for this they need to provide them better various training and development
sessions so that their skills and ability can be improved in context of dealing with the impact
of various external forces (Ployhart and Hale, 2014). The innovation long with the dynamic
capabilities facilitates the organisation such as Tesco that faces significant level of
competition due to which the integration of these two gives reassurance to the organisation
for improving the ability of commercialise the innovation so adopted by them. For this the
mangers of Tesco must consider various practices such as deployment of the entrepreneurial
resources in context of the skills that are possessed by them, the characteristic that they have
as well as their level of motivation.
As per the viewpoint of Lucy Fallon-Byre and Brian Harney, the organisation need to
ensure that they utilise their resources efficiently so that the creativity and the innovation can
foster the performance of the organisation in a systematic, dynamic and sustainable manner.
The dynamic capabilities of the organisation direct the innovation with the aim of utilising
existing resources which later can be renewed and for creating new ones. The human
resource of the organisation is unique resource that facilitates them to get over the
competitors due to which it is identified that innovation can be successful for the organisation
only if their workforce is competent enough to adapt the changes. For Tesco which has been
operating on a large scale in retail industry is necessary to consider the internal organisation
system and processes because efficiency in this will ensure innovate their products and
services as well as processes (Mikalef and Pateli, 2017). Organisations that focus upon
innovation faces challenges related to disturbance in their familiar and repetitive routine and
behaviour which can make constant innovation more risky and uncertain. The consideration
of developing and managing dynamic capabilities Tesco can efficiently interact with their
existing resources for reconfiguring and refreshing them so that new resources can be created
which has better capabilities for managing innovation within the organisation.
As per the view of Barreto (2010), it can be identified that Organisation need to
consider various dimension of dynamic capabilities so that they can consider modification in
the resource base as per the market orientation. The five dimensions such as identification of
the opportunities and threats, market orientation, modification of resource base,
implementation of change and sense making will enable Tesco in analysing the impact send

the requirement for the organisation in terms of building and managing their human resources
incorporating innovation within the organisation (Barreto, 2010). Further it is identified that
not only the external environment but the internal environment also pushes an organisation to
make necessary changes so that the repetitive actions and procedures can be changed with the
abilities and expectations of new and talented employees procured by them. The analysis
made on the basis of theory of innovation facilitates to understand that for managing
innovation an organisation need to adopt an organised and systematic approach so that they
can eventually change their traditional approach to the modern approach. The destructive
innovation theory will enable Tesco in enhancing their profitability by making their products
and services innovative. It will be supported by the dynamic capabilities as this reflects the
potential of the company in systematically resolving the problems and in identifying various
opportunities and threats by analysing the market needs. Building and managing dynamic
capabilities will facilitate Tesco in improving managerial and organizational efficiency,
practices and routines that are adopted by the employees, pattern of collective activities, skills
and capabilities etc. With the help of this the Tesco can take a competitive advantage by
efficiently establishing interrelation between their dynamic capabilities in such a manner that
the outcomes so produced by the organisation directly monitors the resource base along with
related factors such as decision making and market orientation, identification of opportunities
that the company has and the threats that can impact organisation etc. The fundamental
challenge which is being faced by Tesco, while building a dynamic change is related with the
collective behaviour of the employees in context of their routine activities, their pattern of
working for daily activities etc. For incorporating change the emphasis of the manager must
be on acceptance of change by the employees through change in their collective behaviour so
that they can ensure committed workforce that can contribute to the innovation in a
systematic and planned manner (Wohlgemuth and Wenzel, 2016).
The above analysis facilitates to understand that it is important for Tesco to consider
Innovation and dynamic capabilities as a complex process which has different meanings and
implications for a variety of resources that has been used buy them. Due to this it is important
for them to understand the impact of various innovation Strategies and disposition as well as
the motivation of the employees because it has direct impact on the performance of
innovation to be incorporated by the organisation. To support this detailed research is
required from secondary sources as well as from multiple respondents holding higher level
positions within the organisation. Human Resource Department of Tesco has more

responsibility for the development of dynamic capabilities in the human resource so that their
behaviour can be managed positively for the changes taking place within the organisation
(Martin and Javalgi, 2016).
Commercially viable solution
The organisation aims to achieve better profit and increased market share by
advancement in their technology use for providing better products and services to the
customer. To achieve the objectives the Tesco need to focus upon their managerial level and
at entrepreneur level so that they can manage their dynamic capabilities efficiently as well as
by emphasising on human behaviour and their motivation level. On the basis of findings,
commercially viable solutions that are offered to Tesco are given below:
 Employer Strategies for innovation: For enhancing the possibility of successful
implementation of innovation the focus of Tesco must be on positive interaction and
encouraged employee communication by ensuring flexible structure along with
empowered employees who can support innovation (Lin, Su and Higgins, 2016).
Effective planning and its implementation will facilitate the leaders of Tesco in
creating vision among the employees regarding the opportunities which the
innovation and consistent learning environment within the organisation will offer.
 Employee perception: Significant efforts must be taken by the employer so that they
can influence the employee’s innovation behaviour which will lead to change in their
perception. With the help of changed perception Tesco can easily motivate interaction
between the disposition of individual interest and creativity towards the organisational
creativity and innovation.
 Aligning micro and macro levels: This is considered to be the best strategy for
managing innovation with dynamic capabilities as it suggests aligning the individual
interest with the collective phenomena so that organisational objectives can be
achieved. According to this strategy the dynamic capabilities for innovation is
considered to be the ability of organisation for developing new product and service by
aligning their strategic innovation orientation with the behaviour and processes within
the organisation. With this the Tesco can identify their intended managerial strategy
on the basis of perception and behaviour of the employees. This will facilitate them to
identify the dynamic capability and by interaction of the capability with the strategies
the outcomes can be achieved in terms of innovation in product and services of Tesco.

 Conceptual implications: This is considered to be a solution which is implemented
by the top management as dynamic capability are considered to be strategic high-
order capabilities which has to be systematic designed and introduced in the
organisation show that desired outcomes can be achieved (Brown, Colville and Pye,
2015). The corporate and business strategies are formulated by the top management of
Tesco so are the innovation strategies, due to this they can efficiently manage the
interface better as they have authority of direct communication and determination of
the needs, requirements. Behaviour as well as the competence of the employees. By
identifying all this they can develop better strategies which are suitable for their
workplace and can be aligned with other existing strategies of the organisation.
CONCLUSION
It is concluded from the above report that the organisation has to take into
consideration the impact of various factors on the organisation innovation and Technology.
The building and management of dynamic capability facilitates the business in managing the
behaviour of the employees and their motivational level for developing new resources by
utilising the existing one. For implementing innovation better theories of innovation such as
disruptive innovation theory and open innovation theory are considered so that it can be
implemented in a systematic manner.

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