TY - JOUR
AU1 - Zeng,, Jing
AU2 - Mackay,, David
AB - Abstract We examine the interaction of processes of managerial attention and dynamic capabilities deployment, drawing on qualitative data from the development of two Internet platform companies—Alibaba and Tencent—over their first 15 years of existence. Informed by senior management interviews, we create a process model of the relationship between activities of managerial attention and dynamic capability deployment within context. We show how the focus of managerial attention on aspects of the organizational context leads to the deployment of specific dynamic capabilities. Further, we propose that a continuing focus of managerial attention to any aspect of the organization’s context gives rise to core dynamic capabilities—a set of continually deployed processes for changing the resource base in a way that corresponds with the strategic logic of the organization. We find that core dynamic capabilities are complemented by contingent dynamic capabilities—intermittently deployed strategic change processes that enable and enhance the use of core dynamic capabilities. 1. Introduction Many strategy scholars have examined dynamic capability as an extension of the resource-based view to explain the sustainable competitive advantage of the firm (Teece et al., 1997; Eisenhardt and Martin, 2000; Winter, 2003; Ambrosini and Bowman, 2009; Katkalo et al., 2010; Protogerou et al., 2012; Peteraf et al., 2013; Karna et al., 2016). Referring to an organization’s “capacity to purposefully create, extend or modify its resource base,” dynamic capability emanates from organizational processes by which managers attempt to create new or renew existing productive assets in an ever-changing organizational context (Helfat et al., 2007: 4). Recently, theoretical and practical challenges have been highlighted which need to be addressed if dynamic capability is not to lose its meaning and fail to fulfil its initial promise as a strategic management concept (c.f. Connor, 2007; Danneels, 2008; Arend and Bromiley, 2009; Barreto, 2010; Leiblein, 2011; Peteraf, Di Stefano and Verona, 2013; Wilden et al., 2016). In this article, we address one such challenge—a need to open up the “black box” of how dynamic capabilities are deployed in practice (Helfat et al., 2007; Pavlou and El Sawy, 2011). Specifically, we examine the role played by managerial attention to aspects of the organizational and environmental context in the deployment of dynamic capability (Ocasio et al., 2018). To develop understanding of how dynamic capability is deployed in organizational life, we draw on insights from an attention-based view (ABV) of the firm (Simon, 1947; Ocasio, 1997, 2011; Ocasio et al., 2018;). An ABV provides insight into how matters of management control influence business outcomes (Simon, 1947; Ocasio, 1997; Hass and Hansen, 2001). According to the ABV, a firm’s decision makers have limited ability to attend to and act on the “superabundance” of information at their disposal (Ocasio, 1997). The ABV examines the consequences of selective noticing, encoding, interpreting, and focusing of time and effort by organizational decision makers toward aspects of any situation (Simon, 1947; Ocasio, 1997; Hass and Hansen, 2001). Managerial attention determines which stimuli are recognized and identified from the organizational or environmental context as inputs to strategic decision-making processes (Helfat and Peteraf, 2015). As managerial attention is a scarce resource, the direction of managerial focus can have a profound impact on how an organization survives and grows (Ocasio et al., 2018). We use the ABV to develop insights as to how managers focus on aspects of their ever-unfolding organizational and environmental context, and how this focus of managerial attention influences and is influenced by the deployment of dynamic capabilities. We draw on analysis of qualitative case data from two Internet platform companies (IPCs). An IPC is defined as a company that was established from inception around a Web-based platform enabling direct interaction or value creation between interdependent constituents (Zeng and Glaister, 2016). IPCs extract revenue from interactions on their platform, such as eBay profiting for transactions between buyers and sellers, or Google from interactions between content providers, consumers, and advertisers. We choose IPCs as the research setting as the turbulent virtual market environment in which IPCs operate is characterized by features such as high connectivity (Dutta and Segev, 1999), regular customer-oriented innovation (Shapiro and Varian, 1999), and highly competitive conditions (Porter, 2001), meaning that firms that survive and grow are likely to be doing so through dynamic capabilities (Eisenhardt and Martin, 2000; Wang et al., 2015). Previous studies have found IPCs to be firms engaged in “continuous morphing” to regenerate their transient competitive advantage on the Internet (Rindova and Kotha, 2001). A focus on IPCs successfully surviving and growing over time thus provides relevant data to explore the influence of managerial attention on dynamic capability deployment. In this article, we adopt a case study approach tracing the evolution of Alibaba and Tencent, two of the largest IPCs in China over a period of 15 years from formation to market dominance. We identify patterns in reported management concerns, decisions, actions, and corresponding organizational changes over time. We translate these patterns into a process model describing how managerial attention continually influenced the deployment of specific dynamic capabilities as the firms developed. Further, we show how managerial attention shaped the deployment of dynamic capability in response to a continually unfolding organizational context. Analyzing these findings allows us to contribute to knowledge of how dynamic capabilities are deployed in an organization. Complementing recent theorizing about parallel development of dynamic capabilities (Bingham et al., 2015), we explain how managerial attention can instigate contemporaneous deployment of multiple dynamic capabilities. Our dynamic capability deployment process model deepens understanding of how organizational context influences, and is in turn influenced by dynamic capabilities. We build a case for developing further insights into dynamic capabilities as a “situated phenomenon,” which, in practice, must be continually re-evaluated before deployment (Ambrosini and Bowman, 2009). Connecting with a learning perspective (Zollo and Winter, 2002), we introduce the concept of core dynamic capabilities—a set of continually deployed processes for changing the resource base, underpinned by ongoing focus of managerial attention. In the IPC case data, core dynamic capabilities are complemented by contingent dynamic capabilities—intermittently deployed resource base change processes—in response to learning arising from managerial focus of attention on aspects of the changing organizational and environmental context. Through examination of these findings, we address the existing gap in knowledge as to the processual underpinnings of how dynamic capability is deployed in practice over time. To frame our study, we begin by briefly reviewing current theoretical discussions concerning managerial attention, organizational context, external environment, and dynamic capability. We then explain our methodology and outline the recent case histories of our focal organizations, Alibaba and Tencent. This is followed by a thematic analysis and dynamic model of how the focus of managerial attention might influence the deployment of dynamic capability. We conclude a discussion of how core dynamic capabilities might explain the influence of environmental and organizational context on the development and deployment of dynamic capability through patterns of managerial attention. 2. Theoretical review Since Teece et al.’s (1997) seminal article, the dynamic capability view (DCV) has gained momentum within the strategic management literature (Easterby-Smith and Prieto, 2008), generating a wide array of alternative insights and definitions from diverse research activities (Easterby-Smith et al., 2009; Pisano, 2017). In this article we consider dynamic capability as the “organizational capacity to purposefully create, extend, or modify its resource base” (Helfat et al., 2007: 4), comprising sensing, seizing, and reconfiguration capabilities (Teece, 2007). In the terms of this broad definition, “capacity” describes the potential for organizational resource base adaption in reaction to, or in stimulation of, changes to the internal and external context of an organization. This capacity might emanate from organizational routines (Winter, 2003), capabilities (Karna et al., 2016), or processes (Helfat and Peteraf, 2009), deliberately deployed by organizational actors toward achieving purposeful resource base change. The term “resource base” refers to the assets available to the organization through either direct ownership or on a preferential basis in the “external” environment (Helfat et al., 2007). As the notion of a resource base extends beyond the traditional boundaries of the firm, we consider dynamic capability to be shaped in part by the ecosystem in which an organization operates as well as its internal resource endowment (Teece, 2007; Katkalo et al., 2010; van der Borgh et al., 2012; Ahn et al., 2018). In other word, dynamic capability can be considered a situated phenomenon (Ambrosini and Bowman, 2009), determined by the history of the organization in combination with the nature of the current business context (Vergne and Durand, 2011) and the external environment (Wilhelm et al., 2015; Girod and Whittington, 2017), requiring a system-wide appreciation of how it develops and is deployed (Kay, 2010; Pitelis and Teece, 2010). Recent studies have examined how the level of environmental dynamism experienced by an organization influences the potential of dynamic capability to benefit organizational performance through the modification of operational routines and capabilities (Wilhelm et al., 2015; Karna et al., 2016; Girod and Whittington, 2017; Ahn et al., 2018). Other authors have found that the internal context is more influential than the external environment on the application and value of dynamic capability (Wang et al., 2015). However, there is a lack of studies explaining how the deployment of dynamic capability is triggered by the internal or external environment, and how the use of dynamic capability changes over time as internal and external contexts change. In this article, we utilize an ABV to explore the influence of the internal organizational and external environmental context on decision makers and strategic choices as to how dynamic capability is deployed over time (Ocasio et al., 2018). Connecting with Chandlerian notions of capability development (Teece, 2010; Winter and Teece, 2010) through the actions of actors within an organization, an ABV enables exploration of how, as resource allocating decision makers, matters of importance to managers have a bearing on the dynamic capability of a firm (Adner and Helfat, 2003; Teece, 2012; Walrave et al., 2017). In other words, an ABV offers potential to build new insights as to how managers choose between alternative capability development options in response to learning from internal context and external environmental scanning activities (Helfat and Peteraf, 2015; Pisano, 2017). The ABV draws attention to how stimuli are noticed, encoded, and transformed into a limited set of organizational moves, addressing selective, situational, and structural aspects of management activity, as decision makers focus their attention in a limited set of concerns (Ocasio, 1997, 2011). Ocasio (1997) pointed out that firm’s attention structures channel and distribute the limited attention of upper management through the valuation and legitimization of issues and opportunities. If the attention structure is externally oriented, the decision makers are more likely to notice latent opportunities in new markets and less likely to notice shadow options within existing markets (Barnett, 2008). Following this line of logic, we then can expect that as firm evolves over time, the firm’s attention structures may vary as managers focus on different types of issues and opportunities. Therefore, the frequency, manner and extent to which managers focus on particular aspects of the system in which they are embedded might shape how dynamic capability is developed or deployed (Barrales-Molina et al., 2013; Kor and Mesko, 2013; Helfat and Peteraf, 2015). Responding to challenges to develop understanding of managerial awareness (Ocasio et al., 2018) and the nuances of the environmental context on the deployment of dynamic capability (Wilhelm et al., 2015), in this study we use the ABV to develop explanations of how the focus of attention of decision makers—considering both their internal and external environments—leads to the deployment of dynamic capabilities over time. In addressing a question of “how” dynamic capabilities are deployed in practice, we focus on an interplay of management and organizational processes (van de ven, 1992; Langley, 1999) such as attentional, sensing, resource allocation, and reconfiguration processes that drive strategic change (Ocasio et al., 2018). 3. Research method 3.1 Research context and sampling The context of our study is IPCs operating in a highly volatile industrial context where the deployment of dynamic capabilities seems vital for survival (Rindova and Kotha, 2001). As our research examines how managerial attention to aspects of organizational and environmental context influences the deployment of dynamic capability over time, we broadly follow convention on how to study processes embedded in an organizational context (Langley, 1999) using multiple cases (Eisenhardt, 1989). Following Walrave et al. (2017), our focus on a high-tech sector enables us to trace the implications of multiple episodes of managerial attention and associated deployment of dynamic capabilities in a shorter timespan than more traditional industries. Two case study organizations were adopted to enable comparison of organizational information, augment external validation, guard against observer bias, and allow for analytical replication logic (Eisenhardt, 1989; Miles and Huberman, 1994; Yin, 2003). The case firms selected are Alibaba, the biggest Internet business to business (B2B) platform, and Tencent, the biggest social networking site in China. We selected these firms following a purposeful sampling method (Eisenhardt, 1989; Miles and Huberman, 1994), focusing on a single industry and selecting the key performing firms from different strategic groups. As suggested by Rouse and Daellenbach (1999), this sampling improves the potential for generalizability of any findings. Further enabling the research process, Alibaba and Tencent are listed on the Chinese stock exchange, and therefore, similar profiles of available secondary data exist for both firms. As advised by Block and McMillan (1985), we chose case firms that were closely matched in terms of starting conditions and milestones of new venture development (see Table 1 for a chronology of the development of both firms). This research design also allowed emerging conceptual insights from one case to be evaluated against comparative evidence from the other case (Yin, 2003). Table 1 provides an overview of the firms. Table 1. Chronological development of Alibaba and Tencent Key event Alibaba Tencent Company founding date March 1999 founded in Hangzhou November 1998 founded in Shenzhen Development of the service B2B platform Instant message service (IM) First round of financing October 1999, Alibaba Group raises US$5 million from a consortium of investors January 2000, Alibaba Group raises US$5 million from Goldman Sachs and US$20 million from an investor group led by SoftBank 1999, Tencent raises US$2.2 million from IDG and PCCW First milestone of registered users December 2001, Alibaba surpassed its first 1 million registered users November 1999, Tencent surpassed its first 1 million registered users Multiple platform developments May 2003 Online shopping website Taobao Marketplace is founded July 2004 Aliwangwang, a personal computer-based instant messaging tool that facilitates text, audio and video communication between buyers and sellers, is launched on Taobao Marketplace December 2004 Alipay, currently a related company of Alibaba Group, is launched as a third-party online payment platform August 2005 Alibaba Group forms a strategic partnership with Yahoo! October 2005 Alibaba Group takes over the operations of China Yahoo! November 2007 Alibaba Group launched Alimama, an online marketing technology platform November 2003 QQ.com-web portal was launched January 2004 QQ show was introduced that enable customers to spend their QQ currency to design their online identify with Tencent avatar design service August 2004 Tencent introduced QQ online game Initial public offering November 2007 Alibaba.com completes its initial public offering on the Main Board of the Hong Kong Stock Exchange June 2012 Alibaba.com delists from the Hong Kong Stock Exchange September 2014 Alibaba.com completes its initial public offering on the Main Board of the New York Stock Exchange June 2004 Tencent completes its initial public offering on the main board of Hong Kong Stock Exchange Multiple platform developments April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced to complement Taobao Marketplace September 2009 Alibaba Cloud Computing is established March 2010 Taobao Marketplace introduces an online group buying marketplace Juhuasuan April 2010 Alibaba.com officially launches AliExpress to enable exporters in China to reach and directly transact with consumers around the world May 2005 Multi-media social networking service Q-Zone was launched March 2006 C2C platform paipai.com and online payment platform tenpay September 2009 Tencent launched self-developed search engine SOSO January 2011 Launched mobile social communication service—weixin March 2011 Tencent Launched video portal v.qq.com Open platform strategy 2008, Taobao officially launched its Taobao Open Platform (TOP) that allows third parties to build the applications that can access the data from Taobao, such as the products details and the seller information 2011, Tencent officially launched its open platform strategy and opened up eight platforms, including pengyou.com, Qzone, Tencent Weibo, Tenpay, Tencent e-commerce, Soso, cb.qq.com, and QQ Building an ecosystem April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced September, 2008 Alibaba Group R&D Institute is established March, 2010 Taobao Marketplace introduces online group buying marketplace Juhuasuan December 2011 Launched e-Commerce open platform buy.qq.com August 2013 Launched game centers on Mobile QQ and Weixin Key event Alibaba Tencent Company founding date March 1999 founded in Hangzhou November 1998 founded in Shenzhen Development of the service B2B platform Instant message service (IM) First round of financing October 1999, Alibaba Group raises US$5 million from a consortium of investors January 2000, Alibaba Group raises US$5 million from Goldman Sachs and US$20 million from an investor group led by SoftBank 1999, Tencent raises US$2.2 million from IDG and PCCW First milestone of registered users December 2001, Alibaba surpassed its first 1 million registered users November 1999, Tencent surpassed its first 1 million registered users Multiple platform developments May 2003 Online shopping website Taobao Marketplace is founded July 2004 Aliwangwang, a personal computer-based instant messaging tool that facilitates text, audio and video communication between buyers and sellers, is launched on Taobao Marketplace December 2004 Alipay, currently a related company of Alibaba Group, is launched as a third-party online payment platform August 2005 Alibaba Group forms a strategic partnership with Yahoo! October 2005 Alibaba Group takes over the operations of China Yahoo! November 2007 Alibaba Group launched Alimama, an online marketing technology platform November 2003 QQ.com-web portal was launched January 2004 QQ show was introduced that enable customers to spend their QQ currency to design their online identify with Tencent avatar design service August 2004 Tencent introduced QQ online game Initial public offering November 2007 Alibaba.com completes its initial public offering on the Main Board of the Hong Kong Stock Exchange June 2012 Alibaba.com delists from the Hong Kong Stock Exchange September 2014 Alibaba.com completes its initial public offering on the Main Board of the New York Stock Exchange June 2004 Tencent completes its initial public offering on the main board of Hong Kong Stock Exchange Multiple platform developments April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced to complement Taobao Marketplace September 2009 Alibaba Cloud Computing is established March 2010 Taobao Marketplace introduces an online group buying marketplace Juhuasuan April 2010 Alibaba.com officially launches AliExpress to enable exporters in China to reach and directly transact with consumers around the world May 2005 Multi-media social networking service Q-Zone was launched March 2006 C2C platform paipai.com and online payment platform tenpay September 2009 Tencent launched self-developed search engine SOSO January 2011 Launched mobile social communication service—weixin March 2011 Tencent Launched video portal v.qq.com Open platform strategy 2008, Taobao officially launched its Taobao Open Platform (TOP) that allows third parties to build the applications that can access the data from Taobao, such as the products details and the seller information 2011, Tencent officially launched its open platform strategy and opened up eight platforms, including pengyou.com, Qzone, Tencent Weibo, Tenpay, Tencent e-commerce, Soso, cb.qq.com, and QQ Building an ecosystem April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced September, 2008 Alibaba Group R&D Institute is established March, 2010 Taobao Marketplace introduces online group buying marketplace Juhuasuan December 2011 Launched e-Commerce open platform buy.qq.com August 2013 Launched game centers on Mobile QQ and Weixin IDG, IDG capital; PCCW, Pacific Century Cyber Works Ltd. Table 1. Chronological development of Alibaba and Tencent Key event Alibaba Tencent Company founding date March 1999 founded in Hangzhou November 1998 founded in Shenzhen Development of the service B2B platform Instant message service (IM) First round of financing October 1999, Alibaba Group raises US$5 million from a consortium of investors January 2000, Alibaba Group raises US$5 million from Goldman Sachs and US$20 million from an investor group led by SoftBank 1999, Tencent raises US$2.2 million from IDG and PCCW First milestone of registered users December 2001, Alibaba surpassed its first 1 million registered users November 1999, Tencent surpassed its first 1 million registered users Multiple platform developments May 2003 Online shopping website Taobao Marketplace is founded July 2004 Aliwangwang, a personal computer-based instant messaging tool that facilitates text, audio and video communication between buyers and sellers, is launched on Taobao Marketplace December 2004 Alipay, currently a related company of Alibaba Group, is launched as a third-party online payment platform August 2005 Alibaba Group forms a strategic partnership with Yahoo! October 2005 Alibaba Group takes over the operations of China Yahoo! November 2007 Alibaba Group launched Alimama, an online marketing technology platform November 2003 QQ.com-web portal was launched January 2004 QQ show was introduced that enable customers to spend their QQ currency to design their online identify with Tencent avatar design service August 2004 Tencent introduced QQ online game Initial public offering November 2007 Alibaba.com completes its initial public offering on the Main Board of the Hong Kong Stock Exchange June 2012 Alibaba.com delists from the Hong Kong Stock Exchange September 2014 Alibaba.com completes its initial public offering on the Main Board of the New York Stock Exchange June 2004 Tencent completes its initial public offering on the main board of Hong Kong Stock Exchange Multiple platform developments April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced to complement Taobao Marketplace September 2009 Alibaba Cloud Computing is established March 2010 Taobao Marketplace introduces an online group buying marketplace Juhuasuan April 2010 Alibaba.com officially launches AliExpress to enable exporters in China to reach and directly transact with consumers around the world May 2005 Multi-media social networking service Q-Zone was launched March 2006 C2C platform paipai.com and online payment platform tenpay September 2009 Tencent launched self-developed search engine SOSO January 2011 Launched mobile social communication service—weixin March 2011 Tencent Launched video portal v.qq.com Open platform strategy 2008, Taobao officially launched its Taobao Open Platform (TOP) that allows third parties to build the applications that can access the data from Taobao, such as the products details and the seller information 2011, Tencent officially launched its open platform strategy and opened up eight platforms, including pengyou.com, Qzone, Tencent Weibo, Tenpay, Tencent e-commerce, Soso, cb.qq.com, and QQ Building an ecosystem April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced September, 2008 Alibaba Group R&D Institute is established March, 2010 Taobao Marketplace introduces online group buying marketplace Juhuasuan December 2011 Launched e-Commerce open platform buy.qq.com August 2013 Launched game centers on Mobile QQ and Weixin Key event Alibaba Tencent Company founding date March 1999 founded in Hangzhou November 1998 founded in Shenzhen Development of the service B2B platform Instant message service (IM) First round of financing October 1999, Alibaba Group raises US$5 million from a consortium of investors January 2000, Alibaba Group raises US$5 million from Goldman Sachs and US$20 million from an investor group led by SoftBank 1999, Tencent raises US$2.2 million from IDG and PCCW First milestone of registered users December 2001, Alibaba surpassed its first 1 million registered users November 1999, Tencent surpassed its first 1 million registered users Multiple platform developments May 2003 Online shopping website Taobao Marketplace is founded July 2004 Aliwangwang, a personal computer-based instant messaging tool that facilitates text, audio and video communication between buyers and sellers, is launched on Taobao Marketplace December 2004 Alipay, currently a related company of Alibaba Group, is launched as a third-party online payment platform August 2005 Alibaba Group forms a strategic partnership with Yahoo! October 2005 Alibaba Group takes over the operations of China Yahoo! November 2007 Alibaba Group launched Alimama, an online marketing technology platform November 2003 QQ.com-web portal was launched January 2004 QQ show was introduced that enable customers to spend their QQ currency to design their online identify with Tencent avatar design service August 2004 Tencent introduced QQ online game Initial public offering November 2007 Alibaba.com completes its initial public offering on the Main Board of the Hong Kong Stock Exchange June 2012 Alibaba.com delists from the Hong Kong Stock Exchange September 2014 Alibaba.com completes its initial public offering on the Main Board of the New York Stock Exchange June 2004 Tencent completes its initial public offering on the main board of Hong Kong Stock Exchange Multiple platform developments April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced to complement Taobao Marketplace September 2009 Alibaba Cloud Computing is established March 2010 Taobao Marketplace introduces an online group buying marketplace Juhuasuan April 2010 Alibaba.com officially launches AliExpress to enable exporters in China to reach and directly transact with consumers around the world May 2005 Multi-media social networking service Q-Zone was launched March 2006 C2C platform paipai.com and online payment platform tenpay September 2009 Tencent launched self-developed search engine SOSO January 2011 Launched mobile social communication service—weixin March 2011 Tencent Launched video portal v.qq.com Open platform strategy 2008, Taobao officially launched its Taobao Open Platform (TOP) that allows third parties to build the applications that can access the data from Taobao, such as the products details and the seller information 2011, Tencent officially launched its open platform strategy and opened up eight platforms, including pengyou.com, Qzone, Tencent Weibo, Tenpay, Tencent e-commerce, Soso, cb.qq.com, and QQ Building an ecosystem April 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced September, 2008 Alibaba Group R&D Institute is established March, 2010 Taobao Marketplace introduces online group buying marketplace Juhuasuan December 2011 Launched e-Commerce open platform buy.qq.com August 2013 Launched game centers on Mobile QQ and Weixin IDG, IDG capital; PCCW, Pacific Century Cyber Works Ltd. 3.2 Data collection To gather primary data, we first approached the focal firms through personal contacts as under the Chinese Confucian culture, personal contacts help gather quality information that informants may not be willing to share with an unfamiliar interviewer (Tsang, 1998). Between June and August 2012, semi-structured interviews were arranged with 14 participants from Alibaba and 11 participants from Tencent. Between October and December, 2013 we conducted repeated interviews with informants with a purpose of further probing their recent developments and review our case study findings, and also engaged in archival research with both organizations. This approach enabled the collection of both real-time (e.g., two round of interview data) and retrospective data (e.g. both interview data and archival data), thus providing better grounding for theorization and mitigating any effects of retrospective bias (Leonard-Barton, 1990). Consistent with our research aims, this approach allowed us to observe how events evolved over time and why they evolved in a particular way (van de ven and Poole, 1995; Langley, 1999; Pettigrew, 1990). We interviewed senior managers involved in the strategy planning and execution, as they have key “interpretational” roles (Smircich and Morgan, 1982; Bennis and Nanus, 1985) and the “visibility” of the objects of inquiry (Pettigrew, 1990) with respect to the theme of dynamic capability and managerial attention. All the managers involved in this research held comparable positions in the sample firms with at least 6 years’ experience in each organization. Total 6 of our 25 interviewees had been working in the firm since its founding (four from Alibaba and two from Tencent). We used a semi-structured interview protocol (Yin, 2003)—reflecting dynamic capabilities and ABV concepts—to provide consistency between interviews while leaving spaces for other themes to emerge. During the data collection process, rather than probing for information or suggesting ideas, we focused on understanding and clarifying the meanings and interpretation each participant set forth to capture as authentic as possible record of participant views (Eisenhardt, 1989). The interviews normally lasted 60–120 min and were transcribed and translated verbatim within 36 h of the interviews. Where ambiguity of transcription surfaced, we contacted the interviewees for clarification. In addition to interview data, we followed Glaser and Strauss’s (1967) recommendation to use diverse sources of data to obtain multiple vantage points of the phenomena of interest. For both firms, we collected secondary data from the organization’s archives and media sources such as investment and industry reports, published news and magazine articles, and internal documents. For example, we conducted thematic analysis of strategic meeting minutes from over the case study histories of both firms. Through this, we developed an emergent list of discussion topics from the content of the minutes, with topics such as initiatives to improve customer experiences, experimentation and learning, and external relationships with broad range of partners being identified. We then summarized individual categories covered by 120 strategic memos to identify temporal patterns of attention within and across the meetings following the guideline suggested by Yu et al. (2005). 3.3 Data analysis Following established within-case and cross-case comparison methods (Eisenhardt, 1989; Yin, 2003), we developed thick descriptions of each case and built individual case histories (Brown and Eisenhardt, 1997) as previously described in Table 1. To keep the data manageable, we decomposed each case chronology into analytical periods as we reviewed the shifting focus of managerial attention and events associated with dynamic capability deployment. We generated codes describing the aspects of the organizational context or external environment on which the managers focused, and how these focal aspects affected manager’s decision to attempt purposeful resource base change. We then reduced these codes to interpretative clusters (Miles and Huberman, 1994) according to whether they were qualitatively similar or different in character and purpose. Three critical insights emerged from this process that guided our subsequent analysis. First, informants described specific issues that commanded managerial attention and subsequently guided resource re-configuration—we focused on these issues as a primary unit of analysis (Maitlis, 2005). Second, informants shared their general views of how managers focused their attention, and how these focus areas helped them make decisions. These insights guided our focus on patterns of responses across different informants. Finally, early insights suggested patterns in focus of managerial attention and resource re-configuration activities that helped to guide continuing analysis, in which we systematically coded raw data to develop theoretical constructs and a process model (described later in this article). This analysis was followed by cross-case analysis, comparing findings, constructs, and themes in the case organizations (Eisenhardt and Graebner, 2007). The emergent findings and theoretical model was peer-reviewed in a research workshop organized by the first author at her institution in June 2015. The results were also shared with all interviewees, inviting their feedback and comments through e-mail, Skype, and Wechat between May and July 2015. We also recognize the limitations introduced by the centrality of interview data in our study, as participants may have told versions of historical events which exaggerated their role, downplayed luck or mistakes, and attempted to please the interviewers by telling us what they thought we wanted to hear (Alvesson, 2003). To counter these possibilities, we followed established protocols for effective case study research, including triangulating sources, methods and interviewees, reviewing findings with participants after elapsed time, and connecting emergent findings with literature (Eisenhardt, 1989; Yin, 2003). Nonetheless, we acknowledge that further replication studies in alternative contexts would enhance the reliability and generalizability of our findings. 4. Findings In this section, we present our findings about how both organizations appear to have adapted and survived since inception, describing the focus of managerial attention at each phase. We organize these findings according to three main phases in the life of both organizations — initial growth, diversification to defend market share, and opening up of the platform to nurture an open innovative network. In each section, we offer a summary narrative of the events, managerial attention, and deployment of dynamic capability of each organization as described by participants. These narratives are supported by tables of illustrative comments from interviewees from both case organizations. 4.1 Stage 1: Initial growth From launch, a key focus for both Alibaba and Tencent senior managers was building a large customer base, nurturing long-term customer relationships, and developing deep insights into customer preferences. As illustrated in Table 2, despite the financial pressures of starting a new business, the customer was placed at the center of managerial attention as a strategic maneuvre to guide long-term development and sustainability of the nascent organizations. Table 2. Focus of managerial attention and impact on dynamic capability deployment during initial growth phase Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotations A focus of managerial attention on customer relationships and interactions, and evaluation of how purposeful changes in technology and services by the company are being received by the customer, impacting customer views, and translating into effects on the size of the customer base Learning about customer knowledge is continually used to guide experimentation in reconfiguration of resources toward creating distinctive products/services that deliver customer value “You think you know what customers want, actually you don’t. That is the mistake many organization made. For us, we cannot afford to make this mistake because once they (customers) are gone, they are gone. It is only a few click away. We started with small functions, then gradually built up our services based on the dialogue and feedback we have from our customers.” (09, Tencent) “We didn’t treat our customers as numbers, we treated them as individuals, we listened to them, and we used our heart to serve them. It’s not about building a good relationship with them (customers) to make a sale, it is about have a more in-depth understanding of what and why they want certain things or service, and how can we to make it happen in a most convenient and easiest way” (02, Alibaba) “Feedback from our members (customers) has made it clear that what they want, and what their expectations, what their key concerns were etc. Such information gave us a clear direction what can we do to improve our business.” (04, Alibaba) “I believe the technology is for the people, we tell the technology guy what the consumer want, what people want. I'm not a tech guy. I'm looking at the technology with the eyes of my customers, normal people's eyes.” (01, Alibaba) Continual managerial prioritization of resource base changes over time that serve the explicit purpose of protecting and growing the customer base in the long term “We are the fish and we simply cannot survive without the water. And customer is the water. No matter how strong we are internally, without water, our destiny is doomed. Customer might not give us money directly, but the potential benefits can be generated by having a large customer number is huge.” (07, Tencent) “Some companies at that early time mainly focussed on how to make money quickly. They missed the big picture. The resource is everywhere, the information is not scarce, especially on the internet, it is overflowing. So what made us desirable and rare was what value we could create for our customers, which in turn relies on how many customers we have. Without customers, we are nothing.” (05, Alibaba) “With so many Venture Capitalists eyeing on this pie, capital is no longer a luxury to get, customer’s attention is. But the most difficult thing is that customer’s attention shift fast and you need to have that ability to dance with them and catch up with the flow. Having a bureaucratic structure is like committing a suicide in this case. Having the right architectural structure that enables you to have the ability to dance with customer’s flow and movement is crucial.” (11, Tencent) Repeated, rapid redeployment of resources—exploiting the small scale of the organization at that time—to purposefully build ever enhanced customer experiences “We also kept testing the water to see the reaction to our new ideas; some failed, some succeed. (Back then) nobody knew how to commercialize our website, everybody else was doing the portal and we were the only one doing the instant messaging). So trial and error was the only way to learn, and it was the only way to move forward.” (06, Alibaba) “When your company is small, it is much more flexible, and you are much quicker than big companies in terms of responding to the market trend, and you are more likely to try new things, willing to take risks. And all of these qualities are essential to success.” (04, Alibaba) A focus of managerial attention on creating profit in collaboration with others—evaluating the limiting factors in the business ecosystem as well as organizational constraints and identifying resource base changes to grow the business and market opportunities Taking action to extend the organizational resource base—gaining access to the resources of others on a preferential basis through collaboration and cooperation with others in the business ecosystem “It was difficult time, and we were facing either closing down or selling our company because we couldn’t find a way to make money. China mobile that time was just separated from China telecom and they were also looking for a new way to generate profits. And gladly we both figured out a way to make money through each other.” (01, Tencent) “Back then (2003), we didn’t have the credit system and very few people were willing to finish transactions online. We listened to our customer’s concerns and quickly worked with China post and banks to find out alternative ways for them to make payment. We were also working with a third party credit reporting agency to ensure the process was rigorous and information was valid and reliable. Our reputation counted on it because if we can’t be a good gatekeeper, we lose our customers. It also shows the importance of cooperating with others to reach a higher value creation for all” (05, Alibaba) “You can’t sit there and wait for it to happen. You need to be prepared, you need to be proactive, you need to make it happen, you need to keep trying out new things, you need to work with the right partners to drive the change, give them a reason why they should change with you, and how it is going to help them. This is the mistake people always make—it’s not all about you, otherwise you can’t never get anything done.” (09, Tencent) Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotations A focus of managerial attention on customer relationships and interactions, and evaluation of how purposeful changes in technology and services by the company are being received by the customer, impacting customer views, and translating into effects on the size of the customer base Learning about customer knowledge is continually used to guide experimentation in reconfiguration of resources toward creating distinctive products/services that deliver customer value “You think you know what customers want, actually you don’t. That is the mistake many organization made. For us, we cannot afford to make this mistake because once they (customers) are gone, they are gone. It is only a few click away. We started with small functions, then gradually built up our services based on the dialogue and feedback we have from our customers.” (09, Tencent) “We didn’t treat our customers as numbers, we treated them as individuals, we listened to them, and we used our heart to serve them. It’s not about building a good relationship with them (customers) to make a sale, it is about have a more in-depth understanding of what and why they want certain things or service, and how can we to make it happen in a most convenient and easiest way” (02, Alibaba) “Feedback from our members (customers) has made it clear that what they want, and what their expectations, what their key concerns were etc. Such information gave us a clear direction what can we do to improve our business.” (04, Alibaba) “I believe the technology is for the people, we tell the technology guy what the consumer want, what people want. I'm not a tech guy. I'm looking at the technology with the eyes of my customers, normal people's eyes.” (01, Alibaba) Continual managerial prioritization of resource base changes over time that serve the explicit purpose of protecting and growing the customer base in the long term “We are the fish and we simply cannot survive without the water. And customer is the water. No matter how strong we are internally, without water, our destiny is doomed. Customer might not give us money directly, but the potential benefits can be generated by having a large customer number is huge.” (07, Tencent) “Some companies at that early time mainly focussed on how to make money quickly. They missed the big picture. The resource is everywhere, the information is not scarce, especially on the internet, it is overflowing. So what made us desirable and rare was what value we could create for our customers, which in turn relies on how many customers we have. Without customers, we are nothing.” (05, Alibaba) “With so many Venture Capitalists eyeing on this pie, capital is no longer a luxury to get, customer’s attention is. But the most difficult thing is that customer’s attention shift fast and you need to have that ability to dance with them and catch up with the flow. Having a bureaucratic structure is like committing a suicide in this case. Having the right architectural structure that enables you to have the ability to dance with customer’s flow and movement is crucial.” (11, Tencent) Repeated, rapid redeployment of resources—exploiting the small scale of the organization at that time—to purposefully build ever enhanced customer experiences “We also kept testing the water to see the reaction to our new ideas; some failed, some succeed. (Back then) nobody knew how to commercialize our website, everybody else was doing the portal and we were the only one doing the instant messaging). So trial and error was the only way to learn, and it was the only way to move forward.” (06, Alibaba) “When your company is small, it is much more flexible, and you are much quicker than big companies in terms of responding to the market trend, and you are more likely to try new things, willing to take risks. And all of these qualities are essential to success.” (04, Alibaba) A focus of managerial attention on creating profit in collaboration with others—evaluating the limiting factors in the business ecosystem as well as organizational constraints and identifying resource base changes to grow the business and market opportunities Taking action to extend the organizational resource base—gaining access to the resources of others on a preferential basis through collaboration and cooperation with others in the business ecosystem “It was difficult time, and we were facing either closing down or selling our company because we couldn’t find a way to make money. China mobile that time was just separated from China telecom and they were also looking for a new way to generate profits. And gladly we both figured out a way to make money through each other.” (01, Tencent) “Back then (2003), we didn’t have the credit system and very few people were willing to finish transactions online. We listened to our customer’s concerns and quickly worked with China post and banks to find out alternative ways for them to make payment. We were also working with a third party credit reporting agency to ensure the process was rigorous and information was valid and reliable. Our reputation counted on it because if we can’t be a good gatekeeper, we lose our customers. It also shows the importance of cooperating with others to reach a higher value creation for all” (05, Alibaba) “You can’t sit there and wait for it to happen. You need to be prepared, you need to be proactive, you need to make it happen, you need to keep trying out new things, you need to work with the right partners to drive the change, give them a reason why they should change with you, and how it is going to help them. This is the mistake people always make—it’s not all about you, otherwise you can’t never get anything done.” (09, Tencent) Table 2. Focus of managerial attention and impact on dynamic capability deployment during initial growth phase Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotations A focus of managerial attention on customer relationships and interactions, and evaluation of how purposeful changes in technology and services by the company are being received by the customer, impacting customer views, and translating into effects on the size of the customer base Learning about customer knowledge is continually used to guide experimentation in reconfiguration of resources toward creating distinctive products/services that deliver customer value “You think you know what customers want, actually you don’t. That is the mistake many organization made. For us, we cannot afford to make this mistake because once they (customers) are gone, they are gone. It is only a few click away. We started with small functions, then gradually built up our services based on the dialogue and feedback we have from our customers.” (09, Tencent) “We didn’t treat our customers as numbers, we treated them as individuals, we listened to them, and we used our heart to serve them. It’s not about building a good relationship with them (customers) to make a sale, it is about have a more in-depth understanding of what and why they want certain things or service, and how can we to make it happen in a most convenient and easiest way” (02, Alibaba) “Feedback from our members (customers) has made it clear that what they want, and what their expectations, what their key concerns were etc. Such information gave us a clear direction what can we do to improve our business.” (04, Alibaba) “I believe the technology is for the people, we tell the technology guy what the consumer want, what people want. I'm not a tech guy. I'm looking at the technology with the eyes of my customers, normal people's eyes.” (01, Alibaba) Continual managerial prioritization of resource base changes over time that serve the explicit purpose of protecting and growing the customer base in the long term “We are the fish and we simply cannot survive without the water. And customer is the water. No matter how strong we are internally, without water, our destiny is doomed. Customer might not give us money directly, but the potential benefits can be generated by having a large customer number is huge.” (07, Tencent) “Some companies at that early time mainly focussed on how to make money quickly. They missed the big picture. The resource is everywhere, the information is not scarce, especially on the internet, it is overflowing. So what made us desirable and rare was what value we could create for our customers, which in turn relies on how many customers we have. Without customers, we are nothing.” (05, Alibaba) “With so many Venture Capitalists eyeing on this pie, capital is no longer a luxury to get, customer’s attention is. But the most difficult thing is that customer’s attention shift fast and you need to have that ability to dance with them and catch up with the flow. Having a bureaucratic structure is like committing a suicide in this case. Having the right architectural structure that enables you to have the ability to dance with customer’s flow and movement is crucial.” (11, Tencent) Repeated, rapid redeployment of resources—exploiting the small scale of the organization at that time—to purposefully build ever enhanced customer experiences “We also kept testing the water to see the reaction to our new ideas; some failed, some succeed. (Back then) nobody knew how to commercialize our website, everybody else was doing the portal and we were the only one doing the instant messaging). So trial and error was the only way to learn, and it was the only way to move forward.” (06, Alibaba) “When your company is small, it is much more flexible, and you are much quicker than big companies in terms of responding to the market trend, and you are more likely to try new things, willing to take risks. And all of these qualities are essential to success.” (04, Alibaba) A focus of managerial attention on creating profit in collaboration with others—evaluating the limiting factors in the business ecosystem as well as organizational constraints and identifying resource base changes to grow the business and market opportunities Taking action to extend the organizational resource base—gaining access to the resources of others on a preferential basis through collaboration and cooperation with others in the business ecosystem “It was difficult time, and we were facing either closing down or selling our company because we couldn’t find a way to make money. China mobile that time was just separated from China telecom and they were also looking for a new way to generate profits. And gladly we both figured out a way to make money through each other.” (01, Tencent) “Back then (2003), we didn’t have the credit system and very few people were willing to finish transactions online. We listened to our customer’s concerns and quickly worked with China post and banks to find out alternative ways for them to make payment. We were also working with a third party credit reporting agency to ensure the process was rigorous and information was valid and reliable. Our reputation counted on it because if we can’t be a good gatekeeper, we lose our customers. It also shows the importance of cooperating with others to reach a higher value creation for all” (05, Alibaba) “You can’t sit there and wait for it to happen. You need to be prepared, you need to be proactive, you need to make it happen, you need to keep trying out new things, you need to work with the right partners to drive the change, give them a reason why they should change with you, and how it is going to help them. This is the mistake people always make—it’s not all about you, otherwise you can’t never get anything done.” (09, Tencent) Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotations A focus of managerial attention on customer relationships and interactions, and evaluation of how purposeful changes in technology and services by the company are being received by the customer, impacting customer views, and translating into effects on the size of the customer base Learning about customer knowledge is continually used to guide experimentation in reconfiguration of resources toward creating distinctive products/services that deliver customer value “You think you know what customers want, actually you don’t. That is the mistake many organization made. For us, we cannot afford to make this mistake because once they (customers) are gone, they are gone. It is only a few click away. We started with small functions, then gradually built up our services based on the dialogue and feedback we have from our customers.” (09, Tencent) “We didn’t treat our customers as numbers, we treated them as individuals, we listened to them, and we used our heart to serve them. It’s not about building a good relationship with them (customers) to make a sale, it is about have a more in-depth understanding of what and why they want certain things or service, and how can we to make it happen in a most convenient and easiest way” (02, Alibaba) “Feedback from our members (customers) has made it clear that what they want, and what their expectations, what their key concerns were etc. Such information gave us a clear direction what can we do to improve our business.” (04, Alibaba) “I believe the technology is for the people, we tell the technology guy what the consumer want, what people want. I'm not a tech guy. I'm looking at the technology with the eyes of my customers, normal people's eyes.” (01, Alibaba) Continual managerial prioritization of resource base changes over time that serve the explicit purpose of protecting and growing the customer base in the long term “We are the fish and we simply cannot survive without the water. And customer is the water. No matter how strong we are internally, without water, our destiny is doomed. Customer might not give us money directly, but the potential benefits can be generated by having a large customer number is huge.” (07, Tencent) “Some companies at that early time mainly focussed on how to make money quickly. They missed the big picture. The resource is everywhere, the information is not scarce, especially on the internet, it is overflowing. So what made us desirable and rare was what value we could create for our customers, which in turn relies on how many customers we have. Without customers, we are nothing.” (05, Alibaba) “With so many Venture Capitalists eyeing on this pie, capital is no longer a luxury to get, customer’s attention is. But the most difficult thing is that customer’s attention shift fast and you need to have that ability to dance with them and catch up with the flow. Having a bureaucratic structure is like committing a suicide in this case. Having the right architectural structure that enables you to have the ability to dance with customer’s flow and movement is crucial.” (11, Tencent) Repeated, rapid redeployment of resources—exploiting the small scale of the organization at that time—to purposefully build ever enhanced customer experiences “We also kept testing the water to see the reaction to our new ideas; some failed, some succeed. (Back then) nobody knew how to commercialize our website, everybody else was doing the portal and we were the only one doing the instant messaging). So trial and error was the only way to learn, and it was the only way to move forward.” (06, Alibaba) “When your company is small, it is much more flexible, and you are much quicker than big companies in terms of responding to the market trend, and you are more likely to try new things, willing to take risks. And all of these qualities are essential to success.” (04, Alibaba) A focus of managerial attention on creating profit in collaboration with others—evaluating the limiting factors in the business ecosystem as well as organizational constraints and identifying resource base changes to grow the business and market opportunities Taking action to extend the organizational resource base—gaining access to the resources of others on a preferential basis through collaboration and cooperation with others in the business ecosystem “It was difficult time, and we were facing either closing down or selling our company because we couldn’t find a way to make money. China mobile that time was just separated from China telecom and they were also looking for a new way to generate profits. And gladly we both figured out a way to make money through each other.” (01, Tencent) “Back then (2003), we didn’t have the credit system and very few people were willing to finish transactions online. We listened to our customer’s concerns and quickly worked with China post and banks to find out alternative ways for them to make payment. We were also working with a third party credit reporting agency to ensure the process was rigorous and information was valid and reliable. Our reputation counted on it because if we can’t be a good gatekeeper, we lose our customers. It also shows the importance of cooperating with others to reach a higher value creation for all” (05, Alibaba) “You can’t sit there and wait for it to happen. You need to be prepared, you need to be proactive, you need to make it happen, you need to keep trying out new things, you need to work with the right partners to drive the change, give them a reason why they should change with you, and how it is going to help them. This is the mistake people always make—it’s not all about you, otherwise you can’t never get anything done.” (09, Tencent) From the earliest stages of the firm’s operation, a high level of managerial attention was dedicated to creating and maintaining close dialogue between Alibaba and its customers (buyers and sellers of products and services) through online and offline mechanisms. This dialogue shaped resource allocation decisions, as priority was given to the creation of internal resource configurations and activities targeting the creation of distinctive products for the customers and growing the size of the customer base. During the early days of the social media organization Tencent, which was founded in 1998, we identified a similar theme. As with Alibaba, there was an initial strong focus on growing the customer base, even at the expense of short term profit potential. This was deemed a matter of long-term survival. From the earliest days, Tencent’s development was driven by customer needs to the extent that Pony Ma, the founder of Tencent, was described as the company’s “chief customer experience officer.” A recurring theme in the interviews about the launch phase was the importance of engaging the customer in dialogue as a way of understanding how to shape the resource base. Interviewee perspectives consistently emphasized that the delivery of services and resources relevant to customer needs was a co-production arising from managerial attention and customer suggestions. In interactions with customers, rapid responses to customer dialogue through prototyped rapid product launches were encouraged to gather “trial-and-error” learning. For example, after gathering initial customer feedback, Alibaba quickly introduced different value-added services such as “Chinese suppliers” to enable export for Chinese Small-Medium Enterprises (SMEs) and a “Trust Pass” service where the member can be verified by a third-party credit reporting agency before their membership is approved. Similarly, Tencent quickly modified its initial offering based on customer feedback to provide enhanced search engine capabilities and augmented services such as QQ coin (a virtual currency). Dialogue from the customer base was sustained by this prototypical response—“trial and error was the only way to learn, and it was the only way to move forward” as one senior product development manager explained. Many participants highlighted that the “agility” of their firms to execute change in a rapid way that was valued by the customer was enabled by both placing the highest value on customer interactions and treating the customer as effectively part of the organization. As both companies launched and attempted to establish a market presence, managerial attention to customer dialogue and relationship building enabled co-direction of resource base development activities. In effect, managerial learning from scrutinizing the impact of trial and error product development on customers views continued to (re-)direct the deployment of dynamic capabilities in the start-up phase of both organizations. As illustrated in Table 2, the co-direction of resource base change also seemed to be informed at this phase by managerial attention on building dialogue and partnership arrangements with supplier organizations to create collaborative profit potential. For example, although Tencent QQ built a large customer base, it struggled to find a way to monetize its platform between 2000 and 2001. In 2002, Tencent co-operated with China mobile to embrace mobile value-added services for its customers through mobile QQ and started to make a profit. Similar comments were also offered by interviewees from Alibaba, referring to their work with third parties to introduce “Trust Pass,” a bolt-on service to bolster the credibility of the suppliers at a key stage in their development. A managerial focus on interaction with suppliers or partner firms generated resource adaption and profit creation outcomes for both organizations. In the initial growth phase, we also noted that to satisfy evolving customer needs whilst working in synchronicity with external partners, the firm’s internal agility and flexibility was also a focus of managerial attention. From both primary and secondary data, three issues surfaced repeatedly: governance structure, managerial decision-making autonomy, and team collaboration. In both organizations, a priority focus for senior managerial attention was described as how to configure a decentralized organization structure that best allowed individual business unit to respond quickly to the fast-changing market. The data suggest that managerial attention in both firms was directed toward creating an environment that encouraged autonomy, information sharing, and collaboration. This involved senior management facilitation of interaction and coordination between different business units to encourage both efficient use of resources and innovative development of customer offerings. Informants consistently reported how such decentralized structures enabled them to be more effective in managing resource-reallocation. 4.2 Stage 2: Reinforcing market leadership After experiencing similar initial rapid growth phases, both Alibaba and Tencent achieved market leadership (by volume of users) after about 4 years. As illustrated in Table 3, at this stage of development, a key challenge facing both management teams was how to adapt the organization to protect the user base and sustain their leading position. Mechanisms of customer dialogue and interaction remained a managerial focus, taking on new significance as drivers of diversification. Table 3. Focus of managerial attention and impact on dynamic capability deployment during market leadership phase Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotation A focus of managerial attention on diversifying external relationships and offerings to sustain and grow the user base—identifying how to diversify to best meet evolving customer preferences and checking effectiveness of previous diversification efforts Available resources invested or re-allocated to new technologies and services, increase the diversity and complexity of the resource base to meet evolving customer needs and protect the user base size “We wanted to provide a cluster of services so customers can linger around at our sites and don’t have to go anywhere else. It’s all about the online traffic; everybody is fighting for that magic number.” (05, Alibaba) Attempt resource reconfigurations that lead to ‘externally’ held resources—such as educated customers and third-party vendor networks—that are valuable parts of the resource base but not the exclusive property of the organization “We wanted to build a business model that would work in China. In 2003, only 8% users felt comfortable shopping online, the market was still immature and we knew that the key priority was to have a big market share, not to make money, it was too early to think about making money that time” (02, Alibaba) “We worked with many local internet cafe owners to understand our customer’s preferences, their behaviors etc because they (owners) know our customers the most. We provided exclusive incentives for our customers such as QQ currency or the tool they need for QQ game at our partner’s internet café. This was also the incentives to get more local internet café owners to join our web. Everything is connected.” (08, Tencent) A focus of managerial attention on finding operating structures that protect organizational awareness of, responsiveness to, customer needs Continually reconfigure/patch the operating structures of the organization to find was to preserve the ‘smallness’ of how work is done, enabling teams to connect with customer needs “When you are getting bigger, you become less sensitive to the market. That is a very dangerous zone. We had many debates and discussion in terms of how to think big, manage small. It is about the coordination, transparency and decentralization.” (09, Tencent) “[With a new idea, the team] can try it out with 1% of our customers first and see what happens, and expand to see how it would happen with 10% of our customers and then 20%. It’s about keeping testing, monitoring, gathering customer feedback, then revising, then re-retesting. It’s like continuous spiraling development. We can’t control everything, and if we did try, by the time it got our approval, it would be too late anyway.” (03, Tencent) A focus of managerial attention on checking and nurturing the capacity of the business ecosystem that directly and indirectly supports the organization Proactively grow the resource base through collaborative development of organizations in the business ecosystem “No matter how fast we run, if the logistic company can’t catch up with us, our business wont as long as we would hope for. Both Taobao and Tmall generated great business for Logistics Company and we want to make sure they have the right capacity to absorb the growing sales” (10, Alibaba) “You need to know ‘Is your customer ready?, ‘Your surrounding conditions—like infrastructure and our partners—are they ready?’ The outcome you can achieve is not always just associated with you, what you can do, it also depend on many other things.” (07, Alibaba) Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotation A focus of managerial attention on diversifying external relationships and offerings to sustain and grow the user base—identifying how to diversify to best meet evolving customer preferences and checking effectiveness of previous diversification efforts Available resources invested or re-allocated to new technologies and services, increase the diversity and complexity of the resource base to meet evolving customer needs and protect the user base size “We wanted to provide a cluster of services so customers can linger around at our sites and don’t have to go anywhere else. It’s all about the online traffic; everybody is fighting for that magic number.” (05, Alibaba) Attempt resource reconfigurations that lead to ‘externally’ held resources—such as educated customers and third-party vendor networks—that are valuable parts of the resource base but not the exclusive property of the organization “We wanted to build a business model that would work in China. In 2003, only 8% users felt comfortable shopping online, the market was still immature and we knew that the key priority was to have a big market share, not to make money, it was too early to think about making money that time” (02, Alibaba) “We worked with many local internet cafe owners to understand our customer’s preferences, their behaviors etc because they (owners) know our customers the most. We provided exclusive incentives for our customers such as QQ currency or the tool they need for QQ game at our partner’s internet café. This was also the incentives to get more local internet café owners to join our web. Everything is connected.” (08, Tencent) A focus of managerial attention on finding operating structures that protect organizational awareness of, responsiveness to, customer needs Continually reconfigure/patch the operating structures of the organization to find was to preserve the ‘smallness’ of how work is done, enabling teams to connect with customer needs “When you are getting bigger, you become less sensitive to the market. That is a very dangerous zone. We had many debates and discussion in terms of how to think big, manage small. It is about the coordination, transparency and decentralization.” (09, Tencent) “[With a new idea, the team] can try it out with 1% of our customers first and see what happens, and expand to see how it would happen with 10% of our customers and then 20%. It’s about keeping testing, monitoring, gathering customer feedback, then revising, then re-retesting. It’s like continuous spiraling development. We can’t control everything, and if we did try, by the time it got our approval, it would be too late anyway.” (03, Tencent) A focus of managerial attention on checking and nurturing the capacity of the business ecosystem that directly and indirectly supports the organization Proactively grow the resource base through collaborative development of organizations in the business ecosystem “No matter how fast we run, if the logistic company can’t catch up with us, our business wont as long as we would hope for. Both Taobao and Tmall generated great business for Logistics Company and we want to make sure they have the right capacity to absorb the growing sales” (10, Alibaba) “You need to know ‘Is your customer ready?, ‘Your surrounding conditions—like infrastructure and our partners—are they ready?’ The outcome you can achieve is not always just associated with you, what you can do, it also depend on many other things.” (07, Alibaba) Table 3. Focus of managerial attention and impact on dynamic capability deployment during market leadership phase Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotation A focus of managerial attention on diversifying external relationships and offerings to sustain and grow the user base—identifying how to diversify to best meet evolving customer preferences and checking effectiveness of previous diversification efforts Available resources invested or re-allocated to new technologies and services, increase the diversity and complexity of the resource base to meet evolving customer needs and protect the user base size “We wanted to provide a cluster of services so customers can linger around at our sites and don’t have to go anywhere else. It’s all about the online traffic; everybody is fighting for that magic number.” (05, Alibaba) Attempt resource reconfigurations that lead to ‘externally’ held resources—such as educated customers and third-party vendor networks—that are valuable parts of the resource base but not the exclusive property of the organization “We wanted to build a business model that would work in China. In 2003, only 8% users felt comfortable shopping online, the market was still immature and we knew that the key priority was to have a big market share, not to make money, it was too early to think about making money that time” (02, Alibaba) “We worked with many local internet cafe owners to understand our customer’s preferences, their behaviors etc because they (owners) know our customers the most. We provided exclusive incentives for our customers such as QQ currency or the tool they need for QQ game at our partner’s internet café. This was also the incentives to get more local internet café owners to join our web. Everything is connected.” (08, Tencent) A focus of managerial attention on finding operating structures that protect organizational awareness of, responsiveness to, customer needs Continually reconfigure/patch the operating structures of the organization to find was to preserve the ‘smallness’ of how work is done, enabling teams to connect with customer needs “When you are getting bigger, you become less sensitive to the market. That is a very dangerous zone. We had many debates and discussion in terms of how to think big, manage small. It is about the coordination, transparency and decentralization.” (09, Tencent) “[With a new idea, the team] can try it out with 1% of our customers first and see what happens, and expand to see how it would happen with 10% of our customers and then 20%. It’s about keeping testing, monitoring, gathering customer feedback, then revising, then re-retesting. It’s like continuous spiraling development. We can’t control everything, and if we did try, by the time it got our approval, it would be too late anyway.” (03, Tencent) A focus of managerial attention on checking and nurturing the capacity of the business ecosystem that directly and indirectly supports the organization Proactively grow the resource base through collaborative development of organizations in the business ecosystem “No matter how fast we run, if the logistic company can’t catch up with us, our business wont as long as we would hope for. Both Taobao and Tmall generated great business for Logistics Company and we want to make sure they have the right capacity to absorb the growing sales” (10, Alibaba) “You need to know ‘Is your customer ready?, ‘Your surrounding conditions—like infrastructure and our partners—are they ready?’ The outcome you can achieve is not always just associated with you, what you can do, it also depend on many other things.” (07, Alibaba) Focus of managerial attention on aspect of context Influence on deployment of dynamic capability Illustrative quotation A focus of managerial attention on diversifying external relationships and offerings to sustain and grow the user base—identifying how to diversify to best meet evolving customer preferences and checking effectiveness of previous diversification efforts Available resources invested or re-allocated to new technologies and services, increase the diversity and complexity of the resource base to meet evolving customer needs and protect the user base size “We wanted to provide a cluster of services so customers can linger around at our sites and don’t have to go anywhere else. It’s all about the online traffic; everybody is fighting for that magic number.” (05, Alibaba) Attempt resource reconfigurations that lead to ‘externally’ held resources—such as educated customers and third-party vendor networks—that are valuable parts of the resource base but not the exclusive property of the organization “We wanted to build a business model that would work in China. In 2003, only 8% users felt comfortable shopping online, the market was still immature and we knew that the key priority was to have a big market share, not to make money, it was too early to think about making money that time” (02, Alibaba) “We worked with many local internet cafe owners to understand our customer’s preferences, their behaviors etc because they (owners) know our customers the most. We provided exclusive incentives for our customers such as QQ currency or the tool they need for QQ game at our partner’s internet café. This was also the incentives to get more local internet café owners to join our web. Everything is connected.” (08, Tencent) A focus of managerial attention on finding operating structures that protect organizational awareness of, responsiveness to, customer needs Continually reconfigure/patch the operating structures of the organization to find was to preserve the ‘smallness’ of how work is done, enabling teams to connect with customer needs “When you are getting bigger, you become less sensitive to the market. That is a very dangerous zone. We had many debates and discussion in terms of how to think big, manage small. It is about the coordination, transparency and decentralization.” (09, Tencent) “[With a new idea, the team] can try it out with 1% of our customers first and see what happens, and expand to see how it would happen with 10% of our customers and then 20%. It’s about keeping testing, monitoring, gathering customer feedback, then revising, then re-retesting. It’s like continuous spiraling development. We can’t control everything, and if we did try, by the time it got our approval, it would be too late anyway.” (03, Tencent) A focus of managerial attention on checking and nurturing the capacity of the business ecosystem that directly and indirectly supports the organization Proactively grow the resource base through collaborative development of organizations in the business ecosystem “No matter how fast we run, if the logistic company can’t catch up with us, our business wont as long as we would hope for. Both Taobao and Tmall generated great business for Logistics Company and we want to make sure they have the right capacity to absorb the growing sales” (10, Alibaba) “You need to know ‘Is your customer ready?, ‘Your surrounding conditions—like infrastructure and our partners—are they ready?’ The outcome you can achieve is not always just associated with you, what you can do, it also depend on many other things.” (07, Alibaba) In 2003, guided by Chinese customer feedback Alibaba launched Taobao, an online customer to customer (C2C) platform in response to the challenge posed by eBay. Alibaba invested approximately 14 million dollars to build Taobao and developed many affiliated services including Wangwang and Alipay to alleviate Chinese customer’s concern over online shopping. With its free service, it quickly started to gain momentum with more customers shifting their attention from eBay to Taobao. In 2006, eBay market share declined to 6.2%, and it soon quit the Chinese market. In delivering diversification initiatives, in an extension of activities from their earlier rapid growth phase, in both Alibaba and Tencent there was a management focus on interacting extensively with customers, business partners, and non-traditional partners such as local communities and universities. The management logic of this maneuvre, as articulated by the participants, was that successful change could best be delivered by engaging as far as possible with the whole external system in which each firm was embedded. As shown in Table 3, interviewees observed that as both companies generated more platforms to create more online traffic, new management challenges around co-ordination of internal systems started to emerge. In 2005, Tencent re-organized to protect their capacity to engage with and react to external stakeholders. The interviews suggested that there remained a managerial focus on preserving the capacities that had served the organizations well to date. Preserving their trial and error approach, there remained a management focus on keeping work processes simple, flexible, and co-directed by customer feedback. As shown in Table 3, a recurring comment was that in this period in both firms’ histories, there was an emergent focus of managerial attention on the “health” of the external context as an influencer of organizational resource base change initiatives. In an attempt to create the right conditions for growth and market leadership to continue, the IPCs sought to support the modification and extension of the resource base of external stakeholders. For example, in addition to supporting logistics firms to develop their businesses, Alibaba also formed many relationships with local training agencies, universities, and trade associations to provide free training and education sessions for its existing and potential customers. Furthermore, Alibaba built collaborative relationships with many Chinese villages’ trade associations to assist farmers to set up their own virtual business on Alibaba, Taobao, or Tmall. Some villages in China were even coined as “Taobao Villages.” This focus of managerial attention on nurturing favorable external conditions reflected a belief in “the importance of cooperating with others to reach a higher value creation for all” (senior manager, Alibaba). Because of the success and now market leading scale of Alibaba and Tencent, they had to develop collaborative mechanisms in which they acted as guides and enablers for others in their external environment. This managerial focus on deep connection with the external context was also described as having the benefit of improving decision-making and success in executing successful change. This theme recurred frequently amongst participants—internal capability to deliver change was set in the context of external surrounding conditions. Many participants highlighted that their firm’s ability to understand the future uncertainties and potential challenges, and its ability to actively address the challenges at the appropriate time with its external partners, is crucial for a firm’s ability to continually manage its resources in support of sustainable growth. 4.3 Stage 3: Open platform development phase From 2007 and 2008, both companies increasingly undertook initiatives to move from proprietary platforms to “open” platforms, e.g., by 2012, Qzone, Tencent Weibo, Tenpay, Tencent e-commerce, Soso, cb.qq.com, and QQ were open platforms for Tencent, and in 2013, Taobao re-launched as a self-organizing open platform ecosystem. In both organizations, we found that managerial attention was extensively focused on whether to open up proprietary platforms prior to the enactment of an open strategy. The emphasis in these discussions was mainly around protecting customer experience and the challenges of managing relationships with external partners in an open network. By opening up their platform, both organizations were able to attract more alliances and partners with whom to engage, stimulating platform growth and innovation. As illustrated in Table 4, this had the added benefit of growing the capacity of the IPC without permanently internalizing the resource. As one senior manager from Alibaba commented, this reflected a managerial focus on remaining nimble and effective through staying small but highly connected with the external context. Table 4. Focus of managerial attention and impact on dynamic capability deployment during open platform development phase Focus of managerial attention Impact on dynamic capability deployment Illustrative quotation A focus of managerial attention on taking actions that develop a large base of partner organizations while avoiding growing too large as a single organization Purposefully move internal resources to shared open resources, attempting to preserve the ‘smallness’ of the internal resource base and protect rapid reconfiguration potential “They (Western companies) like the game of ‘big fish eats small fish’ Well, keep expanding by eating small fishes and when you become the size of the whale, it is very difficult to turn and change. And that is what will make you fail. We now have thousands of partners to help us to use more innovative way to get more attention from customers” (02, Alibaba) “I always believe small is beautiful. It is not about how fast your machine is, it’s not about how much equipment you have, it’s about how quickly you can change yourself to meet the market. When we grow this big, we face many sources of inertia from hierarchy—they are all recipes for disaster.” (08, Tencent) “When we are all connected in the platform, they (partners, complementors) don’t belong to us but we are all part of the bigger system. It allows different individual business components to exercise their autonomy.” (05, Tencent) A focus of managerial attention on organizing and influencing the business ecosystem such that it enables the success of smaller supplier organizations Invest resources toward addressing institutional voids, nurturing options for outsourcing, and preserving the potential to keep the core resource base small and flexible “It is part of our culture to ensure the high quality of customer experience at both online and offline levels. We are not just letting them (developers) do their thing; we shared our data, our experience, and even financial sources to help them. They (developers) are working for themselves, and they understand the value of quick responses to the market. ” (03, Alibaba) “Banks don’t help small guys. If banks don’t change, let’s change the bank. People say you can never get it done because the government issues. That is a very pessimistic view. We are solving social problems for the government; we are helping small business by providing credit system and support for small businesses, so we have the government on our side” (01, Alibaba) A focus of managerial attention on developing a technology platform that allows a diverse, resilient ecosystem—focused on creating customer value—to flourish Purposefully reconfigure existing, and develop new, technological resources and infrastructure to suit the needs of a customer-value focused business ecosystem of which the organization is a key part "It is impossible for us to become an empire-like business. Your resource can only be stretched so thin. We believe that only by creating an open, collaborative ecosystem that enables its constituents to fully participate can we truly help our small businesses. We spend our focus, effort, time and energy on initiatives that will benefit the greater pool of the ecosystem and its various participants.” (02, Alibaba) “There were many heated debates about whether we should open (platform) or not. Customers were the ultimate driver for this openness, it can bring a new sea of customer experience and it certainly can help us to respond to the shock brought by mobile internet.” (11, Tencent) “When you have an open platform, it’s like building a national grid, everything is connected together, you can’t think of any elements as isolated from the others. We are all heavily dependent on one and other, and issues cannot be resolved in isolation. And we need the diversity, sometimes you need to protect these small niches developers. Without them, it will have a repercussion on our whole system as it evolves” (04, Alibaba) “We want to build a forest that is resilient, which means that diversification and sustaining different niche players are both crucial to our platform. We want to do what we do best, and let our partners to address the things that we are less capable of” (07, Alibaba) Focus of managerial attention Impact on dynamic capability deployment Illustrative quotation A focus of managerial attention on taking actions that develop a large base of partner organizations while avoiding growing too large as a single organization Purposefully move internal resources to shared open resources, attempting to preserve the ‘smallness’ of the internal resource base and protect rapid reconfiguration potential “They (Western companies) like the game of ‘big fish eats small fish’ Well, keep expanding by eating small fishes and when you become the size of the whale, it is very difficult to turn and change. And that is what will make you fail. We now have thousands of partners to help us to use more innovative way to get more attention from customers” (02, Alibaba) “I always believe small is beautiful. It is not about how fast your machine is, it’s not about how much equipment you have, it’s about how quickly you can change yourself to meet the market. When we grow this big, we face many sources of inertia from hierarchy—they are all recipes for disaster.” (08, Tencent) “When we are all connected in the platform, they (partners, complementors) don’t belong to us but we are all part of the bigger system. It allows different individual business components to exercise their autonomy.” (05, Tencent) A focus of managerial attention on organizing and influencing the business ecosystem such that it enables the success of smaller supplier organizations Invest resources toward addressing institutional voids, nurturing options for outsourcing, and preserving the potential to keep the core resource base small and flexible “It is part of our culture to ensure the high quality of customer experience at both online and offline levels. We are not just letting them (developers) do their thing; we shared our data, our experience, and even financial sources to help them. They (developers) are working for themselves, and they understand the value of quick responses to the market. ” (03, Alibaba) “Banks don’t help small guys. If banks don’t change, let’s change the bank. People say you can never get it done because the government issues. That is a very pessimistic view. We are solving social problems for the government; we are helping small business by providing credit system and support for small businesses, so we have the government on our side” (01, Alibaba) A focus of managerial attention on developing a technology platform that allows a diverse, resilient ecosystem—focused on creating customer value—to flourish Purposefully reconfigure existing, and develop new, technological resources and infrastructure to suit the needs of a customer-value focused business ecosystem of which the organization is a key part "It is impossible for us to become an empire-like business. Your resource can only be stretched so thin. We believe that only by creating an open, collaborative ecosystem that enables its constituents to fully participate can we truly help our small businesses. We spend our focus, effort, time and energy on initiatives that will benefit the greater pool of the ecosystem and its various participants.” (02, Alibaba) “There were many heated debates about whether we should open (platform) or not. Customers were the ultimate driver for this openness, it can bring a new sea of customer experience and it certainly can help us to respond to the shock brought by mobile internet.” (11, Tencent) “When you have an open platform, it’s like building a national grid, everything is connected together, you can’t think of any elements as isolated from the others. We are all heavily dependent on one and other, and issues cannot be resolved in isolation. And we need the diversity, sometimes you need to protect these small niches developers. Without them, it will have a repercussion on our whole system as it evolves” (04, Alibaba) “We want to build a forest that is resilient, which means that diversification and sustaining different niche players are both crucial to our platform. We want to do what we do best, and let our partners to address the things that we are less capable of” (07, Alibaba) Table 4. Focus of managerial attention and impact on dynamic capability deployment during open platform development phase Focus of managerial attention Impact on dynamic capability deployment Illustrative quotation A focus of managerial attention on taking actions that develop a large base of partner organizations while avoiding growing too large as a single organization Purposefully move internal resources to shared open resources, attempting to preserve the ‘smallness’ of the internal resource base and protect rapid reconfiguration potential “They (Western companies) like the game of ‘big fish eats small fish’ Well, keep expanding by eating small fishes and when you become the size of the whale, it is very difficult to turn and change. And that is what will make you fail. We now have thousands of partners to help us to use more innovative way to get more attention from customers” (02, Alibaba) “I always believe small is beautiful. It is not about how fast your machine is, it’s not about how much equipment you have, it’s about how quickly you can change yourself to meet the market. When we grow this big, we face many sources of inertia from hierarchy—they are all recipes for disaster.” (08, Tencent) “When we are all connected in the platform, they (partners, complementors) don’t belong to us but we are all part of the bigger system. It allows different individual business components to exercise their autonomy.” (05, Tencent) A focus of managerial attention on organizing and influencing the business ecosystem such that it enables the success of smaller supplier organizations Invest resources toward addressing institutional voids, nurturing options for outsourcing, and preserving the potential to keep the core resource base small and flexible “It is part of our culture to ensure the high quality of customer experience at both online and offline levels. We are not just letting them (developers) do their thing; we shared our data, our experience, and even financial sources to help them. They (developers) are working for themselves, and they understand the value of quick responses to the market. ” (03, Alibaba) “Banks don’t help small guys. If banks don’t change, let’s change the bank. People say you can never get it done because the government issues. That is a very pessimistic view. We are solving social problems for the government; we are helping small business by providing credit system and support for small businesses, so we have the government on our side” (01, Alibaba) A focus of managerial attention on developing a technology platform that allows a diverse, resilient ecosystem—focused on creating customer value—to flourish Purposefully reconfigure existing, and develop new, technological resources and infrastructure to suit the needs of a customer-value focused business ecosystem of which the organization is a key part "It is impossible for us to become an empire-like business. Your resource can only be stretched so thin. We believe that only by creating an open, collaborative ecosystem that enables its constituents to fully participate can we truly help our small businesses. We spend our focus, effort, time and energy on initiatives that will benefit the greater pool of the ecosystem and its various participants.” (02, Alibaba) “There were many heated debates about whether we should open (platform) or not. Customers were the ultimate driver for this openness, it can bring a new sea of customer experience and it certainly can help us to respond to the shock brought by mobile internet.” (11, Tencent) “When you have an open platform, it’s like building a national grid, everything is connected together, you can’t think of any elements as isolated from the others. We are all heavily dependent on one and other, and issues cannot be resolved in isolation. And we need the diversity, sometimes you need to protect these small niches developers. Without them, it will have a repercussion on our whole system as it evolves” (04, Alibaba) “We want to build a forest that is resilient, which means that diversification and sustaining different niche players are both crucial to our platform. We want to do what we do best, and let our partners to address the things that we are less capable of” (07, Alibaba) Focus of managerial attention Impact on dynamic capability deployment Illustrative quotation A focus of managerial attention on taking actions that develop a large base of partner organizations while avoiding growing too large as a single organization Purposefully move internal resources to shared open resources, attempting to preserve the ‘smallness’ of the internal resource base and protect rapid reconfiguration potential “They (Western companies) like the game of ‘big fish eats small fish’ Well, keep expanding by eating small fishes and when you become the size of the whale, it is very difficult to turn and change. And that is what will make you fail. We now have thousands of partners to help us to use more innovative way to get more attention from customers” (02, Alibaba) “I always believe small is beautiful. It is not about how fast your machine is, it’s not about how much equipment you have, it’s about how quickly you can change yourself to meet the market. When we grow this big, we face many sources of inertia from hierarchy—they are all recipes for disaster.” (08, Tencent) “When we are all connected in the platform, they (partners, complementors) don’t belong to us but we are all part of the bigger system. It allows different individual business components to exercise their autonomy.” (05, Tencent) A focus of managerial attention on organizing and influencing the business ecosystem such that it enables the success of smaller supplier organizations Invest resources toward addressing institutional voids, nurturing options for outsourcing, and preserving the potential to keep the core resource base small and flexible “It is part of our culture to ensure the high quality of customer experience at both online and offline levels. We are not just letting them (developers) do their thing; we shared our data, our experience, and even financial sources to help them. They (developers) are working for themselves, and they understand the value of quick responses to the market. ” (03, Alibaba) “Banks don’t help small guys. If banks don’t change, let’s change the bank. People say you can never get it done because the government issues. That is a very pessimistic view. We are solving social problems for the government; we are helping small business by providing credit system and support for small businesses, so we have the government on our side” (01, Alibaba) A focus of managerial attention on developing a technology platform that allows a diverse, resilient ecosystem—focused on creating customer value—to flourish Purposefully reconfigure existing, and develop new, technological resources and infrastructure to suit the needs of a customer-value focused business ecosystem of which the organization is a key part "It is impossible for us to become an empire-like business. Your resource can only be stretched so thin. We believe that only by creating an open, collaborative ecosystem that enables its constituents to fully participate can we truly help our small businesses. We spend our focus, effort, time and energy on initiatives that will benefit the greater pool of the ecosystem and its various participants.” (02, Alibaba) “There were many heated debates about whether we should open (platform) or not. Customers were the ultimate driver for this openness, it can bring a new sea of customer experience and it certainly can help us to respond to the shock brought by mobile internet.” (11, Tencent) “When you have an open platform, it’s like building a national grid, everything is connected together, you can’t think of any elements as isolated from the others. We are all heavily dependent on one and other, and issues cannot be resolved in isolation. And we need the diversity, sometimes you need to protect these small niches developers. Without them, it will have a repercussion on our whole system as it evolves” (04, Alibaba) “We want to build a forest that is resilient, which means that diversification and sustaining different niche players are both crucial to our platform. We want to do what we do best, and let our partners to address the things that we are less capable of” (07, Alibaba) Both case organizations undertook major organizational restructuring to build up an open ecosystem, with a supporting management logic that this would deliver even further mutual benefit to the firm and its partner. For Alibaba, restructuring created Taobao Marketplace, a consumer-to-consumer platform designed for consumers and small businesses; Taobao Mall, a business-to-consumer marketplace; and eTao, which targets the shopping search market. All three companies continue under the Alibaba Group. A similar example can be found in Tencent. In May 2012, to help its operation to move smoothly from PC to mobile internet and from closed platform to an open platform, Tencent underwent a restructuring of its business units into six groups including TEG (Technical Engineering Group), SNG (Social Networking Group), CDG (Corporate Development Group), IEG (Interactive Entertainment Group), MIG (Mobile Internet Group), and OMG (Online Media Group). Echoing the intentions of their re-organization in 2005, one of the purposes of this restructuring was to create small, accountable organizational units that retained an ability to deeply connect with and respond quickly to feedback from external stakeholders. Hierarchical structure was replaced by self-managed groups that focused on agile execution, reflection, collaboration, and continuous experimentation. By creating small teams within a broader supporting structure, swift responses to the customer needs were enabled through effective collaboration potential with developers. The management perspective on this approach suggested a focus in decision-making on developing the whole system, not just the resources under control of the IPC. Participant reflections on each IPC and its external stakeholders repeatedly emphasized themes of interdependency and co-evolution with managerial attention in both firms directed toward building partnerships with complementors, local communities, and even competitors to further redefine their business boundary, increase customer “stickiness” and nurture sustainability. For example, in 2012, Alibaba built a partnership with one of its main rivals Dangdang, one of the other largest e-commerce firms in China. In the following year, Alibaba further partnered with Sina Weibo, the largest Chinese microblogging website, to attract more mobile users. Tencent teamed up with competitors Sogou and complementors JD to expand its business into e-commerce. Both companies compete on attracting small/niche platforms as sources of diversity and future growth Efforts to protect and nurture the external system extended to addressing an institutional void (Mair and Martí, 2009) in the case of Alibaba. In 2014, Alibaba introduced Alipay finance service, a new money market fund for the SMEs and consumers, a mobile app, and a private bank that transform the business and consumer finance services in China. This initiative represented Alibaba’s response to a continuing challenge for their customer base—unlocking new potential for customer value creation through, and beyond, Alibaba’s offerings. In this section, through further analysis of our findings, we propose a model and explanation of how managerial attention might influence the deployment of dynamic capabilities. 4.4 Modeling the dynamics of managerial attention and dynamic capability deployment Once we had constructed the historical narratives in the preceding sections, we re-read the case data multiple times to attempt to model the dynamics of managerial attention and dynamic capability deployment. Using the visual sense-making conventions of Bryson et al. (2004), we created simple box and arrow diagrams to map the causes and consequences of managerial attention and dynamic capability deployment events from the case findings. This was an iterative process akin to emergent coding (Maxwell, 2012), in which we worked back and forth through the historical narratives, elaborating and refining the contents of the boxes and the interlinkages between them. Eventually a point of saturation was reached with an abstract process model—as depicted in figure 1—which could be applied across the case narratives to describe the dynamics of managerial attention and dynamic capability deployment in both organizations. Figure 1. View largeDownload slide Process model of interaction between managerial attention and the deployment of dynamic capabilities. Figure 1. View largeDownload slide Process model of interaction between managerial attention and the deployment of dynamic capabilities. The model contains two overlapping loops—a managerial attention loop and a dynamic capability deployment loop. The managerial attention loop indicates a sequence in which management interactions lead to a renewal or confirmation of strategic priorities, which in turn leads to managerial attention focusing on certain aspects of the organizational context. Using relevant mechanisms to “sense” aspects of the organizational context, management insights are generated about the type of resource base change required by the current situation. These insights lead to resource allocation decisions intended to adjust the resource base to better meet strategic priorities now or in the future. Resource allocation decisions and insights from evaluating the organizational context then become part of ongoing managerial interactions and dialogue. The dynamic capability deployment loop describes how the use of specific dynamic capabilities arise from the communication of resource allocation decisions. As we modeled resource base change episodes from data from our case organizations, we found that the stages in the dynamic capability loop could be aligned with Teece’s (2007) categories of sensing, seizing, and reconfiguring. The attempted use of dynamic capabilities leads to a reconfiguring change to the resource base of the firm (the actual change need not be the one intended). This change then contributes to how the organizational context of internal and external activities and interactions unfolds. Overlapping with the managerial attention loop, this shifting context might then be re-evaluated by sensing mechanisms to generate new management insights to instigate further seizing resource allocation decisions. To illustrate this model being applied, consider the example of the creation of Taobao by Alibaba. Through their work steering the organization, senior managers set a priority of developing a C2C platform to enable growth. Channels of customer feedback about C2C requirements then became a focus of attention for the management team. These sensing mechanisms enabled deep understanding about the required scope of a C2C platform to be grasped by the management team, which in turn led to c.$14M of resources being allocated to develop a new service. Once the platform was operational, how Alibaba interacted with customers and the broader business environment changed while triggering further activities from external stakeholders (such as the development of competitor offerings). As the strategic focus on C2C growth remained constant from the management team, relevant customer feedback channels remained a focus of attention in the altered organizational context. New insights were gained that both triggered further deployment of development resources toward improving Taobao and creating new resources through it (the dynamic capability deployment loop), and informed internal management interactions (the managerial attention loop). It is important to note that the model does not imply that events always unfolded as planned or in a successful way. The arrows indicate the flow of time as activities are attempted (Langley et al., 2013) without implying that any fixed period of time has passed or performance standard has been achieved. Each of the steps in the model is subject to the influence of factors such as human error and unanticipated external occurrences, which in turn had a bearing on the flow of activity and the outcomes achieved from dynamic capability deployments. Such realities were indeed regular features of the historical narratives for both organizations. Over time, through a trial and error approach, the managerial attention loop effectively acted as a learning and control mechanism for dynamic capability deployment, continually detecting and accounting for differences between intended and realized outcomes in focal aspects of the organizational context. Further, the limitations of managerial cognitive capabilities (Helfat and Peteraf, 2015) also introduced errors of reasoning and biases to the dynamic capability deployment process. 4.5 Core and contingent dynamic capabilities Eisenhardt and Martin (2000: 1106) state that “dynamic capabilities consist of specific strategic and organizational processes like product development, alliancing, and strategic decision-making.” During construction of the process model in Figure 1, we observed that certain organizational processes recurred continually, and others intermittently, throughout resource base change events in both case organizations. The processes used continually during dynamic capability deployment in each case, we propose as the core dynamic capabilities of the organization. We define core dynamic capabilities as processes to create, extend, or modify the resource base, which are continually engaged within the organization. Using the process model in Figure 1 as an explanatory device, we suggest that core dynamic capabilities are underpinned by a constant focus of managerial attention in sensing and interpreting relevant aspects of the organizational context. Core dynamic capabilities are enabled by deep, specific managerial knowledge, kept current through learning arising from repeated use of relevant sensing mechanisms. Beyond the core dynamic capabilities, we also identify a set of contingent dynamic capabilities. We define contingent dynamic capabilities as processes to create, extend, or modify the resource base which are intermittently deployed within the organization. Contingent dynamic capabilities may be deployed to deal with unexpected matters arising from the organizational context as they come to the attention of resource allocators. Contingent dynamic capabilities may be directed toward creating complementarities in the resource base that enable the outcomes of core dynamic capabilities to be exploited by the organization. From our historical case data for Alibaba and Tencent, the core dynamic capabilities for both organizations would appear to be product and platform development processes, the deployment of which continually create, modify, and extend customer value creation resources. Our findings suggested that, since inception, both firms exhibited “constant morphing” (Rindova and Kotha, 2001) through deployment of these core dynamic capabilities. We found that the use of these core dynamic capabilities were matched by a continuing strategic objective to deliver value for customers, and a continual focus of managerial attention on sensing current and future customer requirements. This managerial focus shaped resource allocation decisions consistent with a “customer value” logic, enabling continuing reconfiguration of the resource base intended to enhance customer value creation. In both organizations, managerial attention to the value attributed by the customer, not those within the firm, to new resource configurations drove the deployment of specific product and platform development dynamic capabilities. Often, this managerial focus resulted in a prioritization of resource base change toward building and sustaining customer relationships and an ever-growing customer base at the expense of short term financial performance. This was explained by management interviewees from both firms that emphasized the role of customers as ongoing informants and ultimate arbiters of value creating resource configurations. Tracking the continuing adaptation and survival of Alibaba and Tencent highlighted collaboration and external influence processes as contingent dynamic capabilities. Over their histories, managerial attention in both case organizations was directed intermittently toward collaborating with or influencing external stakeholders such as complementor firms, local communities, research institutes, regulatory agencies, and even competitors. Later in their existence, by adopting an open platform approach, both IPCs were able to benefit from close connection with an ever-growing range of external stakeholders (developers) while providing a means to sustain those external stakeholders and the organizational context in which the firm was embedded. A recurring aspect of Alibaba and Tencent’s management approach was an increasingly frequent focus on the co-execution of resource base change to create jointly owned and accessed resources with external stakeholders. Through managerial attention to engagement with external organizations, the case firms were better able to understand how to establish resource base complementarities which enabled exploitation of efforts to directly satisfy evolving customer demand. For example, Tencent collaborated with their competitor Sogou to achieve e-commerce outcomes of a scope and timescale which would not have been possible for either firm on its own. Not only was the firm able to keep costs down and flexibility high through effective external engagement, they also increased the diversity of options available for accessing relevant “external” resources. This is particularly salient in the context of China where infrastructure, such as logistics and credit systems, is relatively underdeveloped, and co-option provides a means to accelerate improvements in the operating environment for all firms. A less frequently deployed example of contingent dynamic capabilities from the organizational case histories was major internal restructuring processes. Both IPCs were observed to undertake more than one major restructure to support their evolving organizational needs while protecting openness to the influence of customers and engagement with external partners. In both Alibaba and Tencent, when the capacity to engage with external stakeholders was threatened by inertia attributed to organic development of hierarchies, action was taken to dissolve these structures to a decoupled, and better externally connected, organizational form. This structuring for openness was vital to the firms’ capacity to continuously reconfigure, reshape its resource base, and adapt the changing environment (Teece et al., 1997; Teece, 2007; Ambrosini et al., 2009). However, the need to deploy internal reconfiguration dynamic capabilities was not a continual focus of the managerial team in either organization. Instead, organizational responsiveness issues detected through a managerial focus on customer value fed back into managerial conversations and strategizing, and in turn triggered a managerial focus toward internal structuring aspects of the organizational context. Through the intermittent engagement of dynamic capabilities to internally reorganize and engage with external stakeholders, the capacity was enhanced for the case firms to create and exploit opportunities through their customer value creating core dynamic capabilities 5. Discussion—managerial attention and dynamic capabilities This article extends our understanding of the influence of managerial attention on the deployment of dynamic capability. Helfat et al. (2007) propose that the deployment of dynamic capability should be purposeful. First, echoing Ackermann and Eden’s (2011: 110) observation that “humans are purposeful and employ choice in attempting to realise their goals,” our findings show how a discrete deployment of dynamic capabilities can arise as a deliberate managerial response to a focused evaluation of aspects of the organizational context. Further, we found that a continuing managerial focus on specific aspects of the organizational context, such as customer value creation, may lead to a sense of organizational purpose underpinned by core dynamic capabilities. Through ongoing deployment of core dynamic capabilities, reconfiguration activities keep the resource base continually aligned with the focus of managerial attention and purposeful choices of the management team. As dictated by changes in the organizational context detected by resource allocators, contingent dynamic capabilities may be deployed to sustain core dynamic capabilities. Thus, indirectly the deployment of contingent dynamic capabilities can represent a purposeful management choice that protects and reinforces organizational purpose. Examined through an ABV theoretical lens, our findings help understand dynamic capabilities as a “situated phenomenon” (Ambrosini et al., 2009). The parallel, intertwined processes of managerial attention and dynamic capabilities deployment influence, and are influenced by, the continually unfolding organizational context. These insights extend Kay’s (2010, p.1216) argument that in seeking to understand dynamic capabilities it is not adequate to focus only on individual decomposable components within a firm (such as processes and routines) as “it is how these parts link together that matters.” Zeng et al.'s (2017) work shares a similar logic that understanding of dynamic capabilities can be developed from process analysis showing how steams of activities occurring over time might lead to organizational outcomes (Langley et al., 2013). Different from Zeng et al.’s (2017) work however, our study illustrates a process model that focuses specifically on the relationship between managerial attention and dynamic capability deployment activities, as they might interact over time. Our findings contribute to our understanding of the deployment of dynamic capabilities by showing how deployment processes interface with managerial attentional processes and the unfolding organizational context. In terms of the debate on the relationship between dynamic and operational processes (Helfat and Winter, 2011; Hine et al. 2014), our model suggests that the relationship between dynamic capabilities and operational capabilities is mediated by managerial attention. We find that dynamic capabilities will reconfigure the resource base, and thus operational capabilities, in response to managerial insights arising from a focus of managerial attention. However, as part of the unfolding organizational context on which managerial attention focusses, the scope and performance of operational capabilities will have some influence on whether dynamic capabilities are triggered. Second, our study suggests that through managerial learning, the nature of dynamic capability deployment in an organization might be shaped over time by external environmental conditions. Confirming the findings of previous studies (as cited in the literature review), we observed that external environmental factors may trigger the deployment of dynamic capabilities if sensed through focused managerial attention. Based on our case findings, the selection of specific organizational processes to be deployed toward purposeful resource base change will be influenced by managerial insights arising from interpreting the outcomes of continuing internal and external sensing activities. As cycles of managerial attention and dynamic capability deployment occur, managerial learning might accrue about the type and form of organizational processes required on a continual or intermittent basis to purposefully manage the organizational resource base. To develop these insights further, the process model in Figure 1 could be combined in future research with an evolutionary model of learning (Zollo and Winter, 2002) explicating how the deployment of dynamic capabilities influences, and is influenced by, the changing internal and external context of the organization. Our findings can be aligned with existing dynamic capability conceptual apparatus such as evolutionary and entrepreneurial fitness (Helfat et al., 2007). Our process model provides a foundation for exploring how managerial attention and the unfolding organizational context might influence evolutionary and entrepreneurial fitness in both deliberate and emergent ways. Our findings suggest that where managerial attentional processes are coupled to dynamic capabilities deployment processes, the potential to resist “core rigidities” will be fostered (Leonard-Barton, 1992). In both case organizations, internal routines and capabilities were not able to settle into rigidities as managerial learning continued to be updated through scrutiny of the organizational context. Given the presence of environmental scanning and learning mechanisms in our model, future studies could examine the impact of absorptive capacity (Cohen and Levinthal, 1990) on dynamic capabilities deployment, as influenced by managerial attention. Our model also provides a point of departure for developing understanding of business ecosystems and dynamic capabilities (Teece, 2007). Case histories from Alibaba and Tencent showed how managerial attention and dynamic capability deployment processes were directed at times toward developing or influencing the ecosystem in which the organizations operated. Our process model could be adopted in further studies as the starting point from which to examine the effectiveness of different dynamic capabilities in enhancing the business ecosystem, and the role of managerial attention in achieving an improved organizational context. For practicing managers, there are important implications of our work. First, our findings suggest that core dynamic capabilities can arise from continuing managerial attention toward specific aspects of the organizational context. This may beneficially bring life to organizational purpose through effective management of the resource base. At the same time, it is important to resist tendencies for managerial myopia (Levinthal and March, 1993), recognizing the need for continuing vigilance and deployment of further contingent dynamic capabilities as dictated by the organizational context. In both Alibaba and Tencent, the managerial insights gained from distributing attention between customers, suppliers, external collaborators, and internal stakeholders powered a continuing evolution of the firm in a way that was valued by the customer and through which the firm was rewarded with growth in the customer base and business performance. Two main limitations of the study must be acknowledged. First, from a small number of cases the generalizability of the findings is necessarily limited. In the discussion section above, we have attempted to achieve analytical generalizability (Yin, 2003) by connecting with established bodies of work on dynamic capability, the ABV, and managerial learning. Further studies adopting different methods and expanding on the constructs in this article might work toward statistical generalizability. We believe that replication of our findings will be possible. As Lincoln and Guba (2000: 207) suggest, “transference can take place between contexts A and B if B is sufficiently like A on those elements or factors or circumstances that the A inquiry found to be significant.” All organizations have managers, and through connection with the ABV, our process model of how managerial attention interfaces with dynamic capability deployment seems germane for organizations operating in a shifting context. This study opens many opportunities for further research. Insights into the relationship between dynamic managerial capabilities and core dynamic capabilities could further enhance our understanding of how the particularities of the management team influence organizational performance (Adner and Helfat, 2003; Helfat and Peteraf, 2015). Studies examining the form and focus of core dynamic capabilities in different organizational contexts are recommended. For example, do core dynamic capabilities have a focus other than customer value creation in different sectors or national settings? And how important is firm size and existing history to the influence of managerial attention on dynamic capabilities? It would also be valuable to examine organizational path dependence in relation to contingent and core dynamic capabilities. Do core dynamic capabilities reinforce path dependence? Do contingent dynamic capabilities offer potential for path-breaking resource reconfigurations? Further researching dynamic capabilities as a situated phenomenon could provide a route to develop understanding of dynamic capability, entrepreneurial management, and business ecosystems (Zahra et al., 2006; Teece, 2007; van der Borgh et al., 2012). 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TI - The influence of managerial attention on the deployment of dynamic capability: a case study of Internet platform firms in China
JF - Industrial and Corporate Change
DO - 10.1093/icc/dty057
DA - 2018-12-28
UR - https://www.deepdyve.com/lp/oxford-university-press/the-influence-of-managerial-attention-on-the-deployment-of-dynamic-LSScJyrbJo
SP - 1
VL - Advance Article
IS - 
DP - DeepDyve
ER -