How are dynamic capabilities conceptualized by city governments?

Source: James Padolsey on Unsplash

By Ruth Puttick

The Public Sector Capabilities Index explores if and how dynamic capabilities can be measured in a city government context. While the concept of dynamic capabilities has some history in private organizations, it is relatively nascent in the public sector, particularly at the urban level. Consequently, few individuals within city governments are familiar with the concept of dynamic capabilities. This unfamiliarity presents a dual challenge: it complicates the identification and measurement of dynamic capabilities in city government and makes it difficult to translate these findings into actionable insights for officials and practitioners.

The Problem

We know that some public sector activities are difficult to measure, or as Mintzberg put it:

“Many activities are in the public sector precisely because of measurement problems: If everything was so crystal clear and every benefit so easily attributable, those activities would have been in the private sector long ago.”

Public sector capabilities fall into this ‘hard to measure’ category.

As we have been developing the Public Sector Capabilities Index, we have found that dynamic capabilities of public organisations are not well known outside of academia, and even within academia, there is an ongoing debate on how to conceptualize or measure them within a (city) government context.

Our knowledge of dynamic capabilities in action tends to derive from case studies, showing the importance of deep qualitative engagement with governments. Yet case-based understanding has its limitations: replication and lesson drawing are not straightforward, particularly as cities have hugely differing contexts or structural conditions.

Furthermore, language matters: practitioners tend to use terms that are too imprecise for academically rigorous measurement. No-one within city government, or any of the wider experts we have engaged so far, has used any of the language or phraseology used in the existing definition of dynamic capabilities.

What we need to do

There are several things we need to do to create a Public Sector Capabilities Index that overcomes these challenges and is used by and useful for city governments:

• Tangibility — we are striving to identify what dynamic capabilities are, how they interconnect, where dynamic capabilities reside, how to measure them, and understand how they can be fostered in the city government context.
• A shared language — we are adjusting and adapting the existing language about dynamic capabilities so it resonates with city governments, national governments, and their wider audiences and partners.
• Actionable recommendations — We are seeking to make concrete recommendations for city governments, national government, and other funders, who want to improve dynamic capabilities in city governments so they can best use available resources.

Mapping dynamic capabilities to existing concepts

To guide our work, we have drawn upon the following definition of dynamic capabilities:

1. Sense-making: the ability to scan and make sense of the environment where a public organisation operates to analyze opportunities and threats.
2. Connecting: the ability to coordinate the connections, interfaces and linkages between the functions performed by a public organisation and the external environment.
3. Seizing: the ability to take advantage of emerging opportunities within a public organization’s external environment.
4. Shaping: the ability to change a public organization’s internal resources in view of changes in the external environment.
5. Learning: the ability to control and manage how the routines developed by a public organization are monitored, assessed, and ultimately discarded or institutionalized.

A central part of the development of the Public Sector Capabilities Index is to apply the concept of dynamic capabilities to a city government context. Does theory transfer to practice? Does the way city governments describe their ‘dynamic capabilities’ resonate with the language in the literature? Can their insights offer a more grounded language for dynamic capabilities?

Where dynamic capabilites reside

To help us advance our thinking, Diagram 1 draws on our research with city governments and wider experts, to show how the existing definition of dynamic capabilities could be adapted and developed to suit a city government context. It is worth emphasising that this diagram is a work in progress. It is intended as a straw man to help prompt discussion and debate to advance our thinking and the wider field.

Diagram 1: Work in progress sketch to show how dynamic capabilities could be conceptualized in city governments

Work in progress

The categorisation is unlikely to be the final iteration. During this exploratory project, it will be an ongoing “work in progress” to help us think through how we conceptualise city government dynamic capabilities. As we move into testing the index and we continue to engage with city governments around the world and reflect on the insights gained, our thinking will inevitably evolve. We hope that by proposing one configuration, we can solicit input to help develop and improve it.

Future work

There are several unanswered questions and areas for further work that the team are currently exploring:

• How do we measure effectiveness? For example, simply having an innovation lab does not automatically mean that a city has effective (dynamic) capabilities. Data and assessment are a central tenant of developing the Public Sector Capabilities Index, and we have a dedicated data team working on this.
• Who decides when dynamic capabilities are deployed? Who oversees the whole process and how? And what are the interlinkages between the different stages
• How to capture capabilities in the wider ecosystem? Our focus is on the capabilities within the city government, but there are interdependencies with the wider ecosystem, so how do we account for these?
• How to distinguish dynamic capabilities from routine capabilities? What is the distinction between dynamic capabilities and the ability to effectively leverage opportunities and solve problems with just simple effective government and “good governance”?

For the endeavor of creating a Public Sector Capabilities Index to be successful, we need to move from theory to practice, from the high level to the practical, to create a robust conceptualization that resonates with city governments. And to be useful, we need to be able to make concrete recommendations to city governments and others who support their problem-solving efforts by answering the following: “To have effective dynamic capabilities, what should city governments do differently? What will it cost? And what will it achieve?”.

Get involved

We will continue to engage with city governments and wider experts to continue exploring how dynamic capabilities can be assessed and fostered. Our intention is to move into testing these our index with city governments in Autumn/Fall 2024, before we publish our feasibility report in mid-2025.

If you have ideas or feedback, we would love to hear from you. Please contact Ruth Puttick, r.puttick@ucl.ac.uk.