Capability evolution of a small software company

Abstract

The software industry experienced a period of particularly rapid evolution in the years just before and after the turn of the millennium. Many new companies were established that took advantage of internet technologies and internet-based business models. The circumstances that these companies operate under have changed and continue to change rapidly. This study is about identifying the appropriate building blocks of a capability-based strategy for one such company. The academic starting point of this study is the resource-based view of the firm. The objectives of the study are to describe the case company's strategic capabilities, to analyse strategic alternatives available to the firm and to identify areas where capability development is needed. An additional objective is to explore the economic and organisation-theoretical foundations of the resource-based view of strategy. The research method used in this study is semi-structured interviews. The respondents are people with experience of working with the case company, mostly in the role of customer. In the interviews many aspects of the case company were discussed: its historical capability development, its current capability levels, its strategic opportunities and its capability development needs. The study identifies four distinctive capabilities of the case company: quick understanding and reaction to customer needs, service quality, complementarity with the clients' competences, and thorough understanding of one particular credit card product. These are the underpinnings of the company's current operations. The results of the study suggest that the case company should be able to attain its stated goal of organisational growth by taking advantage of business opportunities offered by its current main customer. The case company is encouraged to take a strategic path which in the short term leverages its distinctive capabilities and increases its level of specialisation. In the longer term these efforts should enable firm growth and a subsequent expansion of the customer base. The report recommends paying attention to the dynamics of firm growth and goal formation, and closes with a proposal for a tangible action plan.