How do changes in organizational routines lead to changes in the capabilities that produce strategic renewal? To address this question, we conducted a case study of the evolution of Saab Training Systems (STS) – a defense business that underwent strategic renewal over a period of fifteen years. Our analysis of the evolutionary process demonstrates that changes in organizational routines do not necessarily create the capabilities needed for strategic renewal. Environmental changes led to capabilities becoming obsolete, which in turn created pressures to reconfigure the capability base of the business. In the process of transforming new routines into new capabilities, knowledge codification mattered more than other capability learning mechanisms.