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Past research using the resource-based view of a firm suggests that it is important to consider how firms develop, manage, and deploy resources and capabilities to influence the overall process of strategy formation and implementation. Relatively little research has been conducted in conceptualizing how firms implement and manage modularity of organizational routines during capability development. Yet, most companies would benefit from implementing modularity in organizational routines when competing in dynamic market conditions. Such implementations may require fundamental organizational reorientation that incurs significant coordination costs, and in some cases, such modularization attempts may fail, costing organizations significant amounts of valuable resources. This study seeks to conceptualize how modularity of organizational routines can be achieved during the capability development process. We inductively develop a process model of modularization, using qualitative data of an in-depth case study of the capability development experience of a call center. The model reveals that modularization is a complex process, whereby an organization's key functional activities are decomposed into specific operating and strategic routines that are reconfigured iteratively during the process of capability development. Practitioners may derive strategies and tactics from our findings to help them implement and manage the modularity of organizational routines during capability development so as to achieve sustainable competence in fast-moving marketplaces. Researchers should be able to use and develop the theory further with new case studies.