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The core competencies
model of Hamel and Prahalad is an inside-out corporate strategy model that
starts the strategy process by thinking about the core strengths of an
organization.
Where the
outside-in approach (such as Porter's five
forces model) places the market, the competition, and the customer at
the starting point of the strategy process, the core competence model
does the opposite by stating that in the long run, competitiveness derives
from an ability to build, at lower cost and more speedily than
competitors, the CC that spawn unanticipated products. The
real sources of advantage are to be found in management's ability to
consolidate corporate-wide technologies and production skills into
competencies that empower individual businesses to adapt quickly to
changing circumstances. As CC can be seen
any combination of specific, inherent, integrated and applied knowledge,
skills and attitudes.
In their article "The
CC of the Corporation" (1990) Prahalad and Gary Hamel
dismiss the portfolio perspective as a viable approach to corporate
strategy. In their view, the primacy of the Strategic Business Unit is now
clearly an anachronism. Hamel and Prahalad carry on to argue that a
corporation should be build around a core of shared competences.
Business units
should use and help to further develop the CC(s). The corporate center should not be just another layer of
accounting, but must add value by enunciating the strategic architecture
that guides the competence acquisition process.
Three tests to identifying a
CC are:
1. provides potential access to a wide variety of markets,
2. should make a significant contribution to the perceived customer benefits of the end product(s), and
3. a
CC should be difficult for competitors to imitate.
Core competencies
are built through a process of continuous improvement and enhancement
(compare: Kaizen). They should
constitute the focus for corporate strategy. At this level, the
goal is to build world leadership in the design and development of a
particular class of product functionality. Top management can not be just
another layer of accounting consolidation, but must add value by
enunciating the strategic architecture that guides the competence
acquisition process.
Once top
management (with the help of divisional and Strategic Business Unit
managers) has identified an overarching CC, it must ask businesses to identify the projects and the
people closely connected with them. Corporate auditors should direct an
audit of the location, number, and quality of the people who embody the
CC. CC carriers should be brought together frequently to
trade notes and ideas.
E-Article: C.K. Prahalad, Gary Hamel - The CC of the
Corporation -
Book: Michael Goold, Andrew Campbell - Corporate-Level Strategy : Creating
Value in the Multibusiness Company -
Book: C.K. Prahalad, Gary Hamel - Competing for the Future -
Compare with Core Competence:
Resource-Based View
| Blue Ocean Strategy
| Outsourcing |
Delta Model
|
Porter |
Parenting Advantage |
Four
Trajectories of Industry Change
|
Parenting Styles |
Experience Curve |
BCG Matrix
|
Greiner
|
Kay
|
Mintzberg |
Management buy-out |
M&A
| Strategic
Intent
Note: care must be
taken not to let core competencies develop into core rigidities.
Corporate competences are difficult to learn, but are difficult to unlearn as well. Companies that shave pared no effort to achieve a
competence, sometimes neglect new market circumstances or demands and find
themselves locked in by choices made in the past.
More management models
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