The Core Competence of the Corporation

By: C.K. Prahalad and Gary Hamel

Make-Up of the Paper

1.  The Idea in Brief - NEC vs GTE

2. The Idea in Practice - Identify Core Competencies - Build Core Competencies - Cultivate a Core Competency Mindset

Case Study of NEC vs GTE

Case Study of NEC vs GTE

Case Study of NEC vs GTE

WHY?? •  NEC conceived of itself in terms of CORE

COMPETENCIES, GTE did not!!

Case Study of NEC vs GTE

Case Study of NEC vs GTE

Identify Core Competencies

•  Articulate a Strategic Intent that defines your company and its markets.

•  Identify Core Competencies that support that Intent - 1. “How long could we dominate our business if we did not control this competency?” 2. “What future opportunities would we lose without it?” 3. “Does it provide access to multiple markets?” 4. “Do customer benefits revolve around it?”

Identify Core Competencies “How long could we dominate our business if we did not control

this competency?”

•  Short-run: Competitiveness derives from the Price/Performance attributes of Current products.

•  Long-run: Competitiveness derives from an Ability to Build at Lower Cost and at Faster Speed than Competitors + Core Competences that spawns unexpected products.

Identify Core Competencies “What future opportunities would we lose without it?”

•  In 1970s and 1980s, American and European companies such as GE, Motorola, GTE, Thorn and GEC chose to exit the colour television business which they regarded as mature.

•  They lost out on a $20-billion-a-year opportunity that HDTV represents in the 1990s.

Identify Core Competencies “Does it provide access to multiple markets?”

1)  Casio’s core competence with display systems allows it’s success in calculators, laptop monitors, miniature televisions and car dashboards.

2)  3M’s competence with sticky tape has dreamt up businesses as diverse as “Post-It” notes, magnetic tape, photographic film, pressure-sensitive tapes and coated abrasives.

Identify Core Competencies “Do customer benefits revolve around it?”

Example: Honda’s competence with high-revving, lightweight engines offer multiple consumer benefits.

Build Core Competencies

•  Invest in needed technologies.

•  Infuse resources throughout business units to outpace rivals in new business development.

•  Forge strategic alliances.

Cultivate a Core-Competency Mindset

•  Stop thinking of business units as sacrosanct.

•  Identify projects and people who embody the firm’s core competencies.

•  Gather managers to identify next-generation competencies.

Pointers to Take-away •  Core competence is about harmonizing streams of technology, organization of

work, and the delivery of value.

•  Cultivating core competence does not mean outspending rivals on R&D or vertically integrating businesses.

•  Maintain world manufacturing dominance in core products, and you will reserve the power to shape the evolution of end products.

•  Top management’s real responsibility is a Strategic Architecture that guides competence building.

•  A company is capable to compete only if it is conceived of as a hierarchy of core competencies, core products, and market-focused business units.