core competence
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core competenceTRANSCRIPT
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The Core Competence of the Corporation
.
A Presentation for Harvard Summer School ‘13 By Ritesh Malik Akshara ravilla Sonal Kotecha Eesha Palkar
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Perspective of Core Competence
Concept of Core Competence :-C. K. Prahalad
Professor of corporate strategy and international business at University of Michigan.
Gary Hamel:Lecturer in business and policy management
at London Business School.
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Introduction: Main IdeaIdea: The evolution of global management and the
emergence/importance of Competency-minded managementRethinking the Corporation The Roots of Competitive Advantage Identifying Core Competencies – And Losing Them The Tyranny of the SBU Developing Strategic Architecture
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Core Competence
What is Core Competence??
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Core Competence is : a bundle of skills integrated to make a
company unique. the engine for new business
development, underlying component of a company’s competitive advantage.
created from the coordination, integration and harmonization of diverse skills and multiple streams of technologies.
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Video by Prahladhttp://www.youtube.com/watch?v=WfP-VICbLRA
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Rethinking the CorporationBuild product for customers need but have not yet even
imagined.Requires radical change in the management of major
companies.Understand the changing basis for global leadership.
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Analyze the Case
Strategic architecture: to exploit the convergence of computing and communicating(“C & C”).
Acquired competencies in semiconductors.Used collaborative arrangements to multiply
internal resources.Now a world leader in consumer electronics
Image source: NEC
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GTENo strategic Architecture existed.Decentralization made it difficult to focus on core
competence.Senior managers worked as if they were managing
independent business unit.No mutual decision was made.
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Roots of Competitive AdvantagePortfolio of companies versus portfolio of
Business:Canon(personal copiers), Honda(from bikes to four
wheelers).Sony, Casio, Yamaha,Komatsu invented new devices.
Consolidating corporate-wide technologies and resources into competencies.
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Cont..In Short Run companies, its competitiveness
derives from price/performance attributes of current products.
In Long Run companies, its competitiveness derives from an ability to build at lower cost and more speedily than competitors.
Western companies “stuck” in old mentality.Diversified corporation is a “large tree”.
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Identifying Core Competencies – And losing them
How to identify: Accessibility: provide potential access to a variety of
marketsValue-creation: make a significant contribution to
perceived customer benefits of the end product Uniqueness: Be difficult for competitors to imitate
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Identifying Core Competencies – And losing themHow to lose:A Core Competency is lost:
Through outsourcing/OEM-supply relationships=> Example: Chrysler vs HondaThrough giving up opportunities to establish
competencies that are evolving in existing businesses
=> Example: television business
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The Tyranny of the SBU
Two Concepts of the Corporation: SBU or Core Competence SBU Core Competence Basic for competition Competitiveness of today’s products Interfirm competition to build competencies Corporate structure Portfolio of businesses related in product-
market terms Portfolio of competencies, core products, and businesses
Status of the business unit Autonomy is sacrosanct, the SBU “owns” all resources other than cash
SBU is potential reservoir of core competencies
Resource allocation Discrete businesses are the unit of analysis, capital is allocated business by business
Businesses and competencies are the unit of analysis: top management allocates capital and talent
Value added of top management Optimizing corporate returns through capital allocation trade-offs among businesses
Enunciating strategic architecture and building competencies to secure the future
Figure source: Prahalad, C.K., Hamel, G. (1990). “ The Core Competence of the Corporation”. Harvard Business Review, 86.
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The Tyranny of the SBUThe ineffectiveness of SBU model:
Underinvestment in Developing Core Competencies and Core Products
Imprisoned ResourcesBounded Innovation A shift in management is inevitable.
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Developing Strategic ArchitectureA strategic architecture:
Establish objectives for competence buildingA road map of the future that identifies which core
competencies to build and related technologiesCreate a managerial culture, team work, a capacity
to change, and a willingness to share resources, to protect proprietary skills, and to think long term
Consistency of resource allocation, administrative infrastructure
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Developing Strategic ArchitectureManagement duties : To identify and commit to
technical and production linkages across SBUs that will provide a distinct competitive advantage.Top management: make resource allocation priority
decision.Lower level of management: understand and
maintain consistency with top management’s decision and disciplines.
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Benefits of Strategic Architecture• Reduce the investment needed to secure future
market leadership• Provide a logic for product and market diversification• Reduce R&D costs.
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Vickers Learns the Value of Strategic Architecture
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Redeploying to Exploit Competencies
SBUs should bid for core competencies in the same way they did for capital.
How to exploit:SBUs must defend why they need certain talentsSBUs must sacrifice short term in return for long
term benefitsRotation
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ConclusionThis article is a radical breakthrough in
management.Strengths of the article:
Timely, ground-breaking, forward-looking
Weakness of the article:Difficult to read and understand fully
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A presentation for MNGT of Technology &
Innovation by Prof. Thachenkary
Akshara Ravilla Eesha Palkar
Sonal Kotecha Ritesh Malik