thecorecompetenceofthecorporation-131213004715-phpapp01

8/12/2019 thecorecompetenceofthecorporation-131213004715-phpapp01

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The Core Competence of the

Corporation

Ref: CK Prahalad & Gary Hamel


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A Tale of Two CompaniesNEC:% of Total Sales-1990

Comm Sys &

Eqpt

25%

Comp & Ind

Electronic

Devices

45%

ElectronDevices

18%

Other

12%

GTE: % of Total Sales-1990

Tel Ops

70%

Comm Prods &

Services

18%

Electrical

Products

12%


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NEC vs GTE

Sales

0

5

10

15

20

25

81 82 83 84 85 86 87 88 89 90

Year

US$

bn

NEC

GTE


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WW Electronic Supplier Ranking-1987

Sales US $ bn

Computers Telecomms SemiConductors

IBM 50 AT&T 17 NEC 3

UNISYS 10 ALCATEL-ITT 8 HITACHI 2.5

DEC 9 NORTEL 4 TOSHIBA 2.5

FUJITSU 7 NEC 4 MOTOROLA 2.5

NEC 6 SIEMENS 3 TI 2


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Determinants of Firm Profitability

PESTE

15%

5 Forces

40%

You

(Management)45%


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The Three Stages of Competition

OPPORTUNITYHORIZON

STRATEGICARCHITECTURE

COMPETITIVESTRATEGY

Visionof future mkts

Corporate ambitionSense of purpose

Resources (

technology,brands etc)

Competencies

Skills

Industry analysis

Strategic segmentation& positioning

Cost & differentiation

drivers

Competition forExisting Markets

Competition forResources &

Competencies

Competition for

Dreams


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Want to build your brand, create new markets and delight

customers?

Strengthen core

competencies

collective knowledge

that gathers yourfirms diverse skills

and technologies into

one laser-sharp

strategy


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Focus on

Price &

Performance

Short Term

Competitiveness

Ability to build Core

Competencies that generate

Products of the Future

Long Term

Competitiveness


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3 STEPS TO STAYING AHEAD OF

COMPETITION

1. CLARIFY CORE COMPETENCIES

2. BUILD CORE COMPETENCIES

3. CULTIVATE CORE COMPETENCY MINDSET


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CLARIFY CORE COMPETENCIES

1. Articulate Strategic Intent

2. Identify Core Competencies


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Articulate A Strategic Intent

NEC: Exploit the convergence of computing &

communications


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Consider 2 Firms

Firm A Firm B

Aspirations: Modest High

SLACK STRETCH

Resources: High Modest


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Consider 2 Firms (contd)

Firm A

Hi Risk Low Creativity

Firm B

Low RiskHigh Creativity


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Strategic IntentWho would you have bet on 30 years ago?

CATERPILLAR or KOMATSU ?

PHILIPS or SONY ?

RCA or MATSUSHITA ?

GM or HONDA ? HONEYWELL or NEC

PAN AM or BRITISH AIRWAYS ?

CBS or CNN ?

XEROX or CANON ?


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More Examples of Strategic Intent

3M: To solve unsolved problems innovatively

Merck: To preserve and improve human life

Nike:To experience the emotion of competition,winning and crushing

competitors

WalMart: To give ordinary folks the chance to buy the same things as

rich people

Walt Disney: To make people happy


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Identify Core Competencies

How long could we dominate this business if we didntcontrol this competency?

What future opportunities would we lose without it?

Does it provide access to multiple markets? (Casios corecompetence with display systems let it succeed incalculators, laptop monitors and car dashboards)

Do customer benefits revolve around it? (Hondascompetence with high revving, light weight engines offersmultiple consumer benefits)


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BUILD CORE COMPETENCIES

1. Invest in needed technologies. e.g. Citicorp

2. Infuse resources throughout business units to outpace

rivals. e.g. 3M, Honda

3. Forge Strategic Alliances.

e.g. NEC - Honeywell


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CULTIVATE A CORE COMPETENCY

MINDSET

1. Stop thinking of business units as sacrosant

2. Identify projects & people who embody the firms core

competency

3. Gather managers to identify next generation competencies


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Core Competency

(Harmonizing technologies & skills)

3M

Sandpaper

Magnetic Tape

Reflecting Sheet

Sony

Miniaturization


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Competencies: The Roots of Competitiveness (Strategic Architecture)

Competency

1

Competency

2

Competency

3

Competency

4

Core Product 1

Core Product 2

Business

1

Business

2

Business

3

Business

4

1 2 3 4 5 6 7 8 9 10

End Products


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The diversified corporation , is like a large

tree. The trunk and major limbs are core

products, the smaller branches are

business units. The leaves, flowers and

fruits are end products. The root system

that provides the nourishment, sustenanceand stability is the core competency.


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Core Competencies at Canon

Core Competencies

Precision mechanics

Fine optics Micro-electronics

Core Products

Camera

Printer Copier

Aligners


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The Core Product

Reduces fragmentation

Unifies underlying skills

Allows selling to competitors


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A New View of the Corporation

(Layers of Competitive Advantage)

Portfolio of Businesses

Portfolio of Core Competencies

Portfolio of Core Products


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Vickers Map of Competencies

Vickers Map of Competencies

Electronic Controls

-Valve amplifiers

Logic

Motion

Fluid Power

Electrohydraulic

Pumps

Control Valves

Electric Power

AC/ DC

Servo

Stepper

Sensors

Valve/Pumps

Actuator

Machine

System Engineering

Application Focus

Power/Motion

Control

OfferingsSystems Packages Components Service

Training

Focus Markets

Factory Automation Off Highway Missiles/Space

Automative Systems Commercial Aircraft Defence Vehicles

Plastic Process Military Aircraft Marine

Electric Products

Actuators

Fan Packages

Generators


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2 Concepts of the Corporation: SBU or Core Competence

SBU Core Competence

Basis for competition Competitiveness oftodays products Interfirm competition tobuild competencies

Corporate Structure Portfolio of businesses

related in product-market

terms

Portfolio of

competencies,core

products and businesses

Status of the business unit Autonomy issacrosanct;the SBU

ownsall resources

other than cash

SBU is a potentialreservoir of core

competencies

Resource Allocation Discrete businesses are

the unit of analysis;

capital is allocated

business by business

Businesses &

competencies are the unit

of analysis;top

management allocates

capital &talent

Value added of top

management

Optimizing corporate

returns thrucapital

allocation trade-offsamong businesses

Enunciating strategic

architecture & building

competencies to securefuture


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Unleashing Corporate Imagination

Escape the myopia of served market

Think functionality

Challenge price/ performance assumptions

Discover white space opportunities

Employ expeditionary marketing


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Toshibas New Models of Laptops(expeditionary marketing)

1986 4 models

1987 6

1988 8

1989 5

1990 - 10


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The Tyranny of the SBU

Under investment in core competencies and core products

Imprisoned resources

Bounded innovation


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Mobilizing the Organization

Establish an aspiration

level

Analyse with cross-functional teams

Deploy throughout the

organization.

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