Core Competence
(Hamel Prahalad)

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Inside-out strategy. Explanation of Core Competence of Hamel and Prahalad.

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Core CompetenceThe Core Competence model of Hamel and Prahalad is a corporate strategy model that starts the strategy process by thinking about the core strengths of an organization.


Inside-out Corporate Strategy

The Outside-in approach (such as the Five Forces model from Porter) 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 a Core Competence, at lower cost and more speedily than competitors. The Core Competence may result in 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, through which individual businesses can adapt quickly to changing circumstances. A Core Competence can be any combination of specific, inherent, integrated and applied knowledge, skills and attitudes.


In their article "The Core Competence 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 argue that a corporation should be built around a core of shared competences. Compare: Horizontal Integration.


Business units must 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 articulating the strategic architecture that guides the process of competence building.
 

Three tests for identifying a Core Competence

  1. Provides potential access to a wide variety of markets.
  2. Makes a significant contribution to the benefits of the product as perceived by the customer.
  3. A CC should be difficult for competitors to imitate.

Building a Core Competence

A Core Competence is built through a process of continuous improvement and enhancement (compare: Kaizen). It 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, but must add value by articulating the strategic architecture that guides the process of competence building.
 

Once top management (with the help of Strategic Business Units managers) have identified an all-embracing Core Competence, it must ask businesses to identify the projects and the people that are closely connected with it. Corporate auditors should perform an audit of the location, number, and quality of the people related to the CC. CC carriers should be brought together frequently to share ideas.


Core rigidities?

Care must be taken not to let core competencies develop into core rigidities. A Corporate Competence is difficult to learn, but is difficult to unlearn as well. Companies that have spared no effort to achieve a competence, sometimes neglect new market circumstances or demands. They risk to be locked in by choices that were made in the past.


E-Article: C.K. Prahalad, Gary Hamel - The CC of the Corporation -

Book: Michael Goold, Andrew Campbell - Corporate-Level Strategy -

Book: C.K. Prahalad, Gary Hamel - Competing for the Future -




Core Competence Forum (23 topics) Help
  People are our Greatest Asset
How practical are Prahalad and Hamel (1990) when they suggest that the general managerial epithet, “people are our greatest asset” is a tired cliché?...
     
  Is There Any Difference Between a Competence and a Competency?
Is there any difference between an organizational / strategic competence and a competency? In other words are competences the same as competencies?...
     
  Competences versus Core Competences versus Resources
What is the relationship between competences, core competences and resources?
I'm a bit confused right now......
     
  How Does a Core Competence add Value?
What can core competences do and how to they add value to and within the organisation? Please share your thoughts and references / ideas. Thank you!...
     
  Financial Valuation of a Core Competence
How can a firm determine the financial valuation of individual CCs? How can we measure the value of a core competence?...
     
  Defining New Services / Capabilities
How can we come up with ideas to develop new services, based on current internal strength of existing services and capabilities?
What techniques can be used? Please share your thoughts, thank you for your ideas......
     
  Core Competency versus Corporate Competency?
Is there any difference between core competency and corporate competency?
If yes, then please explain....
     
  Core Competences and Porter's 5 Forces
Core competencies are like one pole of a magnet, opposite poles always attract each other. The other pole is customer's expectation's or the gap filling.
How you use your CC's with ref to Porter's Five Forces is also important....
     
  Leadership & Core Competence
Resources that might be easily available will not enable a business to achieve a competitive advantage over rivals. If a core competence yields a long term advantage to the company, it is said to be a sustainable competitive advantage.
Good lead...
     
  Core Competency Should be Challenged
A Core Competency should be difficult for competitors to imitate. But I would like to add that it should also be challenged from time to time by the competitors. Otherwise it will fail to deliver desired results. History says innovation is important ...
     
  Core Competences Change due to ICT
(In what way) Did core competences change after the ICT evolution?...
     
  Examples of Core Competences
Here are few examples of Core Competencies you frequently see in literature on CCs:
Apple: user-friendly design of electronic consumer devices
Intel: innovative design and manufacturing of computer processors
Honda: building very effic...
     
  CC as an Organisational Trait(s)
Try to define your organisation's Core Competency and you find yourself with the same problem as trying to identify your son's talent! He may be a good runner, but, not good enough.
Many companies do a lot of activities exceedingly well and stil...
     
  Outside- in vs. Inside-out
I think the debate on the wisdom of an "outside- in" vs. "inside-out" approache is misplaced. CC is clearly the latter but unless you match your CC with market opportunities, CC will not yield desired results....
     
  The Virtual Company and Core Competences
It's interesting to consider a Virtual Business when you are thinking about Core Competences:
1. The Virtual Company focuses as much as possible / entirely on its own Core C...
     
  Integrating the Core Competence
Having identified the core competence of the organisation, the real challenge - particularly in knowledge intensive organisations - lies ahead in integrating it with the competences of its people so as to enhance the overall organisational capability...
     
  Utilizing a Core Competence
Once an organization has defined its Core Competence, finding or creating new markets to leverage the CC becomes a crucial task. Who can give some advise or suggest a generic method how such markets can be discovered? Please share your experiences....
     
  Is CC REALLY Different from FF?
The trouble with this article and concept is that it begins by suggesting that CC is opposite to Porter's FF approach in that it places CC at the start as opposed to FF which places market, competition and customer first. Then you read down to the "T...
     
  Identifying a Core Competence
How can a firm identify its CC?...
     
  Why Protect Core Comp
Why a firm has to ensure it's CC hard to imitate? the whole market should be aware about a firm CC and the firm should use it in thier marketing activities for branding its culture, it's like using the ISO (I think!!)....
     



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Expert Tips - Core Competence Premium
  Developing Core Competencies - Strategy
 
  Uses (Advantages) of Core Competencies - Strategy
 
  Customer Centricity: Success Factors for Customer Intimacy - Value Disciplines, Customer Strategy, Customer Intimacy, Customer-oriented, CRM
 
  A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times? - Inside-out Corporate Strategy, Corporate Visioning
 
  Qualities of Core Competences - What is a Core Competence and What isn't?
 
  The Key Role of the Strategy Competence in Creating Sustainable Competitive Advantage - Business Strategy, Corporate Strategy, Competitive Advantage, Strategy Education
 
  How to Change a Firm's Core Business? - A 7-Step Process
 

Resources - Core Competence Premium
Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies - Core Competencies
Core Competence - Short explanation
Porter's Industrial Organization Versus Barney's Resource Based View - Business Strategy, Value Chain Management
Core Competence Diagram - Inside-out Strategy
Perspective: Biography Prahalad (1941-2010) - Developing a Broader Perspective towards the Ideas of Prahalad
Core Competencies. What are They, Inventory and Test - Discovering Core Competencies
 

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Compare with Core Competence:  Resource-Based View  |  Blue Ocean Strategy  |  Outsourcing  |  Delta Model  |  Vertical Integration  |  Porter  |  Strategic Types  |  Parenting Advantage  |  Four Trajectories of Industry Change  |  Forget Borrow Learn  |  Parenting Styles  |  Experience Curve  |  BCG Matrix  |  Growth Phases  |  Distinctive Capabilities  |  Organizational Configurations  |  Centralization and Decentralization  |  Management Buy-out  |  Acquisition Integration Approaches  |  Co-Creation  |  Strategic Intent


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