Core Competence
(Hamel Prahalad)

Knowledge Center

The 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

Forum Start a new topic about Core Competence Write here. Ask a question or explain something. Current forum discussions about Core Competence: Why Protect a Core Competence? Why should a firm ensure its core competence is hard to imitate? The whole market should be made aware about a firm's Core Competence (CC) and the firm should use it in their marketing/branding activ... 40   12 comments How to Grow the Core Competence as an Organizational Trait? 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... 26   5 comments Identifying a Core Competence How can a firm identify its CC?... 24   6 comments How to Protect and Avoid Imitation of a Core Competence? How can a firm ensure that its core competence(s) are hard to imitate?... 23   7 comments How to Leverage a Core Competence you Have 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 c... 22   4 comments

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Expert Tips Advanced insights about Core Competence. Here you will find professional advices by experts. Consultancy Tips Teaching Tips Practical Implementation Tips Developing Core Competences Strategy In order to develop core competences, a company should: - Isolate its key abilities and develop and improve them into o... Uses (Advantages) of Core Competences Strategy Core competences are capturing the collective learning in an organization and can be used to: - Design and develop comp... Customer Centricity: Success Factors for Customer Intimacy Value Disciplines, Customer Strategy, Customer Intimacy, Customer-oriented, CRM Customer / Consumer Centricity (CC) is a frequently used concept used by companies to achieve competitive advantages. It...

Information Sources Various sources of information regarding Core Competence. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies Core Competencies Javidan (1998) has made a great contribution to answering the question for the relationship / differences between resour... A Service-Dominant Logic on the Firm Service-Dominant Logic, Perspectives on Marketing Presentation about a service-dominant logic mindset in marketing, including the following sections: 1. Getting the logi... Core Competence Short explanation Short article explains core competences....

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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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