Core Competence
(Hamel Prahalad)

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

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 -

Core Competence Special Interest Group Special Interest Group (171 members)

Core Competence Forum   Recent topics   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?...           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 star...           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 filli...           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...           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 c...           Integrating the Core Competence Having identified the core competence of the organisation, the real challenge - particularly in knowledge intensive organisations - lies ahead in inte...           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 wi...           Core Competences Change due to ICT (In what way) Did core competences change after the ICT evolution?...           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 ...           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?...           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           Collaboration and CC How can a firm avoid that its core competence(s) are threatened when it is collaborating with other firms such as in demand chain collaboration or out...           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!...

Best Practices - Core Competence   Why Protect 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 th...           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 goo...           Identifying a Core Competence How can a firm identify its CC?...           Core Competency versus Corporate Competency? Is there any difference between core competency and corporate competency? If yes, then please explain....           Imitation of Core Competence How can a firm ensure that its core competence(s) are hard to imitate?...           The Virtual Company and Core Competences It's interesting to consider a Virtual Business when you are thinking about Co...           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 adv...           Always link Strategy to CC Core competencies are the activities in which any organization does exceedingly well and they are always built over time. Therefore corporate strategi...

Expert Tips - Core Competence   Developing Core Competencies       Uses (Advantages) of Core Competencies       Customer Centricity: Success Factors for Customer Intimacy       A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times?       Qualities of Core Competences       The Key Role of the Strategy Competence in Creating Sustainable Competitive Advantage       How to Change a Firm's Core Business?

Resources - Core Competence Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies   A Service-Dominant Logic on the Firm   Core Competence   Porter's Industrial Organization Versus Barney's Resource Based View   Core Competence Diagram   Perspective: Biography Prahalad (1941-2010)   Core Competencies. What are They, Inventory and Test     News about Core Competence         News about Competence Prahalad         Videos about Core Competence         Videos about Competence Prahalad         Presentations about Core Competence         Presentations about Competence Prahalad         Books about Core Competence         Books about Competence Prahalad         More about Core Competence         More about Competence Prahalad

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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