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   Forum about Core Competence. People are our Greatest Asset How practical are Prahalad and Hamel (1990) when they suggest that the general managerial epithet, “people are our great (...) 6   2 reactions   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 competence (...) 2   3 reactions   🔥 NEW The Role of AI in Core Competence Do you think Artificial Intelligence (big data, self-learning software, digital networks, algorithms) can be a core comp (...) 0   0 reactions

Best Practices The top-rated discussion topics about Core Competence. Here you will find the most valuable ideas and practical suggestions. 🥇 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 C (...) 34   0 reactions   🥈 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 (...) 26   3 reactions   🥉 Identifying a Core Competence How can a firm identify its CC? (...) 24   5 reactions   Core Competency versus Corporate Competency? Is there any difference between core competency and corporate competency? If yes, then please explain. (...) 17   3 reactions   Imitation of Core Competence How can a firm ensure that its core competence(s) are hard to imitate? (...) 16   6 reactions   The Virtual Company and Core Competences It's interesting to consider a when you are thinking about Core Competences: 1. The Virtual Company focuses as much as (...) 15   2 reactions   Utilizing a Core Competence Once an organization has defined its Core Competence, finding or creating new markets to leverage the CC becomes a cruci (...) 13   3 reactions   Always link Strategy to CC Core competencies are the activities in which any organization does exceedingly well and they are always built over time (...) 12   1 reactions   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? (...) 9   3 reactions   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 (...) 8   0 reactions   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 (...) 8   2 reactions   Leadership & Core Competence Resources that might be easily available will not enable a business to achieve a competitive advantage over rivals. If a (...) 7   0 reactions   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 challen (...) 6   0 reactions   Integrating the Core Competence Having identified the core competence of the organisation, the real challenge - particularly in knowledge intensive orga (...) 5   1 reactions   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 b (...) 4   3 reactions   Core Competences Change due to ICT (In what way) Did core competences change after the ICT evolution? (...) 4   0 reactions   Defining New Services / Capabilities How can we come up with ideas to develop new services, based on current internal strength of existing services and capab (...) 4   0 reactions   Examples of Core Competences Here are few examples of Core Competencies you frequently see in literature on CCs: Apple: user-friendly design of elec (...) 3   1 reactions   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 dem (...) 2   2 reactions

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

Return to Management Hub: Change & Organization  |  Human Resources  |  Knowledge & Intangibles  |  Marketing  |  Strategy

More Management Methods, Models and Theory