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 -

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Best Practices - Core Competence Premium   Identifying a Core Competence How can a firm identify its CC?...           Imitation of Core Competence How can a firm ensure that its core competence(s) ...

Expert Tips - Core Competence Premium   Developing Core Competencies In order to develop core competencies, a company ... Usage (application): Strategy       Uses (Advantages) of Core Competencies Core competencies are capturing the collective lea... Usage (application): Strategy       Customer Centricity: Success Factors for Customer Intimacy Customer / Consumer Centricity (CC) is a frequentl... Usage (application): Value Disciplines, Customer Strategy, Customer Intimacy, Customer-oriented, CRM       A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times? According to Professor Todd Zenger, companies shou... Usage (application): Inside-out Corporate Strategy, Corporate Visioning       Qualities of Core Competences According to Gallon, Stillman and Coates, core com... Usage (application): What is a Core Competence and What isn't?       The Key Role of the Strategy Competence in Creating Sustainable Competitive Advantage Most organizational performance theories assume th... Usage (application): Business Strategy, Corporate Strategy, Competitive Advantage, Strategy Education       How to Change a Firm's Core Business? Chris Zook recommends 7 steps: 1. Define the... Usage (application): A 7-Step Process

Resources - Core Competence Premium Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies Javidan (1998) has made a great contribution to an... Usage (application): Core Competencies   A Service-Dominant Logic on the Firm Presentation about a service-dominant logic mindse... Usage (application): Service-Dominant Logic, Perspectives on Marketing   Core Competence Short article explains core competencies.... Usage (application): Short explanation   Porter's Industrial Organization Versus Barney's Resource Based View This presentation compares Porter's competitive ad... Usage (application): Business Strategy, Value Chain Management   Core Competence Diagram Download and edit this 12manage PowerPoint graphic... Usage (application): Inside-out Strategy   Perspective: Biography Prahalad (1941-2010) A short biography on C.K. Prahalad's career and id... Usage (application): Developing a Broader Perspective towards the Ideas of Prahalad   Core Competencies. What are They, Inventory and Test In this presentation, the concept of Core Competen... Usage (application): Discovering Core Competencies     News about Core Competence         News about Competence Prahalad         Videos about Core Competence         Videos about Competence Prahalad         Presentations about Core Competence         Presentations 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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