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 -

Special Interest Group - Core Competence Special Interest Group (179 members)

Forum - Core Competence   In the forum section you will find recent discussions within this knowledge area.   Why Protect Core Competence? (0 reactions) Why should a firm ensure its core competence is hard to imit...           CC as an Organisational Trait(s) (3 reactions) Try to define your organisation's Core Competency and you fi...           Core Competency versus Corporate Competency? (3 reactions) Is there any difference between core competency and corporat...           The Virtual Company and Core Competences (2 reactions) It's interesting to consider a           Utilizing a Core Competence (3 reactions) Once an organization has defined its Core Competence, findin...           Always link Strategy to CC (1 reactions) Core competencies are the activities in which any organizati...           Core Competences and Porter's 5 Forces (0 reactions) Core competencies are like one pole of a magnet, opposite po...           Is CC REALLY Different from FF? (2 reactions) The trouble with this article and concept is that it begins ...           Core Competency Should be Challenged (0 reactions) A Core Competency should be difficult for competitors to imi...           Integrating the Core Competence (1 reactions) Having identified the core competence of the organisation, t...           Outside- in vs. Inside-out (3 reactions) I think the debate on the wisdom of an "outside- in" vs. "in...           Core Competences Change due to ICT (0 reactions) (In what way) Did core competences change after the ICT evol...           Defining New Services / Capabilities (0 reactions) How can we come up with ideas to develop new services, based...           People are our Greatest Asset (2 reactions) How practical are Prahalad and Hamel (1990) when they sugges...           Examples of Core Competences (1 reactions) Here are few examples of Core Competencies you frequently se...           Collaboration and CC (2 reactions) How can a firm avoid that its core competence(s) are threate...           Is There Any Difference Between a Competence and a Competency? (3 reactions) Is there any difference between an organizational / strategi...

Best Practices - Core Competence In the best practices section you will find the best forum discussions within this knowledge area.   Identifying a Core Competence (5 reactions) How can a firm identify its CC?...           Imitation of Core Competence (6 reactions) How can a firm ensure that its core competence(s) are hard t...           Financial Valuation of a Core Competence (3 reactions) How can a firm determine the financial valuation of individu...           Leadership & Core Competence (0 reactions) Resources that might be easily available will not enable a b...

Expert Tips - Core Competence In the expert tips section you will find advices from experts within this knowledge area.   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 In the Resources section you will find powerpoint presentations, micro-learning videos, articles, news items, etc. within this knowledge area. Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies Core Competencies...   A Service-Dominant Logic on the Firm Service-Dominant Logic, Perspectives on Marketing...   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...     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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