The Core Competence of the Corporation C.K. Prahald and Gary Hamel

1. The Core Competence of the CorporationC.K.Prahald and Gary Hamel Kara Caldwell Daphne Hancock Adrianne Lain John Money Koret Sanchez

2. Authors • C.K.Prahald • HBR • “He was one of the foremost business thinkers of our time”

3. Authors • Gary Hamel • WSJ • “The world’s most influential business thinker.” • Fortune • “The world’s leading expert on business strategy.”

4. Core Competencies • GTE vs NEC • Skills, technologies, and knowledge • Three criteria • Access to wider markets • Add customer value • Difficult to imitate

5. Rethinking the Corporation • NEC Strategy • “C&C” • Strategic Architecture • Interrelated technology and market evolution • GTE Strategy • Decentralized and independent business units • Management reform

6. The Roots of Competitive Advantage • Portfolio of Competencies vs. Portfolio of Businesses • Short term vs. Long term • America vs. Japan • Tree Analogy

7. Competencies: The Root of Competitiveness

8. Sustaining Core Competencies • Organization of Work and Delivery of Value • Communication • Nurturing • Failures at sustaining

9. How Not to Think of Competence • No longer bundles of businesses • NEC • Honda • Canon • Cultivating does NOT equal out spendingor shared costs

10. Identifying Core Competencies – And Losing Them • 3 Test to Identify Core Competencies • Provides potential access to variety of markets • Makes significant contribution to perceived customer benefits of the end product • Should be difficult for competitors to imitate • Ways to Lose Core Competencies • Focus on end product/price • Outsourcing • Forgoing opportunities to establish competencies

11. From Core Competencies to Core Products • Core Products • Tangible link • Contribute to value of end products • Focus is on competence and embedding • Dominant position can influence evolution

12. The Tyranny of the SBU • Old prescriptions have toxic side effects • Companies using SBU logic need new principles • De-centralization • The enemy

13. The Tyranny of the SBU • Differences :

14. The Tyranny of the SBU • Lack of vision, not technical resources by U.S. companies • War of global leadership • 3 battlefields: • Core competence • Core products • End products • Global dominance • 3M, Black & Decker, Canon, Honda, NEC • SBU ideology lets only 1 battlefield be visible to top management • The battle to put competitive products on the shelf today • Attention placed on incorrect area • Capital budgeting rather than human skills that embody core competencies VS.

15. Strategic Architecture The Strategic Architecture should make resource allocation priorities transparent to the whole organization.

16. Developing Strategic Architecture • Strategic Architecture Definition • Communicate Corporate-wide • Training – internal development • What should it look like? • Resource allocation • Creates a culture for the organization

17. Redeploying to Exploit Competencies • Bid for core competencies • Core competencies are corporate resources • Must be careful and communicate purpose • Canon Example

18. Redeploying to Exploit Competencies

19. Redeploying to Exploit Competencies • Managers must be viewed as team players • Create rotation program • Competence carriers trade notes & ideas

20. Discussion Questions • What is "core competence" of a corporation? Why do core competencies not diminish in an organization? • What do the authors mean by "the tyranny of the SBU”? In what ways do the two concepts of the corporation, SBU and core competence, differ? Explain. • What would be your (individual) core competence? How would you relate that to your future development and personal goals in life?