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TheCoreCompetenceoftheCorporationC.K.PrahaladandGaryHamelTheCoreCompetenceoftheCorTheimportanceandcharactersofcorecompetencies.2Fromcorecompetenciestocoreproducts4IdentifycorecompetenciesandLosethem.3SBUandDevelopingStrategicArchitecture5RedeployingtoExploitCompetencies.6ACaseofNECandGTE.1StructureofthisarticleTheimportanceandcharactersC.K.Prahalad•OneofthegreatestIndianbusinessthinkers
•ProfessorofcorporatestrategyandinternationalbusinessattheUniversityofMichigan.•Focusonnextpractices,corporatestrategyandtheroleofmanagementindiversifiedmultinationalcorporationsC.K.Prahalad•OneofthegreGaryHamel•CEOofStrategos,DirectoroftheWoodsideInstitute,andvisitingprofessorofstrategicmanagementatLondonBusinessschool•Concepts:“corecompetence,”“strategicintent,”and“industryrevolution”•Createdrule-breakingstrategiesthathavegeneratedbillionsofdollarsinnewwealth.GaryHamel•CEOofStrategos,Whatiscorecompetence?KnowledgeSkillsAttitudesCoreCompetenceCorecompetenciesaretheorganization'scollectivelearningandabilitytocoordinateandintegratemultipleproductionskillsandtechnologystreams.Theyarealsoabouttheorganizationofworkanddeliveryofvalueinservicesandmanufacturing.
Whatiscorecompetence?KnowleNECVS.GTE(1980)NECGTEBusinessPortfoliosTelephoneSwitchingandtransmissionsystemsLightingproductsSylvaniaTVSatellitesSemi-conductorsDefensesystemsDigitalPABXPacketswitchingTelenet•
Onlycomparableintechnologicalbaseandcomputerbusinesses•
NoexperienceintelecommunicationsNECVS.GTE(1980)NECGTEBusineGTENEC21.8916.461980198819801988Acase:NECVS.GTE3.89.98$billionGTENEC21.8916.4619801988198019NECVS.GTE(1988)GTEBusinessUnitsTelephoneSwitchingandtransmissionsystemsLightingproductsSylvaniaTVSatellitesSemi-conductorsDefensesystemsDigitalPABXPacketswitchingTelenetSemiconductorsFirst-tierplayerNECTelecommunicationsproductsComputersMobiletelephonesFacsimilemachinesLaptopcomputersWordleaderNewenterNECVS.GTE(1988)GTEBusinessNEC:Why?Strategicintentandstrategicarchitectureof“C&C”(Computer&Communication)Constituteda“C&CCommittee”IdentifiedthreeinterrelatedstreamsoftechnologyandmarketevolutionCaredabout“coreproduct”andbuiltstrategicalliancesNEC:Why?StrategicintentandStructure:Theimportanceofcorecompetencies.1Thecharactersofcorecompetencies.2Hownottothinkofcompetence?3Structure:Theimportanceofc(1)TheRootsofCompetitiveAdvantageNEC:
GTE:VSaportfolioofcompetenciesaportfolioofbusiness-repeatedacrossmanyindustryFrom1980to1988,theachievementsofJapanesecompanies-﹡Lowcostandhighquality;﹡
Inventingnewmarkets,creatingnewproducts,andenhancingtheminvanguard(前卫的)markets;﹡
Inestablishedmarket,theyalsomadegreatchallengetowesterncompanies.Manyexamplesaregivenhere.What’stheprobleminmanywesterncompanies?(1)TheRootsofCompetitiveANotTheirseniorexecutivesarelesscapablethanthoseinJapan.
NotJapanesecompaniespossesgreatertechnical
capabilities.YesTheylimittheabilityofindividualbusinessestofullyexploitthedeeptechnologicalcapability.Inthelongrun,competitivenessderivesfromanabilitytobuildthecorecompetenciesatlowercostandfasterthancompetitors.TheprobleminmanywesterncompaniesNotTheirseniorexecutivesareEndProductsBusinessUnitsCoreProductsCoreCompetence.Corporationprovides
nourishment,sustenanceandstabilityEndProductsBusinessUnitsCoreCorecompetenciesarethecollectivelearningintheorganization,especiallyhowtocoordinatediverseproductionskillsandintegratemultiplestreamsoftechnologies.Itisalsoabouttheorganizationofworkandthediversityofvalue.Corecompetenciesarecommunication,involvementanddeepcommitmenttoworkingacrossorganizationalboundaries.Involvesmanylevelsofpeopleandallfunctions.Doesnotdiminishwithuse.Andcorecompetenciesarealsotheengineforthenewbusinessdevelopment.Patternsofdiversificationandmarketentrymybeguidedbythem.(2)TheCharactersofCoreCompetencesCorecompetenciesarethecollSomecompaniesandcorecompetenciesSomecompaniesandcorecompetCultivatingcorecompetencedoesnotmeanoutspendingrivalsonresearchanddevelopment.Corecompetencedoesnotmeansharedcosts,aswhenatwoormoreSBUsuseacommonfacility-aplant,servicefacility,orsalesforce-orshareacommoncomponent.(3)HowNottoThinkofCompetenceSohowtoidentifycorecompetencies?Cultivatingcorecompetencedo
Structure:Identifycorecompetencies1Losecorecompetencies23FromcorecompetenciestocoreproductsStructure:IdentifIdentifycorecompetencies
——threetests
CoreCompetenciesIdentifyCorecompetenciesprovidepotentialaccesstoawidevarietyofmarketCorecompetenciesshouldmakeasignificantcontributiontotheperceivedcustomerbenefitsoftheendproductsCorecompetenciesshouldbediffucultforcompetitorstoimitateIdentifycorecompetencies
Losingcorecompetencies
CoreCompetenciesLoseOutsourcingthecorecompetenciesHavinganallianceorwithoutknowingwheretobuiltcompetenceleadershipForgoingopportunitiestoestablishcompetenciesLosingcorecompetencies
TwoLessons（教训）Thecostsoflosingacorecompetencecanbeonlypartlycalculatedinadvance.
Acompanyhasfailedtoinvestincorecompetencebuildingwillfinditverydifficulttoenteranemergingmarket.
ThrowoutababywithbathwaterindivestmentdecisionsWhenitcomestocorecompetencies,itisdifficulttogetoffthetrain,walktothestation,andthenreboard.TwoLessons（教训）ThecostsofloFromCoreCompetenciestoCoreProducts
CoreCompetenciesCoreProductsEndproductsLinchpin（关键）Thephysicalembodiments
ofcorecompetenciesThecomponentsorsubassembliesactuallycontributingtothevalueoftheendproductsFromCoreCompetenciestoCoreGlobalCompetitionatEachLevelCoreCompetenciesCoreProductsEndproductsBuildordefendleadershipoveralongtime
BuildworldleadershipinthedesignanddevelopmentofaparticularclassofproductfunctionalitySeektomaximizeworldmanufacturingshareincoreproductsMovedownstreamtobuildbrandshareGlobalCompetitionatEachLevStructure:TheTyrannyoftheSBU1DevelopingStrategicArchitecture2Structure:TheTyrannyoftheTwoConceptsoftheCorporation:Competitivenessoftoday’sproductsInterfirmcompetitiontobuildcompetenciesPortfolioofbusinessesrelatedinproduct-markettermsPortfolioofcompetenciescoreproducts,andbusinesstheSBU”owns”allresourcesotherthancashSBUisapotentialreservoirofcorecompetenciesResourceisallocatedbusinessbybusinesstopmanagementallocatescapitalandtalentOptimizingcorporatereturnsthroughcapitalallocationtrade-offsamongbusinessesClarifystrategicarchitectureandbuildingcompetenciestosecurethefutureSBUCoreCompetenceTwoConceptsoftheCorporatioThereconceptualizationofSBU
Whatarethecostsofthisdistortion?Inmanycompanies,theSBUprismmeansthatonlyoneplaneoftheglobalcompetitivebattleisvisibletotopmanagers.ThereconceptualizationofSBU1.UnderinvestmentinDevelopingCore
CompetenciesandCoreProductsReasons:◆Nosinglebusinessmayfeelresponsibleformaintainingaviableresponsibility.◆Noonecanjustifytheinvestmentrequiredtobuildworldleadershipinsomecorecompetence.◆Corporate
managementmaynotimposeamore
comprehensiveviewtoeachSBU.Result:◆SBUmanagerstendtounderinvest.1.UnderinvestmentinDevelopin2.ImprisonedResourcesReason:◆Peoplewhoembodytheuniquecompetenceareseenasthesolepropertyofthebusinesstheygrowup.SBUmanagersareunwillingtolendtheircompetencecarriers.Result:◆Thepeoplecan’tgetassignedtothemostexcitingopportunities,andtheirskills
begintoatrophy.2.ImprisonedResourcesReason:3.BoundedInnovationReason:◆Corecompetencearenotrecognized.Result:◆IndividualSBUwillpursueonlythoseinnovationopportunitiesthatcloseathand.
Conceivingofthecorporationintermsofcorecompetence3.BoundedInnovationReason:ConStrategicArchitecture:
What’sthestrategicarchitecture?Aroadmapofthefuturethatidentifieswhichcorecompetenciestobuildandtheirconstituenttechnologies.Advantages＊Motivateorganizationstolearnfromalliances＊Helporganizationstoensureinternaldevelopmentefforts＊Reducetheinvestmentneededtosecurefuturemarketleadership＊Helpcompaniestofindadistinctcompetitiveadvantage＊Atoolforcommunicatingwithcustomersandotherexternalconstituents.StrategicArchitecture:What’Whatastrategicarchitectureshouldlooklike?Thearchitectureprovidesalogicforproductandmarketdiversification.Thestrategicarchitectureshouldmakeresourceallocationprioritiestransparenttotheentireorganization.Thestrategicarchitectureisnotaforecastofspecificproductsorspecifictechnologiesbetweencustomerfunctionalityrequirements,potentialtechnologies,andcorecompetencies.
WhatastrategicarchitectureExample:VickersSeethepotential
Developtheirstrategicarchitecture
＊Maketargetedacquisitions＊Reorganization＊BuildingadministrativesystemsReapbenefitsGoal:toensurethatchangeintechnologydoesnotdisplaceVickersfromItscustomersAmapofemergingcustomerneeds,changingtechnologiesandcorecompetencies.Example:VickersSeethepotenRedeployingtoexploitcompetenciesTheelementsofcorecompetenciesbelongtothewholecorporateMakeaproperrewardsystemThepositivecontributionoftheSBUmanagershouldbemadevisibleRecordtransfersforthesakeofbuildingcorecompetence
WeanemployeesofftheoldideasRedeployingtoexploitcompete
peoplemaybeexposedtoavarietyofbusinessesthroughacarefullyplannedrotationprogramInearlycareerInmiddlecareerperiodicassignmentstocross-divisionalprojectteamsmaybenecessaryCompetencecarriersshouldberegularlybroughttogetherfromacrossthecorporationtotradenotesandideaspeoplemayInearlycareerInmCorecompetenciesarethewellspringofnewbusinessdevelopmentTopmanagementmustaddvaluebyenunciating(阐明)thestrategicarchitecturethatguidesthecompetenceacquisitionprocess.Onlyofthecompanyisconceivedofasahierarchyofcorecompetencies,coreproduct,andmarket-focusedbusinessunitswillitbefittofightConclusionCorecompetenciesarethewelTheCoreCompetenceoftheCorporationC.K.PrahaladandGaryHamelTheCoreCompetenceoftheCorTheimportanceandcharactersofcorecompetencies.2Fromcorecompetenciestocoreproducts4IdentifycorecompetenciesandLosethem.3SBUandDevelopingStrategicArchitecture5RedeployingtoExploitCompetencies.6ACaseofNECandGTE.1StructureofthisarticleTheimportanceandcharactersC.K.Prahalad•OneofthegreatestIndianbusinessthinkers
•ProfessorofcorporatestrategyandinternationalbusinessattheUniversityofMichigan.•Focusonnextpractices,corporatestrategyandtheroleofmanagementindiversifiedmultinationalcorporationsC.K.Prahalad•OneofthegreGaryHamel•CEOofStrategos,DirectoroftheWoodsideInstitute,andvisitingprofessorofstrategicmanagementatLondonBusinessschool•Concepts:“corecompetence,”“strategicintent,”and“industryrevolution”•Createdrule-breakingstrategiesthathavegeneratedbillionsofdollarsinnewwealth.GaryHamel•CEOofStrategos,Whatiscorecompetence?KnowledgeSkillsAttitudesCoreCompetenceCorecompetenciesaretheorganization'scollectivelearningandabilitytocoordinateandintegratemultipleproductionskillsandtechnologystreams.Theyarealsoabouttheorganizationofworkanddeliveryofvalueinservicesandmanufacturing.
Whatiscorecompetence?KnowleNECVS.GTE(1980)NECGTEBusinessPortfoliosTelephoneSwitchingandtransmissionsystemsLightingproductsSylvaniaTVSatellitesSemi-conductorsDefensesystemsDigitalPABXPacketswitchingTelenet•
Onlycomparableintechnologicalbaseandcomputerbusinesses•
NoexperienceintelecommunicationsNECVS.GTE(1980)NECGTEBusineGTENEC21.8916.461980198819801988Acase:NECVS.GTE3.89.98$billionGTENEC21.8916.4619801988198019NECVS.GTE(1988)GTEBusinessUnitsTelephoneSwitchingandtransmissionsystemsLightingproductsSylvaniaTVSatellitesSemi-conductorsDefensesystemsDigitalPABXPacketswitchingTelenetSemiconductorsFirst-tierplayerNECTelecommunicationsproductsComputersMobiletelephonesFacsimilemachinesLaptopcomputersWordleaderNewenterNECVS.GTE(1988)GTEBusinessNEC:Why?Strategicintentandstrategicarchitectureof“C&C”(Computer&Communication)Constituteda“C&CCommittee”IdentifiedthreeinterrelatedstreamsoftechnologyandmarketevolutionCaredabout“coreproduct”andbuiltstrategicalliancesNEC:Why?StrategicintentandStructure:Theimportanceofcorecompetencies.1Thecharactersofcorecompetencies.2Hownottothinkofcompetence?3Structure:Theimportanceofc(1)TheRootsofCompetitiveAdvantageNEC:
GTE:VSaportfolioofcompetenciesaportfolioofbusiness-repeatedacrossmanyindustryFrom1980to1988,theachievementsofJapanesecompanies-﹡Lowcostandhighquality;﹡
Inventingnewmarkets,creatingnewproducts,andenhancingtheminvanguard(前卫的)markets;﹡
Inestablishedmarket,theyalsomadegreatchallengetowesterncompanies.Manyexamplesaregivenhere.What’stheprobleminmanywesterncompanies?(1)TheRootsofCompetitiveANotTheirseniorexecutivesarelesscapablethanthoseinJapan.
NotJapanesecompaniespossesgreatertechnical
capabilities.YesTheylimittheabilityofindividualbusinessestofullyexploitthedeeptechnologicalcapability.Inthelongrun,competitivenessderivesfromanabilitytobuildthecorecompetenciesatlowercostandfasterthancompetitors.TheprobleminmanywesterncompaniesNotTheirseniorexecutivesareEndProductsBusinessUnitsCoreProductsCoreCompetence.Corporationprovides
nourishment,sustenanceandstabilityEndProductsBusinessUnitsCoreCorecompetenciesarethecollectivelearningintheorganization,especiallyhowtocoordinatediverseproductionskillsandintegratemultiplestreamsoftechnologies.Itisalsoabouttheorganizationofworkandthediversityofvalue.Corecompetenciesarecommunication,involvementanddeepcommitmenttoworkingacrossorganizationalboundaries.Involvesmanylevelsofpeopleandallfunctions.Doesnotdiminishwithuse.Andcorecompetenciesarealsotheengineforthenewbusinessdevelopment.Patternsofdiversificationandmarketentrymybeguidedbythem.(2)TheCharactersofCoreCompetencesCorecompetenciesarethecollSomecompaniesandcorecompetenciesSomecompaniesandcorecompetCultivatingcorecompetencedoesnotmeanoutspendingrivalsonresearchanddevelopment.Corecompetencedoesnotmeansharedcosts,aswhenatwoormoreSBUsuseacommonfacility-aplant,servicefacility,orsalesforce-orshareacommoncomponent.(3)HowNottoThinkofCompetenceSohowtoidentifycorecompetencies?Cultivatingcorecompetencedo
Structure:Identifycorecompetencies1Losecorecompetencies23FromcorecompetenciestocoreproductsStructure:IdentifIdentifycorecompetencies
——threetests
CoreCompetenciesIdentifyCorecompetenciesprovidepotentialaccesstoawidevarietyofmarketCorecompetenciesshouldmakeasignificantcontributiontotheperceivedcustomerbenefitsoftheendproductsCorecompetenciesshouldbediffucultforcompetitorstoimitateIdentifycorecompetencies
Losingcorecompetencies
CoreCompetenciesLoseOutsourcingthecorecompetenciesHavinganallianceorwithoutknowingwheretobuiltcompetenceleadershipForgoingopportunitiestoestablishcompetenciesLosingcorecompetencies
TwoLessons（教训）Thecostsoflosingacorecompetencecanbeonlypartlycalculatedinadvance.
Acompanyhasfailedtoinvestincorecompetencebuildingwillfinditverydifficulttoenteranemergingmarket.
ThrowoutababywithbathwaterindivestmentdecisionsWhenitcomestocorecompetencies,itisdifficulttogetoffthetrain,walktothestation,andthenreboard.TwoLessons（教训）ThecostsofloFromCoreCompetenciestoCoreProducts
CoreCompetenciesCoreProductsEndproductsLinchpin（关键）Thephysicalembodiments
ofcorecompetenciesThecomponentsorsubassembliesactuallycontributingtothevalueoftheendproductsFromCoreCompetenciestoCoreGlobalCompetitionatEachLevelCoreCompetenciesCoreProductsEndproductsBuildordefendleadershipoveralongtime
BuildworldleadershipinthedesignanddevelopmentofaparticularclassofproductfunctionalitySeektomaximizeworldmanufacturingshareincoreproductsMovedownstreamtobuildbrandshareGlobalCompetitionatEachLevStructure:TheTyrannyoftheSBU1DevelopingStrategicArchitecture2Structure:TheTyrannyoftheTwoConceptsoftheCorporation:Competitivenessoftoday’sproductsInterfirmcompetitiontobuildcompetenciesPortfolioofbusinessesrelatedinproduct-markettermsPortfolioofcompetenciescoreproducts,andbusinesstheSBU”owns”allresourcesotherthancashSBUisapotentialreservoirofcorecompetenciesResourceisallocatedbusinessbybusinesstopmanagementallocatescapitalandtalentOptimizingcorporatereturnsthroughcapitalallocationtrade-offsamongbusinessesClarifystrategicarchitectureandbuildingcompetenciestosecurethefutureSBUCoreCompetenceTwoConceptsoftheCorporatioThereconceptualizationofSBU
Whatarethecostsofthisdistortion?Inmanycompanies,theSBUprismmeansthatonlyoneplaneoftheglobalcompetitivebattleisvisibletotopmanagers.ThereconceptualizationofSBU1.UnderinvestmentinDevelopingCore
CompetenciesandCoreProductsReasons:◆Nosinglebusinessmayfeelresponsibleformaintainingaviableresponsibility.◆Noonecanjustifytheinvestmentrequiredtobuildworldleadershipinsomecorecompetence.◆Corporate
managementmaynotimposeamore
comprehensiveviewtoeachSBU.Result:◆SBUmanagerstendtounderinvest.1.UnderinvestmentinDevelopin2.ImprisonedResourcesReason:◆Peoplewhoembodytheuniquecompetenceareseenasthesolepropertyofthebusinesstheygrowup.SBUmanagersareunwillingtolendtheircompetencecarriers.Result:◆Thepeoplecan’tgetassignedtothemostexcitingopportunities,andtheirskills
begintoatrophy.2.ImprisonedResourcesReason:3.BoundedInnovationReason:◆Corecompetencearenotrecognized.Result:◆IndividualSBUwillpursueonlythoseinnovationopportunitiesthatcloseathand.
Conceivingofthecorporationintermsofcorecompetence3.BoundedInnovationReason:ConStrategicArchitecture:
What’sthestrategicarchitecture?Aroadmapo
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