In this article we describe core competencies by Hamel and Prahalad.
What are core competencies?
A core competency or core quality is actually none other than “something” unique or “something” that a company can be good at (Hamel & Prahalad, 1990). According to Hamel and Prahalad, the competitive advantage of a company is dependent on it. The way that a company is able to identify and to develop core qualities or core capabilities determines the company’s success.
By identifying and developing core qualities and core capabilities, one is stimulated to contemplate distinctive strength relative to the competitor. It is thus actually none other than thinking about what the company can be good at and to project this into the future. This approach is different from older models such as the SWOT Analysis and Porter’s Five Forces Model whereby the external environment is the input for the strategic process. Hamel and Prahalad start from the the company’s power that ultimately takes care of good innovative products that delivers a clear advantage to the buyer.
Characteristics of competencies
As proposed above, core competencies concerns “something” unique or “something” that a company can be good at (Hamel & Prahalad, 1990). That is, by nature, considerably abstract. Hamel and Prahalad, therefore, give three characteristics that the core qualities must fulfill.
- It must create an advantage for buyers and is valueable
- It is hard to imitate
- It is rare and there are many potentials to profit from it, for example: various markets or many products.
Furthermore, it can be anything, for example: “knowledge”, technology, organisational structure, or even the ability to produce superior products with regards to an tool.
How to identify core capabilities?
Identify core capabilities by making questions.
- What kind value do we deliver to our buyers now?
- What kind value do we deliver to our buyers over x-number of year?
- What do we need in order to deliver value to our buyers over ten years?
- In what manner do we distinguish ourselves from the competitor?
- How can we maintain this advantage?
There are many extra questions conceivable but this is a good indication.
Examples of core capabilities
A number of specific examples of core capabilities:
- Apple: user-friendly and futuristic design of electronic appliances
- Intel: design of complex chips for pc's
- Rolex: design and production of high-status watches
- Black & Decker: small electric motor technology
A number of general examples of core capabilities:
- For a manufacturer of electronic appliance a core quality could be a certain component.
- For a software developer, it could be, for example, the high quality of the software code.
Give examples of core capabilities to email@example.com or comment on this article.