1. Core IN-Competencies Riley Nay Marriott School of Management
Brigham Young University
April 2010

2. Agenda Core Competencies Test for Competency Core products (activity)
Core IN-Competencies
Developing Core Competencies

3. What is a Core Competency?
A unique bundle of skills and technologies that enables a firm to provide particular benefits to customers.
Core Competencies give firms competitive advantage.
It is important to note that to be successful, companies should assemble portfolios of competencies rather than portfolios of businesses (SBU’s). What sustains companies in the long run is the ability to build core competencies. This is what gives companies competitive advantage over their rivals.

4. Importance of Core Competencies
Think of a business as a tree…
Leaves-end products
Branches-smaller business units
Trunk-core products
Roots-core competencies
In order to have successful end products, roots must be firmly planted. As a company, you cannot look to your competitor’s leaves branches or even trunks, but in order to understand your competitors strategic think, you must look at their roots. The leaves tell you a product is successful, the roots tell you why. A company that understands the importance of developing core competencies are able to build successful core products.
The next slide gives a visual of how a successful company operates
Source: Prahalad & Hamel

5. Core Products Source: Prahalad & Hamel
As noted before, core competencies spawn core products.
Source: Prahalad & Hamel

6. Test for Competencies
There are three questions a company will ask themselves when determining if an activity is a core competency
Provide access to a wide variety of markets
Contribute significantly to the end-product benefits
Is difficult for competitors to imitate
An example of this is a company that is competent in electronic display systems. That core competency can spawn such products as calculators, TV’s, GPS’s, etc.
An example of this could be 3m’s core competency of sticky adhesives. Their post-it notes are an example of creative genius that spawned from their core competency.
Prahalad and Hamel say that imitation will be difficult if the core competence is a complex harmonization of individual technologies.
Source: Prahalad & Hamel

7. Activity
Divide and form groups. Each group will take a different business and come up with one or more core competency that business has and the resulting core products.
Kodak-Invested heavily in technology-patents (point and shoot cameras)
Honda-Engines
Canon-Laser printers
3m-Coatings and adhesives
Black and Decker-small electric motors

8. What is a Core IN-Competency?
An incapability in a business that inhibits competition.
Negative Inertia
Core IN-competencies are core functions in a business that keep that business from competing. These functions can range anywhere from operational functions to marketing functions to leadership functions.
Negative Inertia-Practices in a company that keep the company moving in the wrong direction.

9. Core IN-Competencies Examples of core IN-competencies
Change resistance
Cultural or operational inhibiters
Focus shifts
Forgoing Opportunities
Anytime there is a resistance to change (when change is needed), a company’s competence is forfeited. The ability to change brings about innovation and creative thinking needed for a business to be sustainable.
Another example of a core IN-competency is cultural problems and operational problems. This relates to resistance to change. If the culture in a business is such that “we’ve been doing this forever, there’s no need to change,” then that culture is a core IN-competency.
Another example illuminates the notion of shifting away from our original core competency. Losing sight of your original core competency in perusal of the “business fad” of the day, may have unintended consequences.
Foregoing opportunities is the failure to see opportunities when they arise.

10. Reasons for Resistance
Change Resistance
Resistance seeks to challenge, disrupt, or invert prevailing assumptions discourses, and power relationships.
Type of Resistance
Reasons for Resistance
Generic Resistance
Culture of rejection, of refusal
Person-based Resistance
Personality as a rejective person (“nay-sayer”)
Provoked Resistance
Too much pressure, overload due to change requirements and implications
Argumentative Resistance
Weakness of the intended Concept
The chart gives different reasons for resistance to change. When a business or people within the business fight and resist change, for whatever reason, a stagnant culture is created. This culture, in effect, becomes a core IN-competency. A business cannot remain sustainable if there is a resistance culture within. The ability to accept change is in and of itself a core competency.
Source: Fiedler

11. Exercise
In your groups, come up with a timeline of your business and document the significant changes your business has been through.
After developing the timeline, discuss how employees handled the changes.

12. Cultural Inhibiters GM
They have been known to have “adversarial” relationships with their suppliers.
A GM executive:
“We don’t know what a supplier relationship gets you. It just locks you in. We don’t even like using the word partner.”
GM’s culture over the years has developed into a “We are the biggest and baddest” attitude. They regularly squeezed their suppliers. Then the Japanese came in and changed the rules of the game. The Japanese’s philosophy was to create tight long-term relationships with their suppliers, in which they would take the time to actually develop them so everyone would profit.
Even with the success of these Japanese car makers, GM wouldn’t change their culture; in fact they took things one step further. They stopped renewing contracts with suppliers and started awarding business to the lowest bidder. This cultural inhibiter became GM’s core IN-compentency.
Source: Enright

13. Focus Shifts
Toyota
Once known for its quality standards, Toyota has shifted its focus.
Toyota established itself as a quality guru. They developed different programs and techniques that tested for quality and reduced costs. For example KAIZEN. Over the last decade, though, it appears they have shifted their focus to a more popular cost reduction model-reduce costs wherever possible. This shift from their original core competency proved fatal, literally, to their business. The recent recalls are proof of that. When a company develops a core competency that gives them competitive advantage and they turn away from it, it becomes a core IN-competency.
Quality
Cost

14. Forgoing Opportunities
Companies like GE, Thorn, Motorola, and GEC left the color TV business in the 1970’s and 1980’s.
They regarded the industry as “mature.”
The ability to seize new opportunities or to forge new ones is a core competency. The failure to do so can turn into a core IN-competency because you may loose out on lucrative business opportunities and fall behind the competition.
Describing the fact that these business left this market, Prahalad and Hamel said, “these companies failed to distinguish between divesting the business and destroying their video media-based competencies. They not only got out of the TV business but they also closed the door on a whole stream of future opportunities reliant on a video-based competencies.”
Source: Prahalad & Hamel

15. Developing Core Competencies
Refined definition-Core competencies are the collective learning in the organization.
Companies need to harmonize streams of technology.
Marketing, Engineering, R & D, etc.
A good example given by Prahalad and Hamel is Sony. One of Sony’s core competencies is its ability to miniaturize its products. Sony’s marketers, technologists and engineers shared the same vision of what their customer’s wanted and what Sony could actually produce. Through collective learning throughout the organization, Sony was able to develop products that met customer’s demands and that were also sustainable.
Source: Prahalad & Hamel

16. Strategic Architecture
Executives in companies need to construct their corporate culture around competence building.
Executives need to eliminate or manage properly their core IN-competencies
Prahalad and Hamel said that strategic architecture is a road mad of the future that identifies which core competencies to build. They also note that it is important to make sure resource allocation is transparent to the entire company. This allows for collective learning and understanding of corporate goals. Having the whole company on board will ensure the company’s core competencies are being applied to all facets of the business.
Executives need to identify their core IN-competencies and manage them properly. This may mean taking extra measures to correct or eliminate certain practices or even cultures that have developed in the company that resist change.
Source: Prahalad & Hamel

17. Exercise Core Competencies Core IN-competencies
With your groups, take a piece on paper and fold it in two
On one side list the core competencies of your business
On the other side, list possible core IN-competencies your business might have
After completing the exercise, take a few minutes as groups to discuss the reasons behind your core IN-competencies. Discuss possible ways of developing them into core competencies.

18. Summary
Understand what core competencies are and their importance in organizations.
Understand what core IN-competencies are and how to identify them within your own company.
Develop your core competencies through collective learning.
Build your corporate strategic architecture around your core competencies.
Stress the importance of identifying your core IN-competencies within your own organization.

19. Readings
Gary Hamel and C. K. Prahalad, (1990) "The Core Competence of the Corporation", Harvard Business Review, vol. 68, no. 3, May-June 1990, pp
Michael Enright, (2003) “Buyer-Supplier Relationships”, The Centre for Asian Business Cases, The University of Hong Kong
Stefan Fiedler, (2010) “Managing Resistance in an Organizational transformation: A case study from a mobile operator company”, International Journal of Project Management, vol. 28, iss. 4, May 2010, pp