HAMEL & PRAHALAD HAMEL & PRAHALAD MODELMODEL

Leveraging Leveraging

Core CompetenciesCore Competencies

DEFINITIONSDEFINITIONS

Building core competences, resource strengths Building core competences, resource strengths & organisational capabilities which rivals cannot & organisational capabilities which rivals cannot match is the best way to outperform themmatch is the best way to outperform them

Core Competencies rarely consist of narrow Core Competencies rarely consist of narrow skills or the work efforts of a single departmentskills or the work efforts of a single department

More often they are bundles of skills & know More often they are bundles of skills & know how growing out of the combined efforts of how growing out of the combined efforts of cross-functional work groups along the value cross-functional work groups along the value chain of the companychain of the company

DEFINITIONSDEFINITIONS

Since they reside in collective efforts it is the top Since they reside in collective efforts it is the top management to build/nurture core competenciesmanagement to build/nurture core competencies

Leveraging them mean concentration of more Leveraging them mean concentration of more effort & talent than rivals on effort & talent than rivals on deepening/strengthening these competenciesdeepening/strengthening these competencies

Since requirements of competencies vary widely Since requirements of competencies vary widely bases of competencies need to be broad & bases of competencies need to be broad & flexible flexible

STRATEGIC INTENTSTRATEGIC INTENT

Staking out a particular business positionStaking out a particular business position ““Big, hairy, audacious goals” BEHAGBig, hairy, audacious goals” BEHAG Very long term ( 20/30 years) Very long term ( 20/30 years) Komatsu in the 60s was one-third the size Komatsu in the 60s was one-third the size

of Caterpillar, with little presence outside of Caterpillar, with little presence outside Japan depending on small bulldozers- but Japan depending on small bulldozers- but strategic intent was to “encircle” Caterpillar strategic intent was to “encircle” Caterpillar

STRATEGIC INTENTSTRATEGIC INTENT

Lotus in software & Honda in small engines Lotus in software & Honda in small engines leveraged the expertise of their talent pool by leveraged the expertise of their talent pool by frequently re-forming high intensity teams and frequently re-forming high intensity teams and re-using key people n special projectsre-using key people n special projects

The experiences of such companies tell u that The experiences of such companies tell u that the usual keys to building core competencies the usual keys to building core competencies are superior selection of employees, training & are superior selection of employees, training & retraining, cultural influences, networking, retraining, cultural influences, networking, empowerment, incentives, organisational empowerment, incentives, organisational flexibility, short deadlines, databases and not big flexibility, short deadlines, databases and not big operating budgets operating budgets

SEARCH FOR STRATEGY-SEARCH FOR STRATEGY-CRITICAL ACTIVITIESCRITICAL ACTIVITIES

Identify strategy-critical activities- administrative Identify strategy-critical activities- administrative and support functions are generally routine and support functions are generally routine activities activities

Among primary value chain activities are often Among primary value chain activities are often crucial functions which have to be performed crucial functions which have to be performed exceedingly well like fast check in/check out, exceedingly well like fast check in/check out, room service, food service in a hotel, room service, food service in a hotel, purchasing, production, promotion in chocolate purchasing, production, promotion in chocolate industry, buying quality cocoa beans at low industry, buying quality cocoa beans at low prices reduction of a cent per bar can mean a prices reduction of a cent per bar can mean a seven figure improvement in the bottom-line seven figure improvement in the bottom-line

REASONS FOR OUTSOURCING REASONS FOR OUTSOURCING STRATEGY “NON-CRITICALS”STRATEGY “NON-CRITICALS”

Managers often spend lots of energy and time Managers often spend lots of energy and time on bureaucratic support groups and that on bureaucratic support groups and that distracts them from strategy-critical activitiesdistracts them from strategy-critical activities

Each supporting activity in the value chain is a Each supporting activity in the value chain is a “service” which constitute the bulk of the “service” which constitute the bulk of the overhead costsoverhead costs

Outsourcing them leads to lower costs, speeds Outsourcing them leads to lower costs, speeds decision making, sharpens focus on critical decision making, sharpens focus on critical activities and cuts bureaucraciesactivities and cuts bureaucracies

PARTNERINGPARTNERING

Partnerships add to the firm’s arsenal of Partnerships add to the firm’s arsenal of capabilities and competencies leading to capabilities and competencies leading to sharper strategy executionsharper strategy execution

Coke & Pepsi cultivate their bottlers and Coke & Pepsi cultivate their bottlers and distributorsdistributors

Automakers regularly work with their suppliers Automakers regularly work with their suppliers for advancing design and functioning of auto for advancing design and functioning of auto partsparts

McDonalds work closely with their franchisees McDonalds work closely with their franchisees

STRATEGY CRITICALS AS STRATEGY CRITICALS AS BUILDING BLOCKSBUILDING BLOCKS

A change of strategy leads to emergence of new A change of strategy leads to emergence of new critical activities, competenciescritical activities, competencies

Hence a changed or new strategy cannot be Hence a changed or new strategy cannot be executed with an old structure- need for executed with an old structure- need for Strategy-Structure fitStrategy-Structure fit

Some strategy-critical activities- filling customer Some strategy-critical activities- filling customer orders accurately and promptly, speeding new orders accurately and promptly, speeding new products to market, improving quality of product products to market, improving quality of product and service, SCM, effective use of the Internet. and service, SCM, effective use of the Internet. Getting feedback from customersGetting feedback from customers

DESIGNING THE FUTUREDESIGNING THE FUTURE

Whose future are we stepping into?- designed Whose future are we stepping into?- designed by us or othersby us or others

How do w design the future?How do w design the future? Today’s competitors are the collaborators in Today’s competitors are the collaborators in

planning and designing the collective future- the planning and designing the collective future- the products which will be in use, say, 15/20 years products which will be in use, say, 15/20 years down the road- competitors can compete in down the road- competitors can compete in future again while designing the future from that future again while designing the future from that point of time point of time

EXPEDITIONARY MARKETINGEXPEDITIONARY MARKETING

Exploratory Marketing assumes that time Exploratory Marketing assumes that time will wait for us. Will it?will wait for us. Will it?

As the things keep on speeding up in the As the things keep on speeding up in the future every marketing future every marketing research/exploration will be through research/exploration will be through floating a new productfloating a new product

The products will be in a state of The products will be in a state of continuous redesign- mass customisation continuous redesign- mass customisation