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Prahalad and Hamel are the source of yet another version of flexible strategic planning. In a 1990 article, The Core Competence of
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Plan-to versus Can-do
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the Corporation, they announce a new strategy for the decade to come. In the 1980s, companies set out to restructure, declutter, and delayer. But in the 1990s, companies will face a different standard:23
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They ll be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible indeed, they ll have to rethink the concept of the corporation itself.
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Here we have revolution again. Out with the old, in with the new. In the old concept of the corporation, an autonomous business unit made decisions about its own products. In the new concept of core competencies, products draw on the strengths of the whole corporation:
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Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies . . . that empower individual businesses to adapt quickly to changing opportunities.
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You can t depend on products, because they come and go. Core competencies last longer. They carry you from product to product, and even spawn unanticipated products. So long-term success comes from building core competencies at lower cost and more speedily than competitors. Hamel and Prahalad cite the example of Canon. There you find core competencies in precision mechanics, fine optics, microelectronics, and electronic imaging. Its various business units all draw on the same pool of competencies for an ever-changing mix of products: electronic cameras, a color video printer, a laser imager, a cell analyzer, and so forth. The autonomous business units lend one another skilled staff as needed to develop the next line of products. At first glance, core competencies sounds like the art of what works. You build on what worked in the past, in new combinations, to suit the new situation. You modify Product A to get a Product B. But still we wonder: Where did Product A come from How does a core competency start We don t know. Prahalad and Hamel tell us about competencies that a company already has and can build on, not about how
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106 T H E A D V A N T A G E O F E X P E R T I N T U I T I O N
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it gets those competencies in the first place. To find your best competencies, you take inventory of skills and look forward to applying them in nontraditional ways. Then you conduct three analytical tests: Does the core competency provide potential access to a wide variety of markets, does it make a significant contribution to the perceived customer benefits of the end product, and is it difficult for competitors to imitate The inventory and tests of core competencies seem simple enough. But what about that middle step How do we look forward to applying core competencies in nontraditional ways For that, business units need to work as a team. For example, at NEC Corporation divisional managers come together to identify next-generation competencies. But how What exactly do you look for Prahalad and Hamel don t tell us.24 Here, expert intuition can help. You look for what works, not as a competency but as an activity that has elements of success. Again, when Mr. Marriott discovered that restaurant number 8 was selling food to airline passengers, he realized that his company could develop a core competency in food service in general, not just running restaurants. He did not identify the core competency first and then go out and look for applications, like airline catering. So Prahalad and Hamel have it backwards. Core competencies do not lead to new products. Instead, new products make you realize your core competencies. The coup d oeil precedes the vision. Otherwise we re back to plain strategic planning, where your goal is to apply your core competencies and the activity is a new product or service. The activity comes first you see what to do and that tells you the skills and whatever else you need in order to do it. And you look everywhere in your own or other industries, not just at what you re doing yourself. What works can come from anywhere, not just from your current competencies.
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