Core competency

The core competence refers to an ability or action that may perform better compared to the competition a company and thus has gained a competitive advantage. It is determined by the four features Benefits, Imitation protection, differentiation and diversification. The concept is a variant of the resource-based approach, which has been opposed in the 1990s, the market-based view of Michael Porter.

The concentration on core competencies is a corporate strategy to expand competitive advantages.

Identification of core competencies

Core competencies can not systematically bring you. Who knows, they may, however, systematically utilize and expand. Possible ways to identify are the following questions:

Comparing the development of core competencies in business, then Henry Mintzberg's definition of strategy as a pattern in a stream of decisions to be known. It is these developed skills that keep the company in the present competitive and this is also its strategic importance.

Definition

By Prahalad / Hamel

After C.K. Prahalad and Gary Hamel called core competence in the context of Business Administration

" ... The skills did enable a firm to deliver a fundamental customer benefit"

The statement is often called the " collective knowledge " of an organization interprets what may relate to the technical knowledge, ie manufacturing techniques and the integration of different technology areas, but equally well on organizational knowledge, ie, project management, internal communication etc. "knowledge " denotes not only the " book knowledge " ( engl. explicit knowledge ) but also the experience and skills acquired through use, so impliztes knowledge (English tacit knowledge ).

In order to decide what is a core competency, Prahalad and Hamel suggest three tests before:

To illustrate the effect of the core competencies Prahalad / Hamel designed the tree model. Here the core competencies form the roots on which the root is, which is to symbolize the core products. The branches are formed by the Strategic Business Units ( SBU), where hang the corresponding cyclically renewing the products leaves. On a practical example is to show how such a structure in reality might look like: The core competence is the ability to develop and manufacture high-performance driving machines. This results in the core product of internal combustion engines, which is split into the strategic business units, car engine, truck engine and motorcycle engine. A product that is manufactured by SGE car engine, for example, can be a common-rail diesel engine with 4 cylinders, which is no longer produced after the end of the product life cycle and is replaced by another motor.

According to Kotler / Bliemel

Philip Kotler and Friedhelm Bliemel find - based on Prahalad and Hamel - a very similar definition of the term, however, they emphasize the importance of connected to the core competence competitive advantage.

From this, they develop the following three features of a core competence:

According to Kruger / Homp

A different approach was selected Wilfried Krüger and Christian Homp 1997 by taking the customer's perspective. They set out the following essentials. The core competence should:

Further, they distinguish the core competencies according to different categories:

Management of core competencies

After the idea of the core competencies of Prahalad and Hamel from the resource-oriented approach to strategic management was developed out Krüger and Homp concerned with the management thereof. They developed procedures that can be recognized and used by the core competencies. The core competence management they understood it as a cycle -like process that they represented in the model of core competence management cycle.

So based on the core competencies strategies can be designed, which are considered by the optimal use of existing resources and capabilities within the company a competitive advantage in the market. Such implied by core competencies strategies are, for example, the separation of one's own core competence does not match any strategic business units or the transfer of existing skills to a new business unit or a new product.

Criticism

The attachment of Prahalad and Hamel has caused quite a stir, especially in the management practice. Ian Turner from Henley Management College (cited in Stuart Crainer, 1998) noticed

"After spending many hours in relentless pursuit of Their company 's core compentencies, managers Often Concluded did the concept, Whilst enormously appealing in the abstract, in practice Merely gives rise to frustration and bewilderment "

According Crainer (page 90 ff ) has Turner out some basic truths that were lost in the storm of enthusiasm:

Other critics complain that core competencies are hard to quantify and are ultimately only be determined in retrospect. The success factors of above-average companies are then defined in the ex -post analysis as core competencies.

Companies that identify core competencies, which are inappropriate in relation to the company itself and the market risk run by the strategic realignment to the wrong core competencies and the necessary investments to suffer significant financial and strategic setbacks.

Another effect of the concept is also described by Turner ( as ): The re-emergence of diversification (as use of core competencies in various products ) as an entrepreneurial "weapon".

The concept of core competence encounters in the age of mergers and acquisitions, open innovation and networks of frontiers. From the competitive advantage through its core competence, core competence the case may be, from the core competence projections Rigidity or Competency Trap. Examples are Motorola or Rubbermaid.

Therefore, many authors propose to replace the concept of core competence through a more abstract meta-concept, eg by a Relational capabilities or dynamic capabilities approach. This involves the ability to learn, external strategic resources - eg the network, in co-operation partners or available through acquisition - to make them compatible and useful to incorporate into its own organization as well as to coordinate the existing internal and external strategic expertise and resources and permanently remodel. These resources include knowledge, business processes, human resources and technology. Occasionally, other factors such as enterprise architecture or reputation to be counted.