Core competency and Core rigidity

Report
Group D: Joohyun Hwang, Jae-Yun Ho, Hyun Kyu Park and Snorre Gylterud

Core Competency
 Introduced by Prahalad, C.K. and Hamel, G.
 “The core competence of the corporation”,
published in Harvard Business Review (1990)

Core Rigidity
 Introduced by Leonard-Barton, D.
 “Core capabilities and core rigidities: A paradox in
managing new product development” published in
Strategic Management Journal (1992)
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Introduction and definition
Core competencies
Identification and Rigidity
Overcoming rigidity
Discussion
3/27
Internal
Analysis
Analysis of the
internal
environment of
the firm by
identifying its
strengths and
weaknesses
Core
Competencies
?
Strategic
Intent
Long-term goal
that is
ambitious &
draws from all
levels of the
organization.
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Source: Prahalad and Hamel (1990) HBR
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 It provides consumer benefits
 It is not easy for competitors to imitate
 It can be leveraged widely to many products and
markets.
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Introduction and definition
Core competencies
Identification and Rigidity
Overcoming rigidity
Discussion
7/27
WALL MART
Well-organized supply system
Everyday low prices to customer
NAVER
Various contents
(ex - Knowledge in Naver)

Comfortable web surfing
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SONY’S MINIATURIZATION
GOOGLE’S FASTEST & LARGEST
SEARCH
Simplicity
Superior
performance
Scaled down
technology
Fancy design
Superior
S
earch
Al
gorithm
> 450,000
servers
Makes core competencies difficult to imitate.
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Diversification of business based on core competence.
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
Combine multiple kinds of
abilities.

Several core competencies to
one business unit.

One core competency to
several business unit.
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Introduction and definition
Core competencies
Identification and Rigidity
Overcoming rigidity
Discussion
13/27
Internal
Task
External
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
6-module program by Gallon, Stillman and
Coates (1995)
1.
2.
3.
4.
5.
6.
Starting the program
Constructing an inventory of capabilities
Assessing capabilities
Identifying candidate competencies
Testing the candidate core competencies
Evaluating the core competency position
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
Three factors for identification of core
competencies
1. Provides potential access to a wide variety of
markets
2. Makes a significant contribution to the perceived
customer benefits of the end product
3. Difficult for competitors to imitate
Source: Prahalad & Hamel (1993) The role of core competencies in the corporation
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
Resources – what a firm HAS
 Assets – people, brand name
 Tangible
 Intangible

Capabilities – what a firm DOES
 Capacity or ability to integrate individual firm
resources to achieve a desired objective
 Develop over time

Unique combinations evolves core competencies
Source: Hitt, Ireland and Hoskisson (2001) Strategic Management
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
Exaggerate the core competencies
 To much focus and effort on competencies
 Rewards based on relevance to competencies

Counteract new competencies
 Innovation
 External attractiveness
 Obtain new knowledge
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
Types
 Creativity-lagging environment
 “Unsharing” knowledge
 Engineering/sales cultural discrepancy
 Reinventing the wheel
 Exploding knowledge maze
 Path dependency in innovative ideas
Source: Hacklin, Inganäs,Plüss and Marxt. (2005) Core rigidities in the innovation
process: a structured benchmark on knowledge management challenges
19/27
Source: Walker (2004) Modern Competitive Strategy
Campbell & Faulkkner (2006) The Oxford Handbook of Strategy
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Introduction and definition
Core competencies
Identification and Rigidity
Overcoming rigidity
Discussion
21/27
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Method for overcoming Core Rigidity:
Identify
organization’s
core
competencies
Develop
understanding
for driving
forces
Identify the
relation
between core
competencies
& driving
force
New resource
allocation
Need for Dynamic Capabilities!
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Base Core Competencies
Source: IAPD. (2002) Core Competencies and Technical Excellence
www.corning.com
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Integration
of New
Technology
Joint
Development
with Partners
Source: IAPD. (2002) Core Competencies and Technical Excellence
www.kodak.com
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
Future Prospective of product development

Important Core competencies in the future
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Introduction and definition
Core competencies
Identification and Rigidity
Overcoming rigidity
Discussion
28/27

Questions?

Discussion issues
1. Propose some other conditions for core
competencies.
2. Can you think of any examples of core rigidity?
3. Timing of diversification are related to core
competencies. Think of when, where and why
companies diversify their business.
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