Prahalad

1
Prahalad Hamel Core Competencesthe
collective learning in the organization

• Ability to coordinate diverse skills
  technologies
• across business, functional boundaries
• to create competitive, related products

2
Answering the question

• In a way that
• Is mission-driven
• Is focused but flexible
• Leverages resources organization-wide
• Is hard to imitate

3
Two stories of the 80s

• GTE
• Start Telecom, semiconductors, telecom display
  components (10b)
• Divested semiconductors, TVs
• Became phone company plus
• Result Not a telecom-computing power (16b)

• NEC
• Start Semiconductors, components, computers
  (4b)
• Foresaw convergence of computing communications
  (CC)
• Focused strategy on semiconductors
• Cross-business planning, jt. ventures
• Result CC power (22b)

4
Key BuildingCore Competencies

• Combining skills technologies for focused but
  flexible product range
• Three tests
• Access to changing range of products
• Expertise delivers perceived customer value
• Difficult to imitate

5
The CC tree 3M

• Post-its, magnetic tape, film, abrasives
• Substrates, coatings, adhesives
• Working with sticky stuff

• End products
• (Businesses)
• Core products
• Core Competences

6
Exploiting interdependenciesEconomies of scope

• Cross-business
• Develop share resources core products
• NECs CC committees

• Cross-function
• Understand improve all aspects of value
• Sonys miniatur-ization teams

7
Workforce implications

• Reward contributions to CCs of company
• Multi-business, function career paths
• Cross-business, function work groups

8
Two more stories

• Honda
• Motion products
• High-revving engines powertrains
• Formula One
• Evolving end products

• Chrysler
• Cars
• Mitsubishi engines transmissions
• Shrinking end product share

9
CC strategy versus

• RD intensity
• Cost minimizing
• CCs Looking forward from skills to new apps.
• Not price VS performance
• Mature business exits
• Outsourcing
• Short term cost-min
• Dynamic hollowing
• CCs tech alliances for outside expertise

10
CC vs SBU mindsets

• Competencies
• Evolving end products
• Portfolio of Cs, core prods.
• Allocate all resources via strategic architecture

• SBUs
• Todays end products
• Portfolio of businesses
• Allocate capital via SBU rates of return

11
CCs ? dynamic competitiveness
External driving market forces
Internal CCs now new
Strategic architecture
New opportunities