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Lecture Nine: Outline. Core Competencies The ‘Competence Balance Sheet’ Core competencies and the value chain Selecting partnership options Business Process Management . Core Competencies.
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Lecture Nine: Outline • Core Competencies • The ‘Competence Balance Sheet’ • Core competencies and the value chain • Selecting partnership options • Business Process Management
Core Competencies • Walters (2002) suggests ‘the growth of inter-organisational business structures refocusses attention on core competencies.’
Core Competencies (cont’d) • He cites Hamel and Prahalad’s (1994) definition of a core competency; “.. a bundle of skills and technologies that enables a company to provide a particular benefit to customers”, suggesting they are of most value when they offer a gateway to a wide variety of potential product markets
Core Competencies (cont’d) • Hamel and Prahalad also suggest that a core competency is ‘unlikely to reside in a single individual or within a small team’, and Walters sees this as justification for organisations to consider participating with other organisations
Core Competencies (cont’d) • Walters (2002) cites Rumelt (1994) who suggests
Core Competencies (cont’d) • Core competencies support several businesses and products.
Core Competencies (cont’d) • Products and services are only a temporary manifestation of core competence – the latter develops more slowly and is more stable than products.
Core Competencies (cont’d) • Competence is knowledge and therefore increases with use.
Core Competencies (cont’d) • In the long run, competence, not products, will determine who succeeds in competition.’
The ‘Competence Balance Sheet’ • As cited in Walters (2002), Olve et al introduced to notion of a ‘competence balance sheet’.
The ‘Competence Balance Sheet’ (cont’d) • He suggests that the ‘dynamics of the business environment will lead to a situation where knowledge and core competencies will be viewed as having specific shelf lives, the onus is on the company to identify the core competencies necessary for its future.’
The ‘Competence Balance Sheet’ (cont’d) • Walters (2002) describes ‘the analogy for planning competency requirements uses the principles of financing for growth.
The ‘Competence Balance Sheet’ (cont’d) • The ‘assets’ required for success are identified as competencies, and the ‘liabilities’ indicate how the competencies are to be financed – who is to provide them. “...competencies have limited life expectancies and therefore suggest that the liabilities reflect a degree of competence leverage.’
Core competencies and the value chain • Hamel and Prahalad (cited in Walters 2002) suggest that competencies are most valuable when they represent a gateway to a wide range of potential market products: ‘a core competence leader possesses the option to be a major participant in a range of end-product markets.
Core competencies and the value chain (cont’d) When a value chain approach is considered, the options become much wider for managers who must ask themselves a number of questions regarding existing and new core competencies, in order to compete successfully in existing and alternative product markets. As Hamel and Prahalad make clear, ‘forward thinking must be undertaken to determine the direction of potential product markets’ prior to investing in core competence leadership.
Discussion Questions • Compare and contrast the capability balance sheet with a conventional balance sheet. • How can the capability balance sheet be used to identify viable value chain partners?
