Core competencies

1. Group D: Joohyun Hwang, Jae-Yun Ho, Hyun Kyu Park and Snorre Gylterud Core competencies

2. Core Competency & Core Rigidity • 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)

3. Agenda

4. Background Internal Analysis Core Competencies Strategic Intent Analysis of the internal environment of the firm by identifying its strengths and weaknesses ? Long-term goal that is ambitious & draws from all levels of the organization.

5. Background “A core competency is an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity.” Volvo’s concern about safety Honda’s expertise in engines Source: Prahalad and Hamel (1990) HBR

6. Definition “Core competency is a harmonized combination of multiple resources and skills that differentiate a firm strategically and that meet the following conditions.” • It provides consumer benefits • It is not easy for competitors to imitate • It can be leveraged widely to many products and markets.

7. Agenda

8. Consumer Benefits Wall mart Naver Various contents (ex - Knowledge in Naver)  Comfortable web surfing Well-organized supply system Everyday low prices to customer

9. Hard to Imitate SONY’S MINIATURIZATION GOOGLE’S FASTEST & LARGEST SEARCH Makes core competencies difficult to imitate.

10. Diversification Diversification of business based on core competence.

11. From Core Competencies to End Product

12. The Characteristics of Core Competencies • Combine multiple kinds of abilities. • Several core competencies to one business unit. • One core competency to several business unit.

13. Agenda

14. Identification of Core Competencies

15. Step-by-step • 6-module program by Gallon, Stillman and Coates (1995) • Starting the program • Constructing an inventory of capabilities • Assessing capabilities • Identifying candidate competencies • Testing the candidate core competencies • Evaluating the core competency position

16. 3 Factors for Identifiaction • Three factors for identification of core competencies • Provides potential access to a wide variety of markets • Makes a significant contribution to the perceived customer benefits of the end product • Difficult for competitors to imitate Source: Prahalad & Hamel (1993) The role of core competencies in the corporation

17. Discovering Core Competencies • 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

18. Core Rigidity • 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

19. Core Rigidity • 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

20. Examples of Core Rigidity Source: Walker (2004) Modern Competitive Strategy Campbell & Faulkkner (2006) The Oxford Handbook of Strategy

21. Agenda

22. Overcoming Core Rigidity “Driving Force”Change or factor in the future competitive environment that will affect the commercial success of a business Technological Change Market Conditions Society-Based Change Regulation (Government)

23. Overcoming Core Rigidity Method for overcoming Core Rigidity: Need for Dynamic Capabilities! Identify organization’s core competencies Develop understanding for driving forces Identify the relation between core competencies & driving force New resource allocation

24. Dynamic Capabilities “A core competency in response to change, not only in specific technologies or product.”

25. Case Study I Inorganic materials knowledge Melting and forming processes Measurement of process parameters Manufacturing research abilities  Business I Base Core Competencies Business II Technology Mapping (Extensions to skills of alliance partners / new skills) Business III Business IV Source: IAPD. (2002) Core Competencies and Technical Excellence www.corning.com

26. Case Study II Mass production Integration of New Technology Joint Development with Partners Source: IAPD. (2002) Core Competencies and Technical Excellence www.kodak.com

27. Future Growth of the Concept • Future Prospective of product development • Important Core competencies in the future Challenging Complex Rapidly changing Competitive Link technology , product, market & customer Collaboration across companies and industries

28. Agenda

29. Questions and discussion issues • Questions? • Discussion issues • Propose some other conditions for core competencies. • Can you think of any examples of core rigidity? • Timing of diversification are related to core competencies. Think of when, where and why companies diversify their business.