Strategic intent and Core Competence

Source : George S. Yip, Anderson Graduate School of Management, University of California, Los Angeles, and Garry Hamel and C.K. Prahalad

A new view of strategy ?

The thesis of strategic intent : Companies that have risen to global leadership began with ambitions that were out of all proportion to their resources and capabilities

 Aspects of strategic intent : 

Obsession

 Desired leadership position and criteria the organization will use 

Captures the essence of ambition 

Stable over time

 Sets target that deserves personal effort and commitment (“Beat Benz” , “We will get to the moon before 10 years”)

 Two models of strategy: 

Maintaining strategic fit, trimming ambitions to match available resources, and resources allocated to product units

 Leveraging resources, investing in core competences

 Defeating the old strategy :

 Planners vs winners

 Search for loose bricks

 Change the rules

 The process of surrender

 Strategy recipes limit opportunities for competitive innovation

 Portfolio management leads to predictable predation

 Inflexible SBU organizations

 The core competency concept :

 Competence different from technology : 

Competence = Technologies + social organization + collective learning

Shared information as essence of core competence :

It can be used simultaneously in several different applications

A competence does not “wear out”, though it must be constantly renewed

Competence can be combined in new ways to create new opportunities

Claims for core competence :

A basis for competitive advantage in the medium term

A higher order defensible advantage

A basis for competitive benchmarking

A spot for new business development

The “glue” that hold businesses together 

Picking a core competence :

 Significance as a source of competitive differentiation

 Potential breadth of applications

Difficulty for competitors to imitate

Implications of firm as portfolio of competences :

Different notion of relatedness

Different value added from different levels of management

Different reward criteria for different activities

Fully exploiting the opportunities for shared learning and shared costs

Example of core competence : 

 Behaving as if a firm is a portfolio of competencies : 

Identifying and nurturing core skills that enhance the competitiveness of a range of businesses

 Distinguishing the investment in core competencies from individual businesses

 A recognition that core competencies are not owned by individual businesses

 Rich horizontal communication to share learning

 Using core competencies as a notion to screen new business opportunities

 A way of moving people around the organization, across businesses without organizational trauma

Core competencies are the logic that holds together the apparently diversified activities of the best product innovators.

In these companies, the corporation / top management views these resources as a portfolio of competencies as well as a portfolio of product-based or service-based businesses.

Critical tests for core competencies :

 Provides potential access to a wide variety of markets

 Makes a significant contribution to the unique quality of end product or service

 Be difficult for competitors to imitate

 Core competencies should change the way resources are allocated in the organization :

 They are corporate resources, not individual resources, which, like cash, may be reallocated by management

 Individual projects should bid for competencies in the same way they bid for financial resources

 Competence carriers should be given exposure to a variety of projects to disseminate those CC´s (planned rotation programs, assignments to cross-divisional projects, regular meeting to trade notes and ideas).

Finding the right focus :

(Source : Joseph G Morone, 1993)