Why core-competence is a sustainable Competitive Advantage?

Late Dr CK Prahalad and Gary Hamel developed the Core Competence Model, where in they said that organization’s must delve into their strengths and leverage it to fight competition and even stay ahead of competition.

Prof John De Figiuredo (MIT) described Competency ass “DOING WHAT YOU ARE BLOODY GOOD AT”

While many were advocating organization’s to adopt an Outside Inapproach, Prahalad and Hamel were suggesting an Inside In approach. By focusing on what a Company does best, it helps them to look at new opportunities, new markets and grow their business.

In order to achieve sustainable competitive advantage in the market, organizations must focus on their core-competencies and play to their areas of strength. For too long organizations were distracted by looking outside the organization, looking at market and competition. They were for most times on a ‘catch-up’ mode, trying to catch-up with competitors. But that’s when Prahalad and Hamel, suggested to look inwards and play to their strengths. Why not lead competition rather than being led by competition?

 

We have many examples of organization’s who have stuck to their core-competence and leveraged it to their competitive advantage.

 

  • Google’s core competence is in Data Science. They are able to capture data, analyze data, see trends, correlate data, make a meaning out of it and then leverage the data for business decisions. So, everything that Google does is around Data.
  • Apple’s core competence is in Simplistic Design. Apple adopted a Design First culture in the organization and everything that Apple does revolves around Design and keeping it simple. Look at how they have decluttered the mobile phone and done away with the plethora of physical keys and interface and replaced with touch screen interfaces with very little physical keys.
  •  Amazon’s core competence is in Supply Chain management. They started their online platform to sell books and then mastered Supply Chain management and went on to create the world’s biggest e-commerce platform.
  • For Dhirubhai Ambani, the founder of Reliance, the core competence was Creating Shareholder Value. At a time when the Stock Market was out of reach of the common man, Dhirubhai Ambani went to create one of the largest company in India with public participation and popularized public capital and creating shareholder wealth.
  • In Singapore Airlines, Service is considered their core-competence. It has been ranked as the world’s best airline by Skytrax four times and topped Travel & Leisure’s best airline rankings for more than 20 years.

 

However, this does not mean that organizations must become rigid and not willing to change.

 

  • For most parts of the last century Kodak was the market leader and synonymous with Photography. At its peak Kodak was commanding 80% market share in the US and 50% globally. But it failed to see & recognize the emergence of digital photography. For too long it held on to photograph filming and got disrupted by unknown competitors.
  • Nokia commanded nearly 50% market share in the mobile phone handset business. It was relying heavily on its hardware and failed to see the emergence of software overtaking hardware in mobile phones and in convergence technology.
  • Blockbuster was the leading movie rental company in the US and leading the entertainment market. However, they failed to see Netflix an online digital media company as their competition and the rest is history.

While it is important to focus on core-competence and leverage it to its advantage to create a sustainable competitive advantage, organizations must also be able to be nimble and be adaptable to change. If organizations become too rigid and fail to see the change ahead of time, it will be consigned to dust.

The Ambani’s were known to proudly say that ‘Oil is wealth” but today Mukesh Ambani the Chairman of Reliance Industries has openly said that ‘Data is the new Oil’. Hence Reliance is investing heavily in Reliance Jio and leveraging Data for future growth of its business.

By over relying on their core-competence organizations may fall into a trap of complacency. With change being the only thing constant, organizations must be adaptable to change.

Charles Darwin has said ‘It is not the strongest of the species that survives, not the most intelligent that survives. It is the one that is most adaptable to change

Organizations must be open minded, keep their radars and antennae’s open and foresee the tipping point, where they find that their past competence may notbe in sync with the future competence. Organizations must be fleetfooted and be able to change their core-competence fast and work towards reaching the pole position in the highly competitive market and in a new avatar.

About Author:

Mr. Ramesh Ranjan, Advisor – Farsight Technologies | Founder & Editor – Human Engineers

Mr. Ramesh has served the H.R. and Businesses for 35 Years. He is a former V.P. of H.R. in Schneider electric and worked in Indian & Multi-National Companies in various capacities, including leadership role for the last 20 years.

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