Team Leader

Core competency

Core Competencies

In their 1990 article entitled, The Core Competence of the Corporation, C.K. Prahalad and Gary Hamel coined the term core competencies, or the collective learning and coordination skills behind the firm's product lines. They made the case that core competencies are the source of competitive advantage and enable the firm to introduce an array of new products and services.

According to Prahalad and Hamel, core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, motors are a core product that can be used in wide array of end products. The business units of the corporation each tap into the relatively few core products to develop a larger number of end user products based on the core product technology. This flow from core competencies to end products is shown in the following diagram:

Core Competencies to End Products

End Products |

 1  |  2  |  3  |

|  4  |  5  |  6  |

|  7  |  8  |  9  |

| 10 | 11 | 12 |

|

Business

1 |

| Business

2 |

| Business

3 |

| Business

4 |

|

  |   |   |

|         Core Product  1         |

| |

  |

  |         Core Product  2         |

|   |

|   | |

Competence

1 |

| Competence

2 |

| Competence

3 |

| Competence

4 |

|

The intersection of market opportunities with core competencies forms the basis for launching new businesses. By combining a set of core competencies in different ways and matching them to market opportunities, a corporation can launch a vast array of businesses.

Without core competencies, a large corporation is just a collection of discrete businesses. Core competencies serve as the glue that bonds the business units together into a coherent portfolio.

Developing Core Competencies

According to Prahalad and Hamel, core competencies arise from the integration of multiple...