The Propeller Theory

We have all talked about core competency and non core competencies but how does a company decides what is its core competency. In the initial stages of a product design or service design or delivery, the management doesnt even know about their existence the next year. So how can a company decide on the concept of core competency.

Secondly is there a shift in the core competency over time?
According to some research it has been observed that core competencies of a company do shift. Sometimes so much that we realize it only when the shift is visibly drastic. But all this while the shift is always there, though the internal system is able to see the change, it is also able to adapt to it, so in relative terms there is no change. But when the internal system is unable to adapt, it admits that has been a shift in the above mentioned core competency.

Lets take an example, a company X has the core competency of producing a good Y better than anybody else using a set of unique operations management technique in a country Z. Initially there were trading restrictions with the outside world so company X always had a near monopoly situation. Imports trickled in but the company X was able to adapt to the situation by changing prices and aggressive marketing campaign. Suddenly WTO came in and the barriers were removed, now another set of N companies who imitated (over a prolonged period of time & improvised) some of the same operations management techniques from X during the initial years and implemented them into their own systems now come in with their products in direct competition to product Y. Adding to that they have also exploited some third country for cheap labor and raw material.

So now the company X suddenly realizes that they have lost their core competency ( extreme case) or the core competency has become a mere competency. It is now that they will try to find out if they can realize a new core competency which can provide them with a sustainable competitive advantage. In other cases it may happen that the other companies though cannot copy the core competency of X, they may develop their own ways and means to bypass the advantage it provides.

So they may utilize their other assets to reap in the benefits which company X is getting by its core competency.

Assumption: I believe that core competencies scale high on terms on rarity and non imitability. But over a period of time they can be imitated and improvised. Also a set of competencies of another competitor and a set of non crucial assets can also be utilized to gain the value a company may achieve by a core competency that company X has in its system.
I would like to keep in the discussion open here with a few questions
1. Like the doppler shift, is there a relative shift in the nature and effectiveness of a core competency?
2. How soon a firm can realize its own core competency?
3. Though with lesser efficiency, if a firm can imitate the benefits of a rival's core competency with set of regular mortal competencies and asset class. Do we actually need a core competency?
4. Finally is utilizing such assets and competencies in an effective manner is also a pseudo core competency?

The dual stage core competency theory

Core competence is a word that every management grad encounters. But a more fiddlable and ever changing concept u wont find. Prahlad and Hammel had something else in their mind when they gave the concept in 1990 and today interpretations are mostly the original concept plus the prof or the student's whims and in extreme cases fantasies. Since this is a democratic country , so i feel that not putting my interprtation forward will be a waste of my hard earned " Right to freedom of expression". So here is what I feel about this much maligned/ glorified concept:-

No organization can perform 2 separate processes with the same degree of proficiency. Even though an organization could perform better in many areas than its immediate competition, yet all these areas are either not its core competence or are sourced from the single process that is actually the firm’s core competence.

I believe that the competitiveness (potential or actual) of the company is defined solely by the ability of its human resources as they then take the decisions and perform the tasks that define products, pricing and performance of the organization.

Thus shifting core competence should be the way to go. I feel that if an organization has to outperform competitors then uptil a certain point the core competence can be processes, technology, project management etc- whatever everybody else who is doing well follows. But beyond that threshold, once they are in uncharted territory, they have to shift to people management and development as their core competency. And this gives rise to the Human Capital (HC) centric organization. This is an organization where people are the central hub from which everything else will be derived be it structure, reward , strategy and finally success of the organization.