Identifying and Developing Core
Competencies in Small Businesses
Brian Baldus
Marriott School of Management
Brigham Young University
December 2006
Agenda
• Introduction
– Trends you know
– What you’ve learned
•
•
•
•
Competition
Core Competencies
Meta competencies
Sustained Competitive Advantage
Business Trends You Know
• 1980’s Restructuring
• 1990’s Cultivation of culture
• 2000 and beyond
– Increased Turnover
– Decreasing Product Lifecycle
– Expansion of Globalization
What You’ve Learned
• Past performance does not guarantee future
performance
• Many small businesses fail to compete
effectively
Competition
• Competition is
– Market Share
– R&D Budget
– Product Price/performance
• Three planes
Core Competencies
Core Products
End Products
Source: Prahalad and Hamel
Core Competencies
•
•
•
Three-way test
Potential access to wide variety of markets
Make a significant contribution to the
perceived customer benefits to consumer
Difficult for competitors to imitate
Source: Prahalad and Hamel
Meta competencies
Name for a grouping of core competencies
Source: Shirish Srivastava
An Example
Constituent skills
– BARCODING
– Packaging items
Core Competencies
– PACKAGE TRACKING
– Rapid delivery
– People
Meta competency
– Logistics
Adapted from Shirish Srivastava
Brainstorming
1. What skills gives your company potential
access to wide variety of markets?
2. Of those, what about it makes a significant
contribution to the customer value?
3. Of those, which of them are difficult for
competitors to imitate?
What Makes a core competency?
Meta competencies
(one to two)
Core Competencies
(dozen or less)
Routine Skills, Resources, and Capabilities
(many)
Adapted from Shirish Srivastava
Discovering Meta competencies
Cost Efficiency
Reliable Innovation
Systems
Close External
Relationships
Agility
Strategy
Structure
Systems
Style
Staff
Shared
Values
Skills
Source: Shirish Srivastava (used with permission)
Discovering Meta competencies
Hard
Soft
Cost Efficiency
Reliable Innovation
Systems
Close External
Relationships
Agility
Strategy
Structure
Systems
Style
Organizational Components
Staff
Shared
Values
Skills
Source: Shirish Srivastava
Discovering Meta competencies
Cost Efficiency
Reliable Innovation
Systems
Close External
Relationships
Agility
Strategy
Structure
Systems
Competitive Aspects
Style
Staff
Shared
Values
Skills
Source: Shirish Srivastava
Example – Ideal Hardware
Cost Efficiency
Strategy
Structure
Reliable
Systems
Purchasing (buy
bulk/discount),
sell at higher price
Flat organizational
structure
Innovation
Agility
Handymen
salespeople
Several key
knowledgeable
employees
Reliable
computer and
communication
system
Systems
Communication
system
Traditional feel,
fun displays
Style
Staff
Handymen, Conflict: Handymen
low wages
Shared
Values
Conflict: low wages
Skills
Close Ext.
Relationships
Handymen
Handymen
Handymen
Customer
service is key
Handymen
Handymen
Discovering Meta competencies
Cost Efficiency
Reliable Innovation
Systems
Close External
Relationships
Agility
Strategy
Structure
Systems
Style
Staff
Shared
Values
1. Identify firms capabilities
2. Link each capability to one of the 7 S’s
3. Write the capability under the column that best
describes the capability’s competitive advantage
to the firm (can occur more than once)
4. Identify capabilities occurring in most/all of
the 7 S’s
Skills
Adapted from Shirish Srivastava
New Focus
• Look internally
• Success depends on continually reevaluating
Skills, Resources, and
Competencies Pool
Implement
Sustained
Competitive
Advantage
Narrow the pool
Company and
Market Fit
Nurture
Existing
Competency
Evaluation
Outdated
Develop
New
Adapted from Shirish Srivastava
Abandon
Implementing
1.
2.
3.
4.
5.
Define Meta Competency
Level 5 Leadership Style
Assemble the team
Attract and Retain Resources
Turning the Flywheel
Adapted from Jim Collins, Good to Great Monograph
Summary
• Core competencies are a better measure of
long-run competitive advantage
• Core competencies can be grouped into
larger groupings or meta competencies
• Sustained competitive advantage comes
seeing core competencies as a cycle
Reading List
• Craig M. Watson. Leadership, Management and the Seven Keys,
The McKinsey Quarterly, Autumn 1983, pp. 44-52.
• Stephen R. Covey. The 7 Habits of Highly Effective People, 1989.
• C.K. Prahalad & Gary Hamel. The Core Competence of the
Corporation. HBR, May-June 1990, pp. 79-91.
• Jim Collins. Good to Great, 2001.
• Jim Collins. Good to Great and the Social Sectors: A Monograph to
Accompany Good to Great, 2005.
• Shirish Srivastava. Managing Core Competence of the
Organization. Vikalpa: The Journal for Decision Makers, 2005,
Oct.-Dec. 2005, pp. 49-63.