Strategy: Management and Core Competence
STRATEGY
Is your core competence
A MIRAGE?
40
THE McKINSEY QUARTERLY 1997 NUMBER 1
Managers now consider just about everything a potential competence Are you measurably better, can you sustain the diƒference, and does it matter? Building a core competence: three options
Kevin P. Coyne Stephen J. D. Hall Patricia Gorman Cliƒford
C
– the idea that a company can succeed without a structural competitive advantage by becoming the best at a few key skills or in a few knowledge areas – has enjoyed enormous popularity over the past six years. The article that introduced the concept1 has been one of the most requested reprints in the Harvard Business Review’s history. Executive management programs and MBA curricula routinely devote hours to the subject, and executives oƒten refer to their own and competitors’ core competences as key drivers of strategy.
ORE COMPETENCE
1
C. K. Prahalad and Gary Hamel, “The core competence of the corporation,” Harvard Business Review, May–June 1990, pp. 79–91.
THE McKINSEY QUARTERLY 1997 NUMBER 1
41
IS YOUR CORE COMPETENCE A MIRAGE?
But despite all the attention this concept has received, its tangible impact on corporate performance has been mixed at best, as these statements attest: “Core competence has too oƒten become a ‘feel good’ exercise that no one fails.”2 “True core competences are hard to define precisely and are oƒten discovered retrospectively. That is, as you experiment, you define your competences by simply describing your successes and failures.”3 “We talked to [core competence experts] and asked them to help us identify our core competences. But aƒter having them work with our senior management, leading them through some group exercises, we really had a mess on our hands. We could not define what was core as opposed to noncore, and what was a competence as opposed to some process or oƒfering we just did well.”4 Our own observations bear out these views. Few managers we have talked to
Is your core competence
A MIRAGE?
40
THE McKINSEY QUARTERLY 1997 NUMBER 1
Managers now consider just about everything a potential competence Are you measurably better, can you sustain the diƒference, and does it matter? Building a core competence: three options
Kevin P. Coyne Stephen J. D. Hall Patricia Gorman Cliƒford
C
– the idea that a company can succeed without a structural competitive advantage by becoming the best at a few key skills or in a few knowledge areas – has enjoyed enormous popularity over the past six years. The article that introduced the concept1 has been one of the most requested reprints in the Harvard Business Review’s history. Executive management programs and MBA curricula routinely devote hours to the subject, and executives oƒten refer to their own and competitors’ core competences as key drivers of strategy.
ORE COMPETENCE
1
C. K. Prahalad and Gary Hamel, “The core competence of the corporation,” Harvard Business Review, May–June 1990, pp. 79–91.
THE McKINSEY QUARTERLY 1997 NUMBER 1
41
IS YOUR CORE COMPETENCE A MIRAGE?
But despite all the attention this concept has received, its tangible impact on corporate performance has been mixed at best, as these statements attest: “Core competence has too oƒten become a ‘feel good’ exercise that no one fails.”2 “True core competences are hard to define precisely and are oƒten discovered retrospectively. That is, as you experiment, you define your competences by simply describing your successes and failures.”3 “We talked to [core competence experts] and asked them to help us identify our core competences. But aƒter having them work with our senior management, leading them through some group exercises, we really had a mess on our hands. We could not define what was core as opposed to noncore, and what was a competence as opposed to some process or oƒfering we just did well.”4 Our own observations bear out these views. Few managers we have talked to