Knowledge is the heart of Agility – the driving force of both proactive and reactive change. New knowledge demands to be acted upon; and when one business acts upon new knowledge others have no choice but to follow. This human thing we are distinguishes itself from other life by generating and applying knowledge. The increasing population is building upon an increasing body of past knowledge – which increases the frequency of new knowledge generation and speeds the decay of knowledge value – making the general business environment, which is built on knowledge, more unstable. Conscious knowledge management is the practice that will return general stability in the long run. Short term it will provide preemptive advantage to those who master it first.

Core competency knowledge is just one aspect of the total picture – but an important place to start. We’ll explore the design of a knowledge management practice here; in the context of the competency at the GM metal-fabrication plant. This plant stamps and assembles after-model-year auto body parts. But we won’t be talking about things unique to metal fabrication or even small-lot, high variety production – our business practice design will have application everywhere. As seen, the main issue has revealed itself: those with the competency can’t seem to articulate it instructively. Organizations employ tacit knowledge at the intuitive level that even they are unaware of. That’s pretty common everywhere – and only becomes an issue when you decide it’s time to explicitly inventory this kind of knowledge and spread it around. There are more issues that must be addressed by the business practice to design. First and foremost, the knowledge management process itself must be highly adaptable – able to evolve and accept deeper and better competency understandings over time, able to accommodate new applications for that competency, and able to incorporate new knowledge developed elsewhere. A perfect application for the issue-focused, principle-based design methodology we’ve been exploring.
Issue-focused design means we want to understand our requirements objectively before we commit to a solution. Additional key issues on the proactive side include:
People must be interested and perceive value in order to learn effectively.
* The accuracy of knowledge, once it is captured, and the effectiveness of communicating it are both prime areas for constant improvement.
With time, the product and process technology will change, as will the nature of the knowledge and the knowledge focus.
* Some knowledge pays dividends when understood by different types of employees: engineers, skilled trades, accountants, personnel, management, etc – each requiring a modified learning approach.
* Insular knowledge is dangerous. An effective core competency renewal process must be aware of and able to incorporate relevant developments outside the local and greater-corporate environment.

Key issues on the reactive side include:

* All knowledge does not necessarily good, e.g., know how to make a process highly adaptable when there is no value to the company to do so. A self-healing process eliminates both incorrect and poor-value knowledge.
* People in training are employees with front line jobs, and business priorities change daily. There’s no longer a “time-out” for training. Key points: flexible scheduling, and the training time should look like job time.
* A training procedure must accommodate large and small groups, from a few new hires to large groups of existing employees.
* Technology and applications change with time, so fundamental knowledge must be reinterpreted.

For the core competence perspective to take root in an organization, the entire management team must fully understand and participate in the five key competence management tasks: (1) identifying existing core competencies; (2) establishing a core competence acquisition agenda; (3) building core competencies; (4) deploying core competencies; and (5) protecting and defending core competence leadership.

A firm can’t actively “manage” core competencies if managers don’t share a view of what those core competencies are. Thus, the clarity of a firm’s definition of its core competencies and the degree of consensus that attaches to that definition are the most rudimentary tests of a company’s capacity to manage its core competencies. Whereas most managers will have some sense of “what we do well around here”, they may be quite unable to draw any kind of specific link between particular skill sets and the competitiveness of end products and services. The first task in managing core competencies is therefore to produce an “inventory” of core competencies.

Often observed in most companies attempting to define their core competencies, the process tends to be haphazard and political. The first attempt typically produces a lengthy “laundry list” of skills, technologies, and capabilities – some core, but most not. Every participant in the process wants to ensure that the activities he or she manages are regarded as “core”. A substantial amount of effort is required to fully disentangle competencies from the products and services in which they are embedded, to distinguish core from non-core, to cluster and aggregate the skills and technologies in some meaningful way, and to arrive at “labels” that are truly descriptive and promote shared understanding. The time it takes to arrive at an insightful, creative, and shared definition of core competencies is, in a large company, more likely to be measured in months than weeks. In my professional experience, it even took years considering issues e.g., culture, beliefs, generation-gaps, etc.

Companies typically fall into one of several traps when attempting to identify core competencies. One of the most frequent is delegating the task to the technical group. There is a clear danger in taking such an approach. Core competencies are the soul of the company and as such they must be an integral part of the process of general management. When only the technical group feels ownership, the usefulness of the concept in building new business is jeopardized considerably. Too often the concept of core competencies is highjacked by the technical group in a bid for stature and resources.

Other traps include mistaking assets and infrastructure for core competencies and in inability to escape an orthodox product-centered view of a firm’s capabilities. Additionally, if executives are too rushed to “get the job done”, they may fail to generate a deep and common understanding of what the chosen core competence “labels” mean. A wide group of people in the organization must be capable of describing the competence in reasonably similar terms and share an understanding of just what constituent skills are embodied within the competence. There is yet another frequent pitfall. Companies often fail to apply the test of “customer perceived value” to their list of competencies. Understanding the link between competence and benefit is critical in identifying competencies that are genuinely core. We often recommend that several teams work on defining core competencies. Each team should encompass a broad cross-section of employees – functionally, divisionally, geographically, and hierarchically. Seeking a diversity of views ensures that the best possible definition emerges.

It is important not just to identify and agree on what the core competencies are but also to identify the elements that contribute to each core competency. For example, expertise in the science of color, inks, dyes, substrates, coating, paper handling, and a host of such elements or discreet skills adds up to the core competence in chemical imaging at Eastman Kodak. It is important that these discrete skills are identified and an inventory of people who possess those skills developed. One company succeeded in developing a hierarchy that extended from competencies to skills and technologies to individual employees – “competence holders”. This hierarchy could be accessed through a computer database so that if someone in the company needed to access a particular competence, he or she could locate the right person. Such visibility to a firm’s core competence resources is vital if they are to be fully exploited and easily redeployed.

Further, companies need to benchmark their core competencies with other firms. Senior managers must be full participants in the process of identifying core competencies. The process will involve many meetings, heated debates, frequent disagreements, unexpected insights, and a sense of excitement about potential new opportunities. The task of discovering a firm’s core competencies is not one that senior management can delegate; neither can it be squeezed into a two-or three-day “offsite” workshop. The goal of the process is to develop a wide and deep understanding of the skills that currently underpin the firm’s success, to escape the myopia of the served market, to highlight the “shared property” of the firm, to point the way to new business, to raise sensitivity to the reality of competition for competence, and to provide the basis for actively managing what, after all, are the firm’s most valuable resources. The exercise to identify core competencies cannot take a mechanistic, follow-the-checklist approach.

Given that it may take five, ten, or more years to build world leadership in a core competence area, consistency of effort is key. Consistency depends first of all on a deep consensus about which competencies to build and support, and second, on the stability of the management teams charged with competence development. Such consistency is unlikely unless senior managers agree on what new competencies should be built. Without such consensus, a company may well fragment its competence-building efforts, as various business units pursue their independent competence-building agenda, or the firm may simply fail to build new competencies. Stability to senior management teams and, correspondingly, strategic agenda is also a key.

To leverage a core competence across multiple businesses and into new markets often requires redeploying that competence internally – from one division or strategic business unit to another. Some companies are better at this than others, and hence get greater effective use out of their competencies. We sometimes define a company’s core competencies in the same way a country defines its money supply; stock (the number of bills printed, or the number of people who “carry” a particular skill) multiplied by velocity (how fast the bills change hands, or how quickly and easily competence carriers can be redeployed into new opportunity areas). Many companies have a sizable stock of core competencies – many people with truly world-class skills – but almost zero competence velocity – the ability to redeploy those individuals behind new market opportunities.

For more and more companies today, the ratio of market value to asset value is 2:1, 4:1, even 10:1. The difference between asset value and book value is not goodwill, it is core competence – people embodied skills. The numerator in the ratio reflects investors’ beliefs about the uniqueness of the firm’s competencies and the potential value that can be generated by the exploitation of those competencies in the marketplace. The allocation and management of the assets that appear on the balance sheet is an elaborate, time-consuming ritual, infused with analytical rigor and attempts at numerical precision. But what about the other three-fourths or nine-tenths of corporate value? Through what mechanisms are core competencies allocated? How explicit are the choices about where to put talent? How much pressure is put on divisional managers to justify why they should have preferential access to some particular competence pool? Although human resource executives will proudly proclaim that “people are our most important asset”, there is seldom any mechanism for allocating human capital that approaches, in its sophistication and thoroughness, the procedures for capital allocation. In most Western companies the chief financial officer has more organizational status and raw power than does the head of personnel. In many Japanese companies the situation is precisely reversed – as it should be if a company truly believes that competition for competence is the highest order of competitive rivalry, and if it understands that access to competencies, rather than access to cash, is the most critical driver of growth. We sometimes carry out with a company’s divisional managers illustrates a critical precondition to the capacity to redeploy competence assets. We provide each divisional or strategic business unit manager with a product-geography matrix, and then ask each executive to rank, 1 through 10, their company’s near-term growth opportunities. There is usually little correspondence between one manager’s rankings of growth priorities and any other manager’s rankings. Yet, in the absence of a corporate-wide consensus on new business opportunities – that is, agreement on what projects truly are “urgent” or deserved to be labeled “gold” – there can be no logical basis for the internal reallocation of core competence resources.
One Japanese company regularly publishes a list of the company’s top market and product development priorities. Obviously, there is great status attached to working on a high-profile, critical program. If an individual somewhere in the organization believes that he or she can contribute to one of the high priority projects, that individual can “self-promote” himself or herself onto the team. The team leader may not choose to take the applicant, but if the skills offered are critical to the project’s success, the team leader can ask that the individual be transferred. At this point, the employee’s boss has to justify why that individual’s talents are of more value to the corporation in the current job than in new job. As one might expect, the existence of such a system helps ensure that unit managers do their best to keep key people occupied with truly challenging projects. It also ensures that the best people end up working on the biggest potential opportunities.

The mobility of competencies is also aided when the employees who comprise a particular competence meet frequently to exchange ideas and experience. Seminars and conferences are important for instilling a sense of community among people working in the same competence. The cross-fertilization that results accelerates competence-building. The goal is a group of people who see themselves as corporate resources, and whose first loyalty is to the corporation and the integrity of the company’s core competencies, rather than to any single business unit. Geographic proximity can also aid competence mobility. Where a competence is spread across facilities in a dozen countries or more, collective learning and the reallocation of individuals to new projects are difficult. A company should avoid unnecessary geographical fragmentation of its core competencies.

Core competence leadership may be lost in many ways. Competencies may wither through lack of funding; become fragmented through divisionalization, particularly where no single executive feels fully responsible for competence stewardship; be inadvertently surrendered to alliance partners; or be lost when an underperforming business is divested.
Protecting core competencies from erosion takes continued vigilance on the part of top management. Although most senior managers can easily dredge up competitive measures of sales performance, market share, and profitability, few are able to offer a quick and convincing judgment on whether their company is staying ahead of competitors in core competence development. There is no way to protect a firm’s core competencies from erosion if the health of those competencies is not visible to top management. Divisional managers should be assigned cross-corporate stewardship roles for particular competencies, and should be held responsible for the health of those competencies. Regular “competence review” meetings should focus on levels of investment plans for strengthening constituent skills and technologies, internal patterns of deployment, the impact of alliances, and outsourcing.

It is not to be argued that the core competence perspective should supplant a product-market perspective; rather, it should complement it. Given how deeply engrained the strategic business unit perspective is in most companies, it will take substantial effort from senior management to build the complementary core competence view. The goal is not to “hardwire” the core competence into the organization through structural changes, but to “soft-wire” the perspective into the heads of every manager and employee. This means (1) establishing a deeply involving process for identifying core competencies; (2) involving strategic business units in a cross-corporate process for developing a strategic architecture and setting competence acquisition goals; (3) defining a clear set of corporate growth and new business development priorities; (4) establishing explicit “stewardship” roles for core competencies; (5) setting up an explicit mechanism for allocating critical core competence resources; (6) benchmarking competence-building efforts against rivals; (7) regularly reviewing the status of existing and nascent core competencies; and (8) building a community of people within the organization who view themselves as the “carriers” of corporate core competencies.

Having safeguarded the firm’s existing competencies escaped the myopia of existing served markets, and built a forward-looking competence agenda, a company can move on to the finals tasks in managing the migration path to the future: expeditionary marketing and global preemption.

Any knowledge management system must deal with rapid change in knowledge value, and provide means for evolving the knowledge base under management. Even leadership core competency becomes irrelevant in the churning competitive environment. The design requirements focus on the dynamic nature of knowledge capture, dissemination, renewal, and creation; and recognize the need for transparent training which does not interfere with daily employee productivity.

The context of the design is a GM Metal Fabrication plant with exceptional competency at creating high-variety, low-volume production processes, and their desire for training both new employees and a broader base of existing employees in this competency.

To start – there is a need to build one process to capture knowledge and insight that a few people possess, and another process to plant that knowledge and insight effectively in other minds. Since the value of knowledge and the nature of its application changes constantly, these processes must be change-proficient. Consider the alternative: if succeed in capturing and packaging the insights of a few people today, and also succeed in feeding this boxed wisdom to everyone else, there is both a risk that the contents are incomplete and a time when they become stale – better to let things compete for acceptance than to institutionalize rigor mortise. Leading management sage Tom Peters says it well: “I’m totally opposed to the learning organization idea. I argue for the forgetting organization. You get droids when you have too much training and too many people thinking and learning in the same way” (Wired Magazine, Dec 97). Therefore, there’s a need for a process that captures wisdom from those who have it, even if they can’t articulate what it is; that seeks wisdom wherever it may be at the moment; that actively renews (improves, upgrades) its content; that creates and accepts new knowledge when it is appropriate.

With this reasoning the knowledge capture process has grown into a capture, renewal, and creation process – the activities that identify and package the right stuff. But we’re still going to have problems if this stuff is simply put in a box and handed over to a separate and dedicated “training” process: for one it’ll go stale, for another the trainers will not be quick to change what they teach. A little more reasoning is needed. New employees come in the door and existing employees change job functions constantly throughout the year – frequent events that trigger a need for training.

Meanwhile, deliberate knowledge generation typically relies on the slow-to-admit failure of existing knowledge as its triggering event. This tells us that the knowledge generation activities are better tied to the training triggers – and leads us to the conclusion that we don’t want separate generation and dissemination processes but rather one integrated system – one that generates and reaffirms knowledge in the process of teaching it. The implication here is that the people being trained will be the agents of knowledge generation as well as the triggers. Organizations don’t want off-the-shelf knowledge to feed to people – but rather a training process for discovering and reinterpreting appropriate knowledge and its application. Now there’s a reality to face after addressing the stale knowledge problem: performance pressures preempt time-off for training and postpone financial commitments for training resources.

Organizations also don’t want dedicated training resources – they institutionalize the rigor mortise. Instead, they want a rotating mentor-student relationship that exposes the wisdom of real workers, and challenges them to explain their insights explicitly and similarly, don’t want time-off for training – that encourages the wrong knowledge focus. Instead, organizations wanted a training to occur during the process of solving real problems – with solutions that provide real value in real time to the organization. This was called employment of real people solving real problems in real time Realsearch in the prior essays. Details can be read in “Realsearch: A Framework for Knowledge Management and Continuing Education” available on the web site at http://www.parshift.com.

It is clear that the industry-specific external drivers of change such as technological advances, globalization, consumer choice and demand, and changing government policies and legislation align closely with the requirement for competencies, skills and recognition of all types of learning, both for new entrants and workforce development.

Some competencies may not necessarily be core to a person’s role or occupation, but will add value to it or enable a person to continually develop for personal or professional purposes. These additional competencies may be recognized through formal training and learning leading to the achievement of a certificated qualification. It is assumed that existing qualifications or schemes will form part of the knowledge management framework. Learning and training (in various form of acquisition) may not lead to a qualification or certification and is therefore classified as informal. However, in both cases, the learning experience has added to, or enhanced, the individual’s ability to perform within their given occupation.   The overall competence of an individual will need to have an overarching mechanism that physically records that person’s competence status within the industry in which they are operating. It is assumed that a skills passport or card or certificate will be the mechanism for this. A business may comprise one individual in which case the overall business competence will equate with the competence of the individual. In many cases however, the sum of individual competencies will determine how ‘competent’ the whole business is.

In the organization or business setting, there are a lot of questions yet to be addressed:

1. How competencies are accounted in an individual?
2. Were it recognized and rewarded?
3. How to set motivation to gain more necessary competencies in support to the organizational competencies to achieve the overall organization’s objectives?
4, In this knowledge-intensive era, do companies or organizations still view learning/training as an expense rather than a strategic investment?
5. How to retain the competencies of an individual in the organization (when opted to leave)?

And there are a lot more issues to consider…

A multitude of dangers await a company that can’t conceive of itself and its competitors in core competence terms or perspectives.

First is the risk that opportunities for growth will be needlessly truncated. Too often an opportunity that falls between the cracks of existing market definitions, and has no natural “home”, gets overlooked. Most companies work hard to delineate precisely unit-by-unit ownership of existing competitive space, but shouldn’t equal attention be given to assigning responsibility for new competitive space?

Second, even if someone in the organization spots a new opportunity, if the competencies that are needed to respond to that opportunity lie in another business unit, there may be no way to redeploy the people who “carry” those competencies into the new opportunity arena. Unit managers are notoriously protective of “their” people, and in few companies, there are no any explicit mechanisms for ensuring that the best talent gests aligned behind the most attractive new opportunities. The result is imprisoned and underleveraged competencies.

Third, as a company divisionalizes and fractures into even-smaller business units (a popular trend recently), competencies may become fragmented and weakened. Business unit boundaries may make cross-application difficult and slow the cumulative learning processes through which competencies are enhanced. Individual business units are willing to support competence-building efforts only to the extent that the competence contributes to the competitiveness of today’s end products. Often, an individual business unit can sustain neither the investment nor the patience to build a new core competence.

Fourth, the lack of a core competence perspective can also desensitize a company to its growing dependence on outside suppliers of core products. Managers (often than not) whose only focus is on maximizing brand share may find it expedient to “rent” a competitor’s competencies rather than invest to build one’s own. This is an often dangerous short-cut to competitiveness.

Fifth, a company focused only on end products may fail to invest adequately in new core competencies that can propel growth in the future. Tomorrow’s growth depends on today’s competence-building. Investment in new core competencies provides the seeds for tomorrow’s product harvest.

Sixth, a company that fails to understand the core competence basis for competition in its industry may be surprised by new entrants who rely on competencies developed in other end markets.

And seventh, companies insensitive to the issue of core competence may unwittingly relinquish valuable skills when they divest an underperformed business. To protect core competencies, a company must be able to distinguish between a bad business and the potentially valuable competencies buried within that business.

Many organizations and human capital management vendors are talking about competencies; however, very few companies have successfully implemented a company-wide competency initiative. Competency initiatives that produce the most significant changes are applied systemically across a range of human capital acquisition and management processes.  Integrating a competency model with the various component applications that make up the next generation human capital management system will be a challenge.  No single framework or vendor offers an integrated suite of products or services that provides “best-in-class” capabilities for the range of human capital management applications. Each organization is unique and there is no single vendor solution available today (though there are enormous attempts in various areas but integration of these available resources is of paramount importance).

The core competence perspective is not a natural one in most companies. Typically, the most basic sense of corporate identity is built around market-focused entities, often called “strategic business units”, rather than around core competencies. Whereas it is entirely appropriate to have a strong end-product focus in an organization, this needs to be supplemented by an equally explicit core competence focus. A company must be viewed not only as a portfolio of products or services, but a portfolio of competencies as well. This proved to be true in valuating an organization or a company. Often than not, valuing an organization does not include human capital or knowledge aspects that drives the organization (say for example in acquisition process).

I have another blog in mind in the area of Acquisitions & Mergers soon…

James Manktelow of Mindtools.com states that the idea of “core competencies” is one of the most important business ideas currently shaping the world, which lies behind the current wave of outsourcing, as businesses concentrate their efforts on things they do well and outsource as much as they can of everything else.

The starting point for understanding core competences is understanding that businesses need to have something that customers uniquely value if they’re to make good profits.  “Me too” businesses (with nothing unique to distinguish them from their competition) are doomed to compete on price. The only thing they can do to make themselves the customer’s top choice is drop price. And as other “me too” businesses do the same, profit margins become thinner and thinner. This is why there’s such an emphasis on building and selling USPs (Unique Selling Points) in business. If you’re able to offer something uniquely good, customers will want to choose your products and will be willing to pay more for them.  The question, though, is where this uniqueness comes from, and how it can be sustained.

Prahalad and Gary Hamel argue that “core competencies” are some of the most important sources of uniqueness. These are the things that a company can do uniquely well, and that no one else can copy quickly enough to affect competition. They used examples of slow-growing and now-forgotten mega corporations that failed to recognize and capitalize on their strengths. They compared them with star performers of the 1980s (such as NEC, Canon and Honda), which had a very clear idea of what they were good at, and which grew very fast.  Because these companies were focused on their core competencies, and continually worked to build and reinforce them, their products were more advanced than those of their competitors, and customers were prepared to pay more for them. And as they switched effort away from areas where they were weak, and further focused on areas of strength, their products built up more and more of a market lead.

Hamel and Prahalad give three tests to see whether competencies are true core competencies:

  1. Relevance: Firstly, the competence must give your customer something that strongly influences him or her to choose your product or service. If it does not, then it has no effect on your competitive position and is not a core competence.
  2. Difficulty of Imitation: Secondly, the core competence should be difficult to imitate. This allows you to provide products that are better than those of your competition. And because you’re continually working to improve these skills, means that you can sustain its competitive position.
  3. Breadth of Application: Thirdly, it should be something that opens up a good number of potential markets. If it only opens up a few small, niche markets, then success in these markets will not be enough to sustain significant growth.

An example: One might consider strong industry knowledge and expertise to be a core competence in serving your industry. However, if one’s competitors have equivalent expertise, then this is not a core competence. All it does is make it more difficult for new competitors to enter the market. More than this, it’s unlikely to help one much in moving into new markets, which would have established experts already.

To identify the core competencies, the following are the suggested steps:
I. Brainstorm the factors that are important to your clients.

  • If you’re doing this on behalf of your company or organization, identify the factors that influence people’s purchase decisions when they’re buying products or services like yours (make sure that you move beyond just product or service features and include all decision-making points.)
  • If you’re doing this for yourself, brainstorm the factors (for example) that people use in assessing you for annual performance reviews or promotion, or for new roles you want. Then dig into these factors, and identify the competences that lie behind them. As a corporate example, if customers value small products (e.g. cell phones), then the competence they value may be “component integration and miniaturization”.

II. Brainstorm your existing competencies and the things you do well.

III. For the list of your own competencies, synthesize them against the tests of Relevance, Difficulty of Imitation and Breadth of Application, and see if any of the competences you’ve listed are core competences.

IV. For the list of factors that are important to clients, screen them using these tests to see if you could develop these as core competences:

  • If you’ve identified core competencies that you already have, then great! Work on them and make sure that you build them as far as sensibly possible;
  • If you have no core competencies identified, then look at ones that you could develop, and work to build them; or
  • If you have no core competencies and it doesn’t look as if you can build any that customers would value, then either there’s something else that you can use to create uniqueness in the market, or think about finding a new environment that suits your competencies.

V. Finally, think of the most time-consuming and costly things that you do either as an individual or a company, and strategize.

Here’s what I have found that can you help you learn more about competency (individual or organizational is applicable) but I will make another blog about this one. For now, here’s the preview:

Management recognizes the value of technology in leveraging the various businesses within its business organization. It also recognizes the importance of people in making things happen, that core competencies cannot be static but must be continually enhanced and that its set of competencies must be configured either to ensure its competitive advantage or to enter into new businesses. But how do we translate these core competencies (or even systematically define/pinpoint) into a systematic framework incorporating the overall business strategy?

In the Philippines, local companies recognize this need but many of them have no means (or limited) to systematically translate its corporate vision, mission, core values, and core competencies into specific systems and programs except to obtain the expensive services of foreign consultants. This is the very reason, I made a further study as I have mentioned in my previous blog.

The objective here, therefore, is to conduct an initial study and come up a better way (framework) for managing core competencies, which can be utilized for managing core competencies and can be considered as part of an overall business strategy of an organization.

A sample framework for Innovation

A sample framework for Innovation

What possible benefits that can be achieved?

For the organization, a strategic and systematic framework for documenting, disseminating and creating knowledge resulting to:

  1. An organized way of managing knowledge so that the right information is available at the right time for the right person and level of expertise
  2. Providing a learning environment where people can share and develop knowledge through interaction as teams and where business and technical managers can coach subordinates

At the operational level, a proactive people selection and strategic development process resulting to:

  1. A people development plan which is customized, focused and effective
  2. A career path which can be easily defined and implemented
  3. Greater involvement of the individual and the superior in designing a development plan

For management and HR, a result-oriented process resulting to:

  1. People development interventions that not only enhance people capability and teamwork but also provide a return on training investment that is easily measured and integrated into the existing HR systems
  2. An organized system for manpower planning and selection, and for career planning
  3. A change in mindset and use of the concept of an empowered workforce

Management will be able to have a better leverage with technology because of the accelerated development of people (we all know that whatever initiatives organizations may have e.g., innovation, expansion, acquisition, etc. — people will always be the essential engine). In addition, it will realize short-term and long-term cost savings in terms of tactical and operational efficiency and improvement in product quality (by shortening the learning curve of the organization). The resulting trained manpower of the organization will become the engine for business development as the organization looks forward to business expansions and market diversification.

In particular, the study of managing core competencies shall:

  1. Identify organizational competencies which serve as bases for identifying technical and non-technical specialists and their individual competencies
  2. Provide a system which will document and make available to the right persons at the right time, know-how in various areas of the organization and at a range of levels
  3. Include a system for evaluating people performance and ascertaining level of expertise of specialists
  4. Provide an environment of innovation and promote workplace learning

Dramatic changes in organizations are occurring. A large proportion of these changes place an emphasis on the development and use of intellectual assets and the development of core competencies. Defining and re-defining organization’s core competencies are the results of a deliberate management strategy. In order to be supportive to this business strategy, the practice of business management, technology management, knowledge management, and human resources management will have to undergo significant transformation. The key to this transformation consists in redefining the key concept of the job into a set of individual competencies and organizational units into core competencies architectures.

Background on Core Competency:

Mascarenhas et al. (1998) describes a core competency as taking various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture such as employee dedication.

C.K. Prahalad and Gary Hamel (1995) developed the concept of core competencies in the management field and introduced it in a 1990 Harvard Business Review article. They wrote that a core competency is “an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity.” They developed their main idea through a series of articles in the Harvard Business Review followed by a best-selling book – Competing for the Future. Their central idea is that over time companies may develop key areas of expertise which are distinctive to the company and critical to the company’s long term growth.

In the 1990s managers will be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible – indeed, they’ll have to rethink the concept of the corporation itself.’ C.K. Prahalad and G. Hamel 1990

These areas of expertise may be in any area but are most likely to develop in the critical, central areas of the company where the most value is added to its products. Ever since Prahalad and Hamel introduced the term in the 1990’s many researchers have tried to highlight and further illuminate the meaning of core competency. D. Leonard-Barton (1995) described capabilities as being core if they differentiate a company strategically. On the other hand, Galunic and Rodan (1998) argued that a core competency differentiates not only between firms but also inside a firm. It differentiates amongst several competencies. In other words, a core competency guides a firm recombining its competencies in response to demands from the environment.

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. Core competencies lead to the development of what they call “core products.” Core products are not directly sold to end-users; rather, they are used to build a larger number of end-user products.  They added that 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.

Although it is widely accepted that alignment of core competencies with the wider corporate strategy is necessary, to date there have been few clear statements on what a core competency strategy looks like and how it may be practically implemented. Often argued that current methods and techniques to accomplish this alignment are severely limited, showing no clear description on how the alignment can be achieved.  Many organizations attempt to examine the role of core competencies in the development of business and knowledge strategies viewing knowledge embedded in core competencies as a strategic asset and were articulated and verified in the overall strategy of the organization.

Many companies have developed or adopted various core competency development and knowledge management (KM) initiatives to try to surface and differentiate what they do know from what they need to know and also identify the location of their knowledge gaps. Processes and tools that support efforts to capture knowledge are well known and widely used, such as expertise directories, intranets, communities of practice, knowledge audits, discussion forums, knowledge maps, post- project or after-action reviews, lessons learned banks, building and documenting knowledge-based and expert systems, storytelling, benchmarking and the like.

Although the importance of strategic alignment is well recognized, what is less understood is the practical means to determine what core competencies are strategically important and how these core competencies can be incorporated into the overall organization’s strategy. For example, many suggests that companies may have unique ways of doing this, (itself a competitive advantage) and using different techniques such as SWOT analysis are applicable.

Core competency management undertakings typically center on the core and competent people who embody and can apply their competencies in projects or other business activity settings, and often entail recording or abstracting from the traces of their contextualized activities. Such core competency development initiatives implicitly recognize the centrality of the competencies of individuals and groups in transacting the strategic aims of the organization at operational levels, and in potentially identifying the specific competencies, knowledge, skills, and abilities that give comparative advantages. Rarely, however, are such initiatives directly linked to the overall corporate strategy and (often inappropriately) are typically designed and implemented through the organization’s individual units. A focus on the core competencies related to the overall strategic objectives may be more productive and useful to augment the competitive advantage of an organization. If organizations are centrally reliant on their core competencies for their survival, value and market leadership, their core competency and knowledge management strategies must be fully congruent with wider organization strategy.

A company’s core competencies (Prahalad and Hamel, 1990) are the areas in which it has competitive strength and thus form a platform for its strategic thrusts. Not knowing or appreciating, these means its strategies may fail, and compromise proper valuation of a organization’s knowledge assets underlying the support, adaptation and maintenance of its activities.

Core competencies are necessary part of a knowledge strategy which itself is part of the overall strategy, whether embedded or aligned. To give a sustainable strategic advantage, core competencies should be valuable, rare, hard to imitate or substitute, and ideally will confer a dominating ability in their area. The theoretical literature on core competencies does not, however, generally relate their development to concepts of knowledge management operation, nor to strategy implementation. Nor, although recognizing that some competencies are more important than others, does it distinguish strategic from operational core competencies. It may be proved useful to differentiate these since the only way strategy can be realized is through the competent people performing activities that achieve strategic goals at the operational level, For this to occur, an explicit linkage between strategic goals and operational activity, between strategic core competencies and their implementation (and reciprocally between operational competencies and strategic objectives) must be articulated. Since contemporary thinking on strategy emphasizes ability to respond to environmental changes quickly at all levels rather than planning in a controlled environment, an embedded knowledge strategy will act as the medium through which these levels can be brought into alignment and allow for emergent strategy to be developed across the organization.

A compelling question that may be asked, “But how does an organization decide what set of operating-level initiatives would best meet its strategic goals?” and goes on to identify the “challenge of linking strategy with execution at the knowledge or competency level” by a focus on various activities around intellectual capital. As an open research question however, specific implementation guidance is not offered, and associated literature often notes only generic steps (identify strategic business drivers, determine business critical knowledge characteristics and locations, construct knowledge value chains and find competency gaps). Yet an organization’s ability (or otherwise) to knowledgeably enact and leverage corporate processes and technologies are the essence of a strategic competency. In a view of strategy that is not purely top down, but is essentially enacted dynamically by the knowledgeable activity of people in the “middle”, it is crucial to reify these competencies in relation to strategy formulation. Current tools do not go far enough in guiding this, nor do they provide explicit methods for systematic engagement at this level.

I attempted to study a Philippine-based organization and the development and mapping of its long-term corporate core competency development and knowledge strategy. Having identified the need to provide detailed guidance or framework on identifying an organization’s core competencies and to directly link or relate these effectively to knowledge strategy and overall organization’s strategy, I had came across a process of core competency development and strategies including knowledge development and that the framework can be a good vehicle to properly manage core competency strategies in support to the overall organization’s vision.

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