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.