C. K. Prahalad

The Core Competence of the Corporation

Development of a firms core competencies is identified as the key for global leadership and competitiveness in the 1990s. NEC, Honda, and Canon are used as exemplars of firms that conceive of themselves in terms of core competencies. Core competencies are the organizations collective learning and ability to coordinate and integrate multiple production skills and technology streams; they are also about the organization of work and delivery of value in services and manufacturing. A firm must conceive of itself as a portfolios of competencies, instead of a portfolio of strategic business units (SBUs). The latter limit the ability of firms to exploit their technological capabilities; they are often dependent on external resources. The real source of advantage lies in managements ability to consolidate corporate-wide technologies and production skills into competencies, which will allow individual businesses to adapt to emerging opportunities. Cultivating core competencies does not mean outspending rivals on RD (2) they significantly contribute to the customer benefits of the end-product; and (3) they should be difficult for competitors to imitate. Cultivating core competencies also means benefiting from alliances and establishing competencies that are evolving in existing businesses. The tangible links between core competencies and end products are core products, which embody one or more core competencies. Companies must maximize their world manufacturing share in core products. Global leadership is won by core competence, core products, and end products; global brands are built by proliferating products out of core competencies. Firms must avoid the tyranny of the SBU, the costs of which are (1) under investment in developing core competencies and core products, (2) imprisoned resources, and (3) bounded innovation. Top management must add value to a firm by developing strategic architecture, which will avoid fragmenting core competencies, establish objectives for competence building, make resource allocation priorities transparent and consistent, ensure competencies are corporate resources, reward competence carriers (personnel who embody core competencies), and focus strategy at the corporate level. A firm must be conceived of as a hierarchy of core competences, core products, and market-focused business units. Obsession with competence building will mark the global winners of the 1990s. (TNM)

Co‐creating unique value with customers

The traditional system of company‐centric value creation (that has served us so well over the past 100 years) is becoming obsolete. Leaders now need a new frame of reference for value creation. In the emergent economy, competition will center on personalized co‐creation experiences, resulting in value that is truly unique to each individual. The authors see a new frontier in value creation emerging, replete with fresh opportunities. In this new frontier the role of the consumer has changed from isolated to connected, from unaware to informed, from passive to active. As a result, companies can no longer act autonomously, designing products, developing production processes, crafting marketing messages, and controlling sales channels with little or no interference from consumers. Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby co‐create value. The use of interaction as a basis for co‐creation is at the crux of our emerging reality. The co‐creation experience of the consumer becomes the very basis of value. The authors offer a DART model for managing co‐creation of value processes.

Why sustainability is now the key driver of innovation

This publication contains reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles.

The Role of Core Competencies in the Corporation

The scorecard of Western firms—be it performance along dimensions such as quality, cycle time and cost, or growth and new business creation—has been less than satisfactory. We need a new approach t...

Global Competitive Pressures and Host Country Demands: Managing Tensions in MNCs

Much has been written about the growing complexity of strategic demands facing multinational corporations. The authors examine conflicts implicit in the recent development of several such demands, and look at some of their administrative and organizational implications. In illustrating the administrative adaptations made by several companies, the authors highlight the need for change on a broader basis than the continual reorganizations resorted to by many MNCs.

Managing Discontinuities: The Emerging Challenges

Firms will have to rethink the nature of their core competencies and acquire new ones that will shape their future. This article is a framework for getting started.

Wettlauf um die Zukunft

Ist Ihr Unternehmen fit fur die Zukunft? Sind Ihre Mitarbeiter darauf vorbereitet, die Entwicklungen Ihrer Branche in den nachsten funf bis zehn Jahren entscheidend zu pragen? Ist Ihr Zukunftskonzept — verglichen mit demjenigen der Konkurrenz — einzigartig? Wenn nicht, dann ist Ihr Unternehmen mit groser Wahrscheinlichkeit gefahrdet, den „Wettlauf um die Zukunft“ zu verlieren.

Technological innovation and interdependence: A challenge for the large, complex firm

Abstract Faced with accelerating change in their technological environment, managers of large, complex firms must ensure that relevant new technologies are developed and utilized for the rejuvenation of existing and the creation of new businesses. Responsibility for managing this process has rested traditionally with existing research and development units. Growing dissatisfaction with this solution has led to new approaches for innovation, such as internal venturing, which attempt to emulate small, entrepreneurial companies. In this article, the authors argue that all approaches to innovation that remain confined to individual organizational units, be they existing or especially created, lead to suboptimal results when the technologies involved have implications for several business units. They then discuss a number of organizational capabilities that are necessary to differentiate innovative activities from on-going operations, and yet—at the same time—allow large, complex firms to exploit their unique advantages by integrating their new and existing activities. Administrative mechanisms available to top management for shaping the organizational context are discussed next. Finally, the authors present two illustrative cases from their research.

Technological innovation and interdependence

Abstract Faced with accelerating change in their technological environment, managers of large, complex firms must ensure that relevant new technologies are developed and utilized for the rejuvenation of existing and the creation of new businesses. Responsibility for managing this process has rested traditionally with existing research and development units. Growing dissatisfaction with this solution has led to new approaches for innovation, such as internal venturing, which attempt to emulate small, entrepreneurial companies. In this article, the authors argue that all approaches to innovation that remain confined to individual organizational units, be they existing or especially created, lead to suboptimal results when the technologies involved have implications for several business units. They then discuss a number of organizational capabilities that are necessary to differentiate innovative activities from on-going operations, and yet—at the same time—allow large, complex firms to exploit their unique advantages by integrating their new and existing activities. Administrative mechanisms available to top management for shaping the organizational context are discussed next. Finally, the authors present two illustrative cases from their research.

Learning to Lead

All large firms around the world are concerned about value creation through organic growth and innovation. In fact, continuous innovation is the only source of sustainable advantage. Indian industry can be a source of innovations, not just for the Indian market but also for the global market. And for this, India has to focus on the next practices, not just be content with the best practices. The competitive landscape is being altered by five major forces that will reshape the basis for competition: They are: i) Deregulation of a large number of industries such as telecom, power, health, and financial services bringing a significant change; ii) Globalization giving rise to ‘micro multinationals;’ iii) Emerging markets like India and China growing rapidly and already positioned to be the No. 2 and No. 3 economies of the world; iv) Convergence of technologies and industries wiping out old business boundaries and creating new ones; and v) Ubiquitous connectivity having a big impact on how business is done as more than a billion people are connected through wireless and personal computers (PCs). The innovation and the value creation debate around the world are centring on these five issues and the firms that adapt themselves fast to the changing scenario are going to be the winners. In this lecture, the author addresses the following questions: Where will the ‘next practices’ come from? How do we start seeing a pattern of opportunity that others may not yet recognize? How do we commercialize complex technologies? How do we understand the changing nature of the key driving forces that will create the next world economic order? How do we create a global perspective irrespective of our work or our current preoccupations? The author cites, as examples, specific case studies of innovation taking place in India in a wide variety of areas: hospitality industry, adult education, automotive, health care, and communications and computing. He believes that these examples represent the harbingers of next practices. The author has the following suggestions for the Indian industry to move to the next phase – to lead: Indians need to have the confidence and commitment to leverage their capacity for experimentation into the global marketplace. India needs to recognize the emerging patterns and develop a methodology for radical innovations. India needs a full measure of knowledge creators and thinkers. Indian companies are in a cusp of a very good opportunity and those who have the courage and imagination to move forward, experiment, consolidate, and leverage will be at an advantage.