Identifying and Developing Core Competencies in Small Businesses Brian Baldus Marriott School of Management Brigham Young University

Agenda Introduction Trends you know What you’ve learned Competition Core Competencies Meta competencies Sustained Competitive Advantage

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

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

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

Competition is

Market Share

R&D Budget

Product Price/performance

Three planes

Core Competencies

Core Products

End Products

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

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

Meta competencies Name for a grouping of core competencies Source: Shirish Srivastava

Name for a grouping of core competencies

An Example Constituent skills – BARCODING – Packaging items Core Competencies – PACKAGE TRACKING – Rapid delivery – People Meta competency – Logistics Adapted from Shirish Srivastava

Constituent skills – BARCODING

– Packaging items

Core Competencies – PACKAGE TRACKING

– Rapid delivery

– People

Meta competency – Logistics

Brainstorming What skills gives your company potential access to wide variety of markets? Of those, what about it makes a significant contribution to the customer value? Of those, which of them are difficult for competitors to imitate?

What skills gives your company potential access to wide variety of markets?

Of those, what about it makes a significant contribution to the customer value?

Of those, which of them are difficult for competitors to imitate?

What Makes a core competency? Routine Skills, Resources, and Capabilities (many) Meta competencies (one to two) Core Competencies (dozen or less) Adapted from Shirish Srivastava

Discovering Meta competencies Source: Shirish Srivastava (used with permission) Shared Values Systems Staff Style Close External Relationships Skills Structure Strategy Agility Innovation Reliable Systems Cost Efficiency

Discovering Meta competencies Organizational Components Source: Shirish Srivastava Hard Soft Shared Values Systems Staff Style Close External Relationships Skills Structure Strategy Agility Innovation Reliable Systems Cost Efficiency

Discovering Meta competencies Competitive Aspects Source: Shirish Srivastava Shared Values Systems Staff Style Close External Relationships Skills Structure Strategy Agility Innovation Reliable Systems Cost Efficiency

Example – Ideal Hardware Customer service is key Conflict: low wages Shared Values Communication system Reliable computer and communication system Systems Handymen Handymen Handymen Handymen Handymen, Conflict: low wages Staff Traditional feel, fun displays Style Close Ext. Relationships Handymen Handymen Skills Several key knowledgeable employees Flat organizational structure Structure Handymen salespeople Purchasing (buy bulk/discount), sell at higher price Strategy Agility Innovation Reliable Systems Cost Efficiency

Discovering Meta competencies Identify firms capabilities Link each capability to one of the 7 S’s Write the capability under the column that best describes the capability’s competitive advantage to the firm (can occur more than once) Identify capabilities occurring in most/all of the 7 S’s Adapted from Shirish Srivastava Shared Values Systems Staff Style Close External Relationships Skills Structure Strategy Agility Innovation Reliable Systems Cost Efficiency

Identify firms capabilities

Link each capability to one of the 7 S’s

Write the capability under the column that best describes the capability’s competitive advantage to the firm (can occur more than once)

Identify capabilities occurring in most/all of the 7 S’s

New Focus Look internally Success depends on continually reevaluating

Look internally

Success depends on continually reevaluating

Develop Abandon Existing Sustained Competitive Advantage Adapted from Shirish Srivastava Skills, Resources, and Competencies Pool Narrow the pool Competency Evaluation Nurture New Outdated Company and Market Fit Implement

Implementing 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

Define Meta Competency

Level 5 Leadership Style

Assemble the team

Attract and Retain Resources

Turning the Flywheel

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

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.

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.