Strategy and magic

Over the last twenty years or so, there has been increasingattention to the ideas of `corporate strategy' and `businessplanning', with the consequence that most organizations practisethe dark arts, and most business schools include these ideas,related techniques and models in ®nal-year degree courses, as wellas in MBAs.

Arguably the popularity of strategy owes much to the idea thatstrategy and planning deal with the future, and that with just a littletechnique, and just a little forecasting, it is possible to predict andsteal the future.

Competing for the future

The beguiling idea that it is possible to take advantage of one'sforecasted future is just one step away from the idea, popularizedby Hamel and Prahalad (1994), that one can (and should) look tocreate one's future. But further examination of their ideas, andWatson's (1994) study of the adoption of the recipe adopted byZTC, should lead careful readers to conclude that the possibility ofcompetitive advantage coming from an organization's `corecompetences' requires in advance the creation of a culture (andhard systems) which is prepared to embrace a strategic intent(Hamel and Prahalad, 1989), which shifts attention to the trulylong run.

In this sense the possibility of strategic dominance is best seenwithin the culture±excellence school of management popularizedby Peters and Waterman (1982). By emphasizing the human sideof management, they helped writers and managers to move awayfrom over-reliance on the rational managerial approach, arguingthat `people matter'; arguing that strategic success is largelyachieved through the energy and commitment of people, ratherthan the adoption of mechanistic processes and techniques alone(cf. Mintzberg, 1994).

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Strategic Change, Vol. 6, 371±375 (1997)

GuestEditorial

Competitiveadvantage andcore competences

Competitive advantage

In many senses this ®nding appears to run contrary to thecelebrated work of Michael Porter (1985), who introduced us tothe idea of `competitive advantage'. Based in a largely micro-economic paradigm of business, Porter's argument was that anorganization should choose its generic strategy based on ananalysis of where it is able to create the greatest value-added for itscustomers. Citing Porter (1985, p. 25):

The generic strategy speci®es the fundamental approach tocompetitive advantage a ®rm is pursuing, and provides thecontext for the actions to be taken in each functional area.

This apparently simple formula for the development ofcompetitive strategy led to a rush of new work and newapplications having the expression `competitive advantage' intheir title or in the text. Competitive advantage got everywhere!

But in the haste to develop and extend Porter's original thinking,writers and practitioners have lost sight of Porter's powerfulinsights about the relationships, competitive advantage andgeneric strategy. They have failed to explore the logic andconsequence of his thinking about the value chain, and as a resultfailed to explore the value chain as a basis for co-operation where,for example, supply chain members work in a co-operative way(rather than adversarially), where mutual goals and visions can bepursued and achieved (cf. Nelson and Weinstein, 1994).

Bill Clinton?

`It's the economy, stupid', muttered Bill Clinton as he obtained asecond term in Of®ce in the White House.

`It's relationships, stupid', is what Porter was driving at in hiswork on competitive advantage.

Yes, the irony is that whilst Porter's work comes out of anessentially abstract micro-economic approach, between the linesof work it is possible to recognize the importance of humanbeings, and especially the exchange relationships between humanbeings, as being a focus for the development of one's strategy.

Porter's work on the value chain can therefore be reinterpretedin light of our growing understandings and beliefs about theimportance of people in our organizations. Bartlett and Ghoshal(1994, p. 81), amongst others, preach that

senior managers must convert the contractual employees of aneconomic entity into committed members of a purposefulorganization.

and then go on to challenge readers by asserting that (1994, p. 86):

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Managers need to recognize and respond to the reality that theiremployees don't just want to work for a company; they want tobelong to an organization. More than just providing work,companies can help give meaning to people's lives.

Virtually all of Charles Handy's recent work celebrates theimportance of people in organizations and, without too muchexaggeration, we can therefore return to Michael Porter's work andreinterpret his work on competitive advantage and the value chain asinvolving both

* an economic approach: a sense which requires organizations tobe clear about the economic basis of their (generic) strategy; and

* a behavioural approach: an approach which sees thecommitment, persistence, knowledge, pride and interpersonalqualities of an organization's people determining the successof one's chosen (generic) strategy.

Core competences

In this light it becomes possible to toggle between the idea ofcompetitive advantage and core competences, where the latter arede®ned by Hamel and Prahalad (1994, p. 203) as

A core competence represents the sum of learning acrossindividual skill sets and individual organizational units

and in their earlier article (Prahalad and Hamel, 1990):

Core competence is communication, involvement, and a deepcommitment to working across organizational boundaries

Re¯ecting some of the ideas and language around MichaelPorter's work, Hamel and Prahalad argue that a core competenceshould help an organization achieve its chosen competitiveadvantage by providing

* customer value: `it should make a disproportionate contribu-tion customer-perceived value';

* competitor differentiation: it should be dif®cult for com-petitors to emulate Ð `competitively unique' or `competitivelysuperior';

* extendibility: it should provide potential access to a wide varietyof markets Ð providing `gateways to tomorrow's markets'.

Just a moment's re¯ection about these three criteria leads one torealize that

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1. the `discovery' of one's core competences is not necessarily aneasy matter;

2. the acquisition and development of the `right' core com-petences for the future is clearly a strategic issue; and

3. core competences have a sort of longevity intimately linkedinto an organization's ability to surface and apply its learningto the development and application of appropriate technolo-gies, processes and products. They are essentially culturallybound and determined.

Summary and conclusion

This editorial has toured some of the issues relating to the ideas of`competitive advantage' and `core competences'. It makes thepoint that the idea of competitive advantage is inextricably linkedwith the idea of generic strategies, and that in this paradigm theaim is to provide superior value for customers.

Based initially on an economic approach to strategy, Porter'sthinking can be seen as consistent with the work in the culture±excellence school of management which haloes the contributionof people in organizations. Attention to relationship managementis one expression of this development; so too the idea of corecompetences which sees the need to mobilize (human) resourcesby exciting people to learn and work together, to add superiorvalue to customers.

We ended with the observation that the discovery anddevelopment of one's core competences isn't necessarily an easymatter for an organization, but a process critical to future success.

PS. Some ®nal thoughts

Very recently I facilitated a small group of non-executive directorsamong whom one or two disputed the value of the idea of corecompetence, and sought to reduce the strategic process to the simpleformula `Let's agree what we do best and then let's develop it'.

If Hamel and Prahalad's idea of core competence is to be valuedand applied, isn't it therefore essential to shift attention away frompriority being given to a resource-based view of strategy, to onewhere strategy emphasizes the things which are visionary,inspiring, and gain commitment? I, for one, hope so!

Peter FranklinProfessor of Strategy and Management,

Nottingham Business School

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References

Bartlett, C. A. and Ghoshal, S. (1994). Changing the role of topmanagement: beyond strategy to purpose, Harvard Business Review,November±December, 79±88.

Hamel, G. and Prahalad, C. K. (1989). Strategic intent, Harvard Business

Review, May±June, 63±76.Hamel, G. (1996). Strategy as revolution, Harvard Business Review, July±

August, 69±82.Hamel, G. and Prahalad, C. K. (1994) Competing for the Future, Harvard

Business School Press, Boston, MA.Mintzberg, H. (1994). The Rise and Fall of Strategic Planning, Prentice

Hall, Hemel Hempstead.Nelson, P. and Weinstein, B. (1994). Supply chain relationships: a

paradigm shift, Working Paper Series, Henley Management College.Peters, T. and Waterman, R. (1982). In Search of Excellence, Harper

Collins, New York.Porter, M. (1985). Competitive Advantage, Free Press, New York.Prahalad, C. K. and Hamel, G. (1990). The Core Competence of the

Corporation, Harvard Business Review, May±June.Watson, T. J. (1994). In Search of Management, Routledge, London.

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