4.6 KM Core Competencies

4.6 KM Core Competencies

          As we know the business world is becoming increasingly competitive. Today’s highly competitive market economy is presenting organizations of all sizes with new challenges including (Ashworth, 2009):

  • Permanently-connected customers, partners, and providers that are continuously driving the need for innovative new products and services based on changing needs, and agility in processes and people.
  • Highly informed and increasingly mobile customers and project teams, capable of working rapidly in multiple locations, time zones, and across geographic and organizational boundaries.
  • Pressures to become competitive and more profitable and to do more with less as customers demand lower pricing, rapid, real time solutions to their needs, yet at the same time reducing corporate risk and overhead.
  • Local, regional, national and global competition for both customer dollars requires better ways to connect with your most profitable customers requiring best-in-class brands and business development capabilities as today’s market needs change as Baby Boomers life needs alter, and the Millennial generation arrives with its own values and expectations. This applies to the need to find the best talent.
  • Ongoing technological innovation and the accompanying challenges of integrating useful new capabilities and product lines with existing processes, systems and practices.
  • Being competitive means becoming innovative; staying at the forefront of market as a market leader, and competing for sustainability often against larger better capitalized competitors. More and more well organized and capitalized competitors are expanding their offerings into new markets, creating a real need for competitive advantage.     

          To face these challenges, organizations, on the one hand, need to manage the ever-growing complexity, volume and variety of needs. On the other hands, they need to develop knowledge and technical capacities that allow a business to be competitive in the marketplace. These capacities are usually known as core competencies.

          The term core competencies was originally coined by Pralahad and Hamel (1990, p. 82) who defined it as "the collective learning of the organization, especially how to coordinate different production skills and integrate multiple streams of technologies". Since then it has been defined in multiple ways, but very generally, core competencies refer to the firm's primary expertise, which is a source of sustained competitive advantage (Leonard-Barton, 1992). Arriving at a more precise definition is not necessary for our purpose here. Suffice it to say, that these are key capabilities, which, from the resource-based perspective of the organization, are the primary drivers of innovation and competitive advantage.

          Galunic and Rodan (1998) argue that "a core competence differentiates not only between firms [organizations] but also inside a firm [organization] it differentiates amongst several competencies. In other words, a core competency guides a firm [organization] recombining its competencies in response to demands from the environment". Core competencies thus have a large knowledge component, and managing them is, in the very least, a product of corporate strategy working with KM and innovation management. This simplified model has strategy dictating the overall direction - KM managing the knowledge dynamics, and innovation management turning core competencies into profitable core products.

          To understand the role of KM let’s look how core competencies cab be managed:

  • Identifying and assessing core competencies: The organization should map out its key competencies, possibly linking them directly to specific core products. Then, an evaluation must take place, assessing what one has vs. what one needs to have (as determined by strategy and the competitive environment). KM is responsible for identifying where the key knowledge is located, including the tacit expertise and knowledge embedded in products, routines, etc, as well as identifying knowledge gaps.
  • Sustaining core competencies: Organizational core competencies, like all knowledge assets, have the virtue of improving rather than depreciating through use. Conversely, lack of use will lead to erosion of available skill set. The role of KM here is twofold, on the one hand, it must keep stock of the state of key knowledge assets and, on the other, it must leverage key knowledge assets across the organization.
  • Building core competencies: Building new core competencies involves interplay between knowledge, practice, coordination, and refinement. Knowledge assets must be built, enhanced, combined, and coordinated in an environment that supports experimentation and improvement. Building core competencies can be a complicated endeavor since sustained competitive advantage is derived from assets that are hard to imitate (Dierickx and Cool, 1989). From a KM perspective, this implies the build-up of specific tacit knowledge and expertise (i.e. uncodified knowledge that is generally more valuable, and inherently more difficult to copy and transfer) across multiple departments or functions.
  • Unlearning core competencies: Organizations have a habit of trying to keep doing what they have always been doing. Unlearning a competency when it is no longer useful is one of the key aspects of a successful firm, and history is riddled with examples of organizations that have failed to do so. In the process of unlearning, KM again plays an important role by identifying and managing the organization's knowledge assets in the right direction. This may be done through re-training, restructuring, creating new knowledge flows, external knowledge acquisition, outright removal, etc.

          Core competencies are being considered as a 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, “how does an organization decide what set of operating-level initiatives would best meet its strategic goals? and what are the challenges of linking strategy with execution at the knowledge or competency level”. It is an open research question. Also, there are no specific implementation guidelines available. 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 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 identify 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 .