Academic journal article Research-Technology Management

Harnessing Competencies, Capabilities and Resources: Like an Axe Splitting Wood, Market Penetration Depends on the Alignment of Technological Competencies, Capabilities and Resources

Academic journal article Research-Technology Management

Harnessing Competencies, Capabilities and Resources: Like an Axe Splitting Wood, Market Penetration Depends on the Alignment of Technological Competencies, Capabilities and Resources

Article excerpt

"Core Competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies," Prahalad and Hamel wrote in 1990 (1). Their introduction of core competencies had a major impact on management practice and thinking; since then, multiple authors have adopted, adapted and extended the idea of core competencies.

One of the most prevalent adaptations was to change "competency" to "capability" and apply a more general definition to the term. Stalk et al. stated that, "whereas core competence emphasizes technological and production expertise at specific points along the value chain, capabilities are more broadly based, encompassing the entire value chain" (2). They go on to propose that core capability is "a set of business processes strategically understood" and that it represents "technological and production expertise at specific points along the value chain."

Leonard-Barton turned core competency into core capability in this way: "core capability is an interrelated, interdependent knowledge system" (3). Teece, Pisano and Shuen modified the idea and named it "dynamic capabilities" to emphasize the active and continuously changing nature of maintaining organizational capabilities. They recognized that "static capabilities" were severely limited and that really valuable "capabilities" required constantly adapting to new situations (4). Even Hamel and Prahalad sometimes use the terms interchangeably in their later writings (5). These adaptations have contributed to confusion about the meaning of the two terms.

In this paper I propose that there is an important distinction to be made between competency and capability. Providing different definitions of these two terms is valuable in aligning two different sets of practices within a company. This alignment is essential to the effective penetration of the market with new and existing products. I propose that capabilities refer to a broad set of practices in which a company has proficiency, but that these practices are rooted in daily operations. I define capability as the organizational ability to execute activities repetitively, efficiently and predictably.

Competency, in contrast, refers to a company's ability to improve its performance continuously. "Improved performance" may apply to better production efficiency, financial ratios, marketing effectiveness, or product development. A competency is the source of differentiation for the company that allows it to create and offer unique products, services and solutions to customers.

Further, established companies possess many more capabilities than they do competencies. Although they have developed the ability to execute repetitively in a number of areas, they have relatively few competencies, or areas in which they are able to improve their performance continuously. New companies, in contrast, have relatively more competencies and fewer capabilities. Their entire business strategy is based on a few things that they can do differently than established industry leaders, but they possess very few capabilities to deliver products and services repetitively and efficiently.

Market Penetration

In order to penetrate the market, a company must be able to align both its capabilities and its competencies so as to satisfy the needs of its customers. Established markets are filled with products that meet the needs of a specific set of customers. New entrants into the market must provide either a better product or a different product in order to displace those that already exist. Porter emphasized two sustainable strategies of entering and remaining in an industry: a company must be able to offer the same products at a lower cost, or it must be able to offer differentiated products that cannot easily be duplicated by competitors (6).

Christensen extended this perspective by demonstrating the power of technological advances to enable a low-cost strategy to be transformed into a differentiated product (7). …

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