Understanding, finding, and conceptualizing core competence depth: a framework, guide, and generalization for corporate managers and research professionals.

Author:Edgar, William B.
Position:Report
 
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INTRODUCTION

The construct of the core competence--sometimes called by other names such as organizational competencies or distinctive capabilities--has been widely studied (Bogner & Thomas 1994; Fowler et. al. 2000; Lei 2000; Leonard-Barton 1992; Nelson & Winter 1982; Pitt & Clarke 1999; Post 1997; Sanchez et. al. 1996; Walsh & Linton 2001; Winter 2003), especially since the publication of Prahalad and Hamel's influential 1990 article, "The Core Competence of the Corporation." Since then, empirical and conceptual research on this concept has brought about many views of what these competencies are and how they can be applied to create better products and services.

In general, core competencies have been seen as capabilities held by people within a firm that, when applied through corporate operational processes to create products and services, make a critical contribution to corporate competitiveness. For a more complete discussion of core competencies, see Edgar and Lockwood (2008), which reviews the core competencies literature, describes their elements, and identifies research that remains to be done.

What has not been published, however, is a paper intended for intellectual leaders within corporations and their executives to help them understand the structure of core competencies, identify which key aspects of the competence their firms hold more deeply, and recognize concepts pertaining to competence depth that apply to all core competencies. This paper provides such direction in three ways.

First, the paper presents a conceptual framework, drawn from previous research, for understanding the core competencies of a firm, revealing the internal dynamic of the core competence, the elements of the core competence, and the resulting competence breadth.

Second, utilizing concrete examples arising from firms' knowledge of communication networks, documents, and computing the paper presents a useful methodological guide for applying this framework to discover the depth of core competencies held by a particular firm. This guide has several advantages. Primarily employing patent analysis and supplemented by interviews, it is inexpensive to do. It draws upon numerous internal and external perspectives as to the depth of a firm's core competencies. It also illuminates the complexity usually found within the depth of a core competence while making it comprehensible.

Third, the paper presents a generalized conceptualization of core competence depth arising from the use of this methodology. This generalization addresses two important questions regarding the underlying reality about which people holding a core competence are deeply knowledgeable: 1) what does it mean to understand something deeply? and 2) what does it mean to be able to perform a skill proficiently? Answering these questions reveals that competence depth encompasses understanding things that are relatively stable, known as entities, as well as things which are inherently dynamic, known as processes. Moreover, depth includes being able to move beyond understanding entities or processes and to do things like engaging in processes by performing skills well. It also means understanding or being able to do the basic forms of entities or processes, their versions, and the variations of these basic forms and versions. As this occurs, core competence depth grows in three important ways--horizontally, vertically, and cumulatively. (Please note that this paper is a follow-up to Edgar and Lockwood (2011), which presented a methodology for identifying core competencies' structure through determining their breadth. In contrast, this paper presents a means for discovering the deeply held aspects within that breadth that contribute to core competencies' competitive power.)

CORE COMPETENCE FRAMEWORK

The framework for discovering core competencies described below draws upon research that examined four corporations (Edgar & Lockwood, 2008, 2011), each with annual revenues in excess of one billion dollars. Oriented around providing knowledge and information in different forms, the four corporations provide an array of advanced products such as switches, multiplexers, routers, transmitters, copiers, printers, scanners, and integrated circuits. They also offer complex services such as communication network planning, network design and implementation, and document management.

Across the four firms, five core competencies were identified as enabling these products and services. Three emerged from an understanding of the communication network. A fourth was based upon an understanding of both physical and digital documents. The fifth was based upon understandings of silicon and the creation of silicon-based integrated circuits.

The framework draws upon its underlying research to reveal three things:

1) How core competencies work (their internal dynamic)

2) What core competencies are made of (their elements)

3) The breadth of core competencies

How Core Competencies Work (Their Internal Dynamic)

The common dynamic among the above competencies was initially revealed through conceptual analysis (also known as content analysis) of corporate documents and through interviews with internal corporate professionals. The interviewees stressed the dynamic's progressive iteration. Please see Edgar and Lockwood (2011) for details of this research methodology.

The internal dynamic of a core competence can be depicted in a Core Competence Chart. For instance, Figure 1 depicts one of the three core competencies emerging from an understanding of the communication network. Here corporate understandings of the general phenomena of communication and networks converge into a thorough corporate understanding of the communication network core phenomenon. (These are shown in bold in Figure 1, as are the other examples discussed below.) Out of this emerges familiarity with specific product technologies, such as switching, and using an understanding of the general phenomenon of light, with product sub-technologies, such as optical switching. Drawing upon familiarity with the general phenomenon of computing hardware, this focused expertise brings about an understanding of the product class of optical switches.

Emerging from--and contributing back to the understandings of network technologies and product classes--are the functional skills in manufacturing optical switches to be components of communication networks, as well as the technological skill of optical switching. These skills are in turn part of a larger integrated skill set supporting the creation and management of both the elements of communication networks as well as complete networks.

As this iterative progression occurs, people holding the competence are able to use a range of technologies related to the communication network, and to provide specific products and services arising from them. The result is complex but varied competitive power to meet the networking needs of customers.

What Core Competencies Are Made of (Their Elements)

The progressive, iterative dynamic described above occurs through the interaction of competence elements, which are the individual competence component understandings and skills held by corporate employees and managers. Competence elements can be applied and enhanced by corporate managers' decision-making or corporate employees' learning and action.

Guided by the competence literature, conceptual analysis performed upon corporate documents like annual reports and product catalogs revealed seven major elemental categories of understandings and skills that exist within each of the five identified competencies; it also revealed numerous instances of understandings and skills within each category. As it did so, it also revealed underlying, tangible items corresponding to the categories and instances of skills and understandings. Then, knowledge of the categories, instances of the categories' understandings and skills, and underlying items was subsequently refined by the interviews with corporate professionals.

[FIGURE 1 OMITTED]

Fortunately, the elemental categories can be useful as a means of classifying and conceptualizing the extensive number of competence elements in the form of understandings and skills held by corporate employees. The categories can be defined as patterns, discussed below, which the individual competence elements follow. As is true with individual elements, these categories can be applied or enhanced by corporate managers and employees through decisionmaking, learning, and action.

Table 1 presents the elements for three core competencies. For all three competencies, the instances, or members, within the seven elemental categories are shown as bulleted items. Only a sample of the most important instances within the categories is presented, since each competence had too many understandings and skills to present them all.

Documentary analysis and interviews of corporate professionals revealed the first five competence elemental categories to include complex understandings of different phenomena, technologies, and types of products or services (Table 1, left two columns). Similarly, they showed the last two categories to involve singular and integrated skills.

1) Understandings of core phenomenon and related disciplines (Table 1; Row 1).

A core phenomenon, the foundation of a core competence, is the thing or activity which people holding a core competence understand most thoroughly. Understandings of general phenomena, discussed below, converge into the thorough understanding of this phenomenon, and it is out of this thorough understanding that the other understandings and skills comprising the rest of a firm's core competence emerge. These understandings are often enriched by corporate employees' knowledge of related disciplines. Analysis revealed four variations of core phenomena. They include:

  1. Something created by the company holding the competence.

  2. Something the company's...

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