Core Competencies in

Technology
and its
Commercialization

Dr. Hina Juneja

 Core Competencies

• World class firms today tend to converge on similar demanding standards

of cost and quality in their products and services.
• The criteria of cost and quality remain important as the minimum
thresholds to be reached if a firm is to stay competitive in world markets,
but they are receding in importance as critical sources of sustainable and
differentiating competitive advantage.
 Core Competencies

• Products no longer provide a sustainable and leading competitive edge.

They are easily bypassed, back-engineered, cloned, replaced, or marginally
excelled.
• In such a hyper-competitive situation, a firm's management of technology
needs to shift towards a more specific and sharper strategic focus.
• This should be designed to generate a leading or differentiating
technological edge for strengthening the firm’s competitive position.
 Core Competencies

• Core competence is a term used in the strategic management literature for

those central elements that define the firm’s ability to compete (Prahalad
and Hamel 1994).
 Core Competencies and Capabilities

These two terms are used interchangeably, but sometimes they are
distinguished in terms of their scope or coverage.
• Core competency is used to denote a focusing of skills and expertise,
primarily in the domain of production technology.
• Core capabilities denote excellence in knowledge-based specialties or
service activities, throughout a firm’s value chain. They may also
incorporate technology-related specific and unique skills.
 Criteria for Core Competencies

A core competency provides potential access to a wide variety of

markets

A core competency should make a significant contribution to the

perceived customer benefits of the end-product

A core competency should be difficult for competitors to imitate

 Technology Competence Features

Technology competence can improve an organization’s product portfolio.

This is possible in different ways:
• New Functions
• New Features
• Superior Dependability
• Reduced Costs
 Competencies are argued to have strategic
potential when they are:

Exploit opportunities and/or neutralize threats in a

Valuable
firm’s environment.

The number of firms that possess them is less than

Rare that needed to generate perfect competition in an
industry.

Imperfectly Because of their complexity, or the uniqueness of

imitable the conditions under which they were acquired.

Have no
strategically
No alternative ways of achieving the same results
equivalent
substitutes
 Core Competencies in Technology

• Competencies can have a technological basis.

• Differential competencies potentially allow a firm to gain benefits over its
competitors.
For firms selecting future technological investments around core
technologies it is worth referring to studies that demonstrate:
1. The importance of cumulative know-how, and the value of building on
existing competencies (Prahalad and Hamel 1994; Pavitt 1990).
 Core Competencies in Technology

2. The riskiness and difficulty associated with complete technological

diversification. Incremental diversification is the least difficult and risky
and more likely to be successful (Roberts 1991).
3. The danger of core competencies becoming core rigidities, creating
engrained practices that cannot evolve to deal with new circumstances
(Leonard-Barton 1995).
 Example: Honda

Honda provides an example of the way firms can think about core
competencies.
It produces a variety of products, but its core expertise lies in the design and
manufacture of engines and power trains, and it has developed its product
range around these competencies.
Honda’s Core Competencies
 Example: Honda

Once core competencies have been determined, it is possible to consider their

technological basis.
Using this form of analysis, it can be seen that Honda’s innovation strategy
involves the supplementation and improvement of these technologies that
contribute to its core competencies.
Honda’s Core Technological Competencies
 Commercialization

Commercialization refers to a firm’s disciplined and creative efforts towards

using its technological competence to generate profits.
 Commercialization

Companies that have the capability to manage the commercialization process

effectively differ from others in terms of four factors:
1. They get products or processes to market faster
2. Use or leverage technologies (core competencies) in products across a
wider range of markets
3. Introduce more products
4. Incorporate a greater breadth of technologies in them