Posts Tagged ‘core competencies’

The Shifting Language of Strategy

December 23, 2010

My post on International Business terms got me thinking about the shifting popularity of Strategic Management terms.

So, here we go with some comparisons.

Let’s start with the topic itself and its two main constituent threads (i.e. strategic management, corporate strategy, and business strategy):

All three terms boomed from the late 1970s, but it was business strategy (i.e. decisions about how to compete in markets) that screamed away from corporate strategy (what markets to compete in).  As with many of the IB terms, all the concepts have faded in recent years, perhaps as conversations became more specific (or even less-business focussed).

It doesn’t surprise that such corporate strategy has waned in a relative sense, as the orthodox rhetoric has been towards streamlined, focused organisations.  Looking at some of the typical such corporate strategy terms (diversification, mergers, acquisitions, outsourcing), shows a genuine plateauing in all terms, other than outsourcing which has raced up in the past decade (this no doubt reflects not just usage by strategy scholars, but also the critics thereof). Diversification peaked way back in the late 1980s (although this term has a considerably wider usage than its strategy meaning), which correlates pretty nicely with the decline in such behaviour (at least by Western firms):

The influence of Michael Porter, and his big ideas/tools (Five Forces, generic strategies) have proven surprisingly consistent in terms of usage, although they too have waned this millennium:

In terms of talking about competitive advantages, core competences/core competencies peaked in the early 200s, while dynamic capabilities are still on a steady rise (I get similar results with the singular versions of the terms):

What terms have I missed (conscious that comparing phrases with different word counts is not practical/tenable, nor does it make much sense to use terms with other common uses, such as resources)?

As this is likely to be my last pre-Christmas post, I wish you all a fun festive season and safe passge into 2011.

 

The very quotable CK Prahalad

August 13, 2010

As I mentioned back in April, the fields of strategic management and international business research and teaching lost an important scholar with the death of C.K.Prahalad.

Management magazine Strategy+Business recently published an excellent interview with Prahalad compiled during conversations in 2009.

I typically try to add some value on this blog, but in this instance I’ll just share some of the fantastic insights the interview includes and urge you to read through it yourself in its entirety:

C.K.Prahalad on research:

“A lot of times, research tends to start with the methodology. I prefer to start with a problem that’s of interest and apply whatever methodology is appropriate.”

“To me, the problems of greatest interest are things that you cannot explain with the current prevailing theory.”

“We had to stay constantly focused on weak signals. Each weak signal was a contradictory phenomenon that was not happening across the board. You could very easily say, “Dismiss it, this is an outlier, so we don’t have to worry about it.” But the outliers and weak signals were the places to find a different way to think about the problem.”

“If you look historically at the strategy literature, starting with Alfred D. Chandler Jr.’s Strategy and Structure: Chapters in the History of the Industrial Enterprise [MIT Press, 1962], the most powerful ideas did not come out of multiple examples. They came out of single-industry studies and single case studies. Big impactful ideas are conceptual breakthroughs, not descriptions of common patterns. You can’t define the “next practice” with lots of examples. Because, by definition, it is not yet happening.”

On the nature of entrepreneurship:

“Having aspirations greater than your resources. That’s universal. Whether you’re Sam Walton or Narayana Murthy [founder of Infosys Technologies Ltd.], if your aspirations are not greater than your resources, you’re not an entrepreneur. For large companies to be entrepreneurial, they have to create aspirations greater than their resources. You can call it “strategy as stretch” or “strategic intent.””

On the lack of discipline (my term not his) in strategic management writing:

“Indeed, the biggest impediment in the growth and strategy literature is that, unlike in the financial literature, there are no standardized terms. There is no organizing thesis and principle.”

As I said, there’s a whole lot more there (especially some insights into the academic journey he took from India to Michigan).  Feel free to provide your favourites from his pearls of wisdom.

I’m clicking to Westfield

June 17, 2010

Aussie shopping centre powerhouse Westfield (the world’s biggest shopping centre operator) announced a curious brand extension last week. The firm is reportedly planning to use its website as a virtual shopping mall, hosting e-commerce interfaces for a variety of retailers (with fashion being the rumoured kick-off).

So, is this a good move for Westfield?

As I’ve argued elsewhere, Westfield has five particularly powerful competencies: (i) property selection; (ii) redevelopment; (iii) financing; (iv) retailer relations; and (v) branding and marketing . The first three have no relevance to this venture, so the firm is only left with retailer relations and branding/marketing.

Source: Daniel Austin (d)Not

The retailer relations is partially about Westfield’s capacity to offer a more extensive suite of locations relative to rivals and the resultant bargaining power they wield as a landlord. It is also about Westfield’s extensive monitoring of tenant sales and sophisticated contracting processes.

Westfield already carries some information about tenants on their website, and because of their prominent landlord status can certainly attract the attention of these firms. I would be stunned if any of the retailers would grant Westfield exclusive rights to host/direct traffic to their e-commerce portal. Indeed, e-commerce is a substitute to the physical interface, and a mechanism these retailers can use to more effectively negotiate with Westfield as a landlord. Westfield will need to tread much more carefully in these e-relationships.

The counterbalancing angle may spring from the final competency – branding/marketing. Westfield was a global pioneer of using a common brand for their malls (indeed, my post title reflects the reported source of this brainwave – a founder heard a shopper saying they were “heading to Westfields”, and saw the scope for differentiation).

It may well be the case that online shoppers welcome the ‘browsing’ capacity of a virtual Westfield mall. New/small retailers with limited capital to expand their bricks and mortar footprint across Westfield’s 119 malls, may relish being next door to Zara, The Gap and Gucci on the Westfield website. It may also be a mechanism for virtual internationalisation. This could be a chance for Aussie retailers to test the waters in the US, UK and NZ without crossing an ocean. Presumably solely e-commerce retailers could also tap into this spillover effect. Getting this right could also extend consumer awareness of Westfield beyond their current whitebread Anglo markets.

The big challenge is making the site sticky enough. Westfield will need to fill the competency gap in build a user interface that is engaging, exciting and innovative. If they don’t get it right quickly someone could easily build a rival (Google perhaps?).

The uspide for Westfield is that there isn’t much downside here. I wouldn’t think there is an enormous investment required here. It is just a mechanism to augment an already profitable business (and perhaps distract some investors from the firm’s exposure to property price and finance risk).

Verdict? Interesting experiment that could conceivably secure some first mover/network effect advantage.

The sad passing of a highly competent pyramid builder

April 19, 2010

I was saddened to receive the news today of CK Prahalad’s untimely passing. His influence was felt across the strategic management and international business fields for several decades.

With Gary Hamel he defined and popularised the idea of core competencies as a driver of firm success. This was a wonderful operationalisation of the resource-based view, and helped to shift attention away from external environmental forces (a la Michael Porter).

His earlier work with Yves Doz on multinational headquarters’ control of subsidiaries was just as influential in international business circles, and he integrated strategy and literature very effectively when looking at the role of cooperative strategic alliances.

Hopefully the most influential and world-altering work he produced will be his exploration of the scope for multinationals and entrepreneurs to build advantages through servicing the billions of currently impoverished in the developing world. He coined the bottom of the pyramid concept and worked hard in proselytising on this issue. Here’s a short video of Prahalad explaining his perspective on globalisation and its potential:

It is rare for academics to be so active in their engagement with and pursuit of the ideas they talk about. Prahalad worked with many firms, governments, investment houses and communities. He cared about the future for India’s poor (and beyond). His death is a tragic loss for all.