IntroductionIrrespective of whether one operates in the manufacturing or service industry, Core Competencies are so important. What really matters in the real world is how profitable a particular industry is; how quickly it reacts to fresh competition. It is also important to note the kind of leadership in any organization, as this is one vital variable that contributes to the commercial success of the organization itself.
Be that as it may, as already mentioned in the summary of this article, Core Competencies are bundles of skills and technologies that enable an organization to offer superior benefits to customers. The two learned gentlemen, Prof Gary Hamel, and the late Prof C.K. Prahalad, had emphasized the importance of technology prowess in most of their writings. They reasoned that by doing so, the complexity of various activities that take place within an organization is so unique that this becomes a big secret that is often stored in the minds of hundreds of people. The range of activities enables the organization, which are called Entry barriers in Strategic Management language. This concept has been discussed in an earlier article on how competitive advantages works in India.
By imposing such formidable entry barriers on the competition, the organization virtually insulates itself against any new competition and goes on acquiring new strengths, most of which are specific to the organization and are embedded in technologies and systems within the organization. Such strengths, in turn, lead to a very good competitive advantage for the organization and this simply means that the organization is several notches above the nearest competitor in terms of several parameters of business excellence. Another concept of competitive advantage has been discussed in detail in an earlier article on understanding the concept of entry barriers in the Indian market context.
In this article, we will discuss a) The art of building Core Competencies b) How to evolve Strategies using Core Competencies c) Increasing complexity of internal actions through Core Competencies d) Learning from the best-in-class leaders of Core Competencies and e) Continued emphasis on excellence to further cement Core Competencies.
The art of building Core Competencies Core Competencies are always conscious, long-term Strategic actions. That is, the organizations identify something that can never be easily copied by even the nearest competitor. The complexity of operations is unique only to the particular organization, and to this extent, the competitors are baffled by these complexities. This is exactly when the organization starts to excel in terms of its well-defined Core Competencies and erects formidable entry barriers, all the way.
The best example of one such excellent organization is Sundaram Fasteners. This organization belongs to the TVS group. When one looks at fasteners, which are nothing but nuts and bolts that are essential components of all automobiles, the products may look deceptively simple. However, they are not at all simple. The process of manufacture has an entire range of complex activities built into it. For instance, it takes forty tools to manufacture a single fastener and Sundaram Fasteners has more than six lakh tools in its tool library. The nearest competitor, called Precision Fasteners, has around half these number of tools. It has been recorded that even if a new competitor were to enter this business, it will take fifteen years for that organization to even come anywhere near the level of Sundram Fasteners. It is sheer common-sense that the complexity of operations would have multiplied by any number of times, at Sundram Fasteners, by then.
For decades, this wonderful TVS organization was led by a legend called Suresh Krishna. Though his daughters are now at the helm of affairs, he still keeps on doing what he has always been famous for -- building any number of Core Competencies specific to manufacturing excellence. For instance, it has consistently won the Best Supplier of the Year Award from General Motors, the automobile giant from the USA. It is also a Deming Award winner. Mr. Suresh Krishna stands tall among all leaders of TVS group companies for his unique HR capabilities of building the most dedicated workforce in the entire group. It should be noted that it is the sole supplier of fasteners to Tata Motors as well.
Hence, it should be importantly noted that only highly focused groups like the TVS group, Maruti Udyog, Mahindra and Mahindra, and Toyota, among other highly focused organizations, can build core competencies. Toolmaking of Sundram Fasteners has taken them decades; it is not an ordinary joke to spend precious time in this fashion. Yet, when they are well set, the global competencies start to show their power. Every single guy starts to look up to such leaders for leadership. It is not without reason that Mr. Suresh Krishna led the CII for some time and built into one of the most influential employer bodies of India. Such highly ethical and strong leaders always go after long-term results.
How to evolve Strategies using Core CompetenciesKnowledge of huge markets, about customer profiles, strong brands, smart supply chain management and building unique niche markets through knowledge-based competencies, does go a long way in building good Core Competencies. ITC did it with the atta brand called Aashirwad. This was deliberately done, after a good deal of research into what types of pure wheat can enable the final product, that is shown as one that helps the housewife make good chappathis. Similarly, Hindustan Unilever has now embarked on a smart advertising formula, built on the "empowered woman" concept. Such is the nature of the product that the memory recall is so powerful. When brands have such powerful positioning, the strategy of making it a powerful commercial success naturally follows.
Realizing that its sales of Cola products always showed a downward trend, with new competitors entering the market with their own brands offering unique and different competencies, PepsiCo launched Kurkure, a very good brand that became a successful snack brand. As a competitor to PepsiCo 's success with Lays, ITC has come out with Bingo, that fights it out in the same market. These are examples of building formidable Core Competencies since the learning is not restricted to just one market, but several markets on a pan-India basis.
Companies like Sundram Fasteners, with manufacturing-related competencies, has motivated other big players in the same kind of business. For example, the Rane Group, Ucal Fuel and such other companies have patiently honed their skills over several years. TAFE of the Simpson Group has done it in tractors. To this day, this company is closely held, but it's manufacturing prowess has enabled it to build its own Core Competencies. Since the complexity of skills involved is never easy to copy, the Core Competencies get built and then the particular organization virtually lords the market.
Increasing complexity of internal actions through Core CompetenciesAs already mentioned in the aforesaid discussion, the range of activities and actions that are specific to the company, keep on increasing day in and day out. For example, the organization of several hundreds of thousands of tools at Sundram Fasteners, through the implementation of the 5S concept, is so perfect and it is impossible to easy copy such a large operational detail by any competitor. The Deming Award in so many TVS companies is a trade secret, and they keep on increasing the range of complex actions.
Learning from the best-in-class leaders of Core CompetenciesProf Tsuda, who was a full-time consultant to Toyota, was also the consultant to the TVS group. Since Toyota is also a major customer, it does help to learn from such world-class companies. Today, the TVS group can teach literally every Indian organization how to manage money, as most are zero-debt or near zero-debt companies. Similarly, they are all heavily-focused companies. The range of learning implicit in this kind of focus can also be easily imagined.
Continued emphasis on excellence to further cement Core Competencies The Aditya Birla group has implemented many a leadership development program, for honing the leadership skills of its Top Management, in a changed global scenario. It is also reported to be keen on shedding some areas, where it does not see any synergy between its real Core Competencies in commodities and its presence in other businesses. The Tata group is also reportedly engaged in such a similar exercise.
The smartest of companies will always try to focus on their well-known Core Competencies and further hone them for business excellence. This is exactly what should be done anyway.
ConclusionGiven the complexities of the global business environment, it does pay to build formidable Core Competencies today. Since such competencies also have entry barriers erected, as a rule, the competition will be left far behind. Indian companies will do well to really focus on such competencies at all times.
A very nice presentation about the core competencies. In the 1970s, in India, only two companies were manufacturing the explosive materials required for mining. Both the companies were initiated with technology transfer from giants in that particular area. One company was started by an MNC and they had their own technology. The other company was started with the know-how from a foreign organisation. These two companies ruled the entire industry and they dictated the rates. The technology was a very closed technology within the two companies. Their core competency was very well kept under their seat only.
But in the 1980s, some entrepreneurs started looking at those products as they had a very high demand. The technology experts who were with the other two organisations started coming out and helped these entrepreneurs in getting the technology. Because of the local technology and equipment, the CAPEX required for these establishments came down very heavily and the previous two companies suffered a blow. The consumers like Coal India and Singareni Colleries supported these small players. So there was a sea change.
Sometimes employee migration, that too who are at senior positions, cause a shift in core competencies of the organisations. So such companies should have a mechanism to keep these key persons with them for long. Then only they can keep their core competency in a closed way.