1. Competence-based strategic management
A competent organization has the ability to structurally and systematically coordinate and commit sustainable resources for creating and distributing value to customers and stakeholders
Arjan Vernhout

2. Topics
▪ Strategic management ▪ Strategic logic ▪ Systems thinking ▪ Hierarchy of assets ▪ Manager as a puzzler ▪ Organization as an open social system ▪ Competence modes ▪ Competence leveraging vs. developing ▪ Strategic working with competences

3. Strategic management
Art & science of structurally and systematically discovering strategic options and formulating, implementing and evaluating cross-functional decisions… ▪ specifying the role and objectives ▪ developing policies and plans ▪ allocating resources to implement policies and plans… For creating and distributing value to customers and stakeholders
STRATEGIC
ANALYSIS
CHOICE
IMPLEMENTATION

4. ECONOMIC PERSPECTIVES BEHAVIORAL AND ORGANIZATIONAL PERSPECTIVES
Strategic management - Overview
THEORY OF
COMPETENCE-BASED
STRATEGIC
MANAGEMENT
An integrative
strategy
theory that
incorporates
economic,
organizational
and behavioral
concerns
in a framework
that is:
DYNAMIC
SYSTEMIC
COGNITIVE
HOLISTIC
INDUSTRIAL ORGANIZATION ECONOMICS
INDUSTRY STRUCTURES
STRATEGIC GROUPS
VALUE CHAIN ANALYSIS
FIVE FORCES ANALYSIS
RE-ENGINEERING
RESOURCE-BASED VIEW
CORE COMPETENCES
EVOLUTIONARY THEORY
DYNAMIC CAPABILITIES
LEARNING ORGANIZATION
THEORY OF THE GROWTH OF FIRMS
GENERAL MANAGEMENT (HARVARD)
BUSINESS POLICY
LEADERSHIP
STRATEGIC HRM
1990s
1980s
1970s
1960s
1940s-50s
ECONOMIC PERSPECTIVES
BEHAVIORAL AND ORGANIZATIONAL PERSPECTIVES
From: R. Sanchez, A. Heene (2004), The new strategic management: organization, competition and competence

5. Strategic logic Strategic logic 5 2 3 4 1
Recognize market opportunities
Strategic logic
for continuous value creation and distribution
Attract, retain and improve the best available resources for creating and realizing product offers
Define product offers that create value for customers with targeted preferences
Distribute value created to providers of required resources
Manage uncertainties in creating and realizing product offers 5 2 3 4 1
From: R. Sanchez, A. Heene (2004), The new strategic management: organization, competition and competence

6. Strategic logic - Starbucks Coffee1.
Around 15 new stores a week with the goal to open stores worldwide in the next 10 years Starbucks Hear Music™ Coffeehouses and Media Bars and opened a special Starbucks Entertainment area at iTunes. Also customers can wirelessly browse, search for, preview, buy and download music from the iTunes Wi-Fi Music Store in several Starbucks stores Starbucks is Fair Trade Certified™, Starbucks initiated C.A.F.E. (Coffee and Farmer Equity) Practices, Black Apron Exclusives™ 2. 3.

7. Strategic logic - Starbucks Coffee
Starbucks management is constantly improving training resources, not only at the product knowledge level, but also in areas that help store partners take ownership in the business….. employee turnover rate, according to some reports, is 120% less than the industry level Starbucks paid on average, $2.64 per kg for high-quality coffee beans. This was 74% higher than the commodity market’s price during the year. Other examples are: partnerships with firms like Johnson Development Corporation, acquired businesses like Ethos Water and started the Starbucks Foundation 4. 5.

8. Systems thinking #1
An organization from a competence-based perspective is seen as an open social system
Open social system = dynamic and complex collection of elements, interacting as a structured functional entity that continuously interacts with its environment
▪ energy, material and information flow between the different elements that compose the system
▪ feedback is used to regulate the dynamic behavior of the system: feedback is a process whereby some proportion of the output signal of a system is passed (fed back) to the input

9. “The purpose of strategy is to enable the institution to achieve its
Systems thinking #2
Environment
Organization
Assets
Process
Products/Services
Customers
Resources
Stakeholders
Competitors
“The purpose of strategy is to enable the institution to achieve its
desired results in a continuous changing environment “

10. Hierarchy of assets # 1 Core competences Competences Capabilities
Skills
Assets
Resources

11. Hierarchy of assets # 2 Assets Tangible assets Intangible assets
Physical
Financial
Human
Technological
Reputation
▪ characteristics
production
facilities
▪ location
▪ production
flexibility
▪ capacity
surpluses
▪ property and
equipment
▪ receivables
from clients
▪ cash and cash
equivalents
▪ liabilities
▪ equity
▪ knowlegde
and expertise
▪ adaptability
▪ loyalty
▪ availability
▪ performance
▪ patents,
copyright,
company secrets
▪ R&D facilities
▪ qualifications of
employees
▪ brands
▪ corporate image
▪ corporate
identity
▪ relationship with
suppliers
▪ customer
satisfaction

12. Hierarchy of assets # 3
Skills are special forms of capability, usually embedded in individuals or teams, that are “useful in specialized situations or related to the use of a specialized asset” Capabilities are repeatable patterns of action in the use of assets to create, produce and/or offer products to a market. Capabilities arise from the coordinated activities of groups of people who pool their individual skills in using assets to generate organizational action

13. Hierarchy of assets # 4
Competence is the ability (being capable of) to apply assets in a coordinated way (interaction and integration of capabilities) in order to reach a certain aim. If this coordinated interaction and integration of capabilities leads to reach a certain aim (e.g. introduce new products successfully) then these capabilities lead to a competence Furthermore a competence is related to processes and interaction between the assets in an organization and lies generally embedded in certain organizational units, such as sales, marketing, logistics or production

14. Hierarchy of assets # 5
Core competences is defined as an unique combination of knowledge, capabilities, structures, technologies and processes in an organization, which makes it possible to provide products or services which absolutely no other organization can produce in the same way, at the same moment and at the same speed Core competences and competences add the most value to the realization of the organization goals and objectives
From: Sanchez, R. (2002), Understanding competence-based management Identifying and managing five modes of competence, Journal of Business Research, Volume 57, pp

15. Manager as a puzzler
“He who wants to understand how the organization achieves competitive advantage, must search for the system resources”
For developing an integrated system of
resources, management needs extraordinary
analytic and appraisal skills
A certain model for the puzzle of an
organization system of resources that can
be imitated does not exist
If managers want to develop an integrated system of resources, the pieces of the puzzle eventually have to fit

16. Firm-adressable resources
Organization as open social system
Strategic logic
Management processes
Intangible assets
Tangible assets
Operations
Product offers
Product markets
Firm-adressable resources
Borders of the
data
data &
Competitors
decisions
policies & procedures
budgets
revenue
organization
Mode 1
Mode 2
Mode 3
Mode 4
Mode 5
From: Sanchez, R. (2004), Understanding competence-based management Identifying and managing five modes of competence, Journal of Business Research, Volume 57, pp

17. Competence mode # 1 1.
Cognitive flexibility to imagine alternative strategic logics:
Depends on managers ability to perceive market needs and identify specific market preferences the organization might serve, to determine the characteristics of products and services that can satisfy those needs and preferences, to design supply chains and select appropriate distribution channels for realizing new products, and ultimately to define product offers that will be perceived by markets as having attractive net delivered customer value

18. Competence mode # 2 2.
Cognitive flexibility to imagine alternative management processes:
Depends on managers ability to identify the kinds of resources (assets, skills and capabilities) required to carry out a given strategic logic, to create effective
organization designs (allocations of tasks, decision making and information flows) for the processes that will use the required resources and to define appropriate controls and incentives for monitoring and motivating the value-creating processes envisioned by a given strategic logic

19. Competence mode # 3 3.
Coordination flexibility to identify, configure and deploy resources:
Depends on the ability of a firm’s managers - in this case, usually the midlevel managers of larger firms, but also top managers of smaller firms - to acquire or access, configure and deploy chains of resources for leveraging product offers capable of creating value in the markets targeted by the firm. These resources may include both firm-specific resources that are acquired and become internalized by a firm and firm-addressable resources that the firm can access but that remain external to the firm

20. Competence mode # 4 4.
Resource flexibility to be used in alternative operations:
Depends on the managers ability of the resources in an organization’s resource chains to be used in alternative ways. In essence, within the resource chains available to an organization, the intrinsic resource flexibility of the resources composing those chains will constrain the different ways in which the organization’s available resource chains can be used

21. Competence mode # 5 5.
Operating flexibility in applying skills and capabilities to available resources:
The operating flexibility depends fundamentally on the skills and capabilities an organization can apply at the working level in using its available resources.
This mode is therefore expressed by the operating flexibilities that result from the collective capabilities of a firm’s human resources - in this case, primarily its front-line managers and employees - to sustain efficient use of available resources when facing a range of variations in inputs, in required outputs and in the environmental conditions affecting the operations of the firm
Understanding the five strategic options of competence discussed above is essential to identifying the various kinds and sources of organizational competences and to effectively managing their interrelationships. As Chiesa and Manzini have noted, ‘‘the identification of different levels of competence is central in clarifying the link between the competence view of the firm and strategic decisions, operational management (and) end products and services.’’

22. Competence leveraging vs. building
Competence developing
Creation of new strategic options
Competence leveraging
Realization of strategic options
Internal cashflow
From: R. Sanchez, A. Heene (2004), The new strategic management: organization, competition and competence

23. Strategic working with competences
Define the role of the organization within the social-economic environment
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Phase 6
Phase 7
Determine the goals and objectives of the organization
Determine the need for competences of the organization
Inventory the present competences of the organization
Analyse the ‘fit’ between the present and needed competences
Competence-based training and development
Determine to what extent the goals and objectives are realised
Determine effective work behaviour based on the formulated objectives
Performance appraisal and competence-based rewarding
Phase 8
From: Vernhout, A. (2004), Strategisch werken met competenties: theorie en praktijk van het competentiedenken

24. Management…..
Management exists for the sake of the institution’s results and performance. It has to start with the intended results and has to organize the resources of the institution to attain these results ~ Peter F. Drucker

25. Further reading
R. Sanchez, A. Heene (2004), The new strategic management: organization, competition and competence
A. Heene, S. Vermeylen (1999), De stille kracht van de onderneming: competentiedenken in strategisch management
A. Vernhout (2004), Strategisch werken met competenties: theorie en praktijk van het competentiedenken