Brief Introduction The Core Competence of the Corporation Written by: C.K.Prahalad and Gary Hamel Value Innovation: The Strategic Logic of High Growth Written by: W.Chan Kim and Renee Mauborgne
GTE & NEC Why is the dramatic change between GTE & NEC? What is Core Competence? How to identify Core Competence? What is Core/End Products? What’s the difference of SBU & Core Competence? How to develop strategic architecture? The Logic
GTE & NEC GTE: 1980: telecommunication industry Variety of products 1988: Telephone operating company Others closed or divested NEC: 1980: small computer business company 1988: World leader in telecommunication and computer
Why is the dramatic change between GTE & NEC? C&C Committee Core Competence Core Product End Product Strategic architecture Resources Myriad strategic alliances Computing Communication Components Semiconductors Mobile Mainframe PC
Why is the dramatic change between GTE & NEC? GTE: NO strategic intent and strategic architecture NO commonly accepted view of evolving IT SBU: Decentralization makes it impossible to focus on core competencies
Why is the dramatic change between GTE & NEC? Distinction between GTE & NEC: NEC: a portfolio of competencies GTE: a portfolio of businesses NEC: long-sighted (price/performance of current products) GTE: short-sighted (core competencies) The real source of CA: management’s ability to consolidate corporate-wide technologies and production skills into competencies
What is Core Competence? Core Competence Core Production End Production Honda Cars Manufacturing Of engines
What is Core Competence? Collective learning in the organization Technology integration –Embed tech into product via teamwork & value delivery Communication, involvement & commitment to working across boundaries
How to identify Core Competence? 3 criteria CC provides potential access to a wide variety of markets CC should make a significant contribution to the end products (customer benefits ) CC should be difficult for competitors to imitate
What is Core/End Products? Core Products: –The components that actually contributes to the value of end products –Linkage between Core Competence and end products End Products: directly to customers How to distinguish? – Core Products: manufacturing share – End Products: brand share
SBU & Core Competence Reconceptualization of the Corporation Costs of SBU –Underinvestment in developing Core Competence –Imprisoned Resources –Bounded Innovation
How to develop strategic architecture? Make resource allocation transparent To the entire organization Development of administrative infrastructure to strategic architecture, teamwork, think long term Identify and commit to the technical and production linkages Across SBUs The strategic architecture can not be copied easily by competitors.
Outline more information about Value Innovation summary of the paper Value Innovation : The Strategic logic of High Growth
What’s Value Innovation Value Innovation is not defining the solution to a problem. V.I is redefining the problem itself.
Authors W. Chan Kim & Renée Mauborgne W. Chan Kim is a professor of strategy. He was a professor at the University of Michigan He is an advisory member for the European Union. He was born in Korea. Renée Mauborgne is the INSEAD distinguished fellow and affiliate professor of strategy and management at INSEAD, France. She was born in the United States.
Details of the Book Don’t Don’t Compete with Rivals—Make Them Irrelevant In today’s overcrowded industries, competing head-on results in nothing but a bloody “red ocean”. Tomorrow’s leading companies will succeed by creating “blue oceans” of uncontested market space ripe for growth.
The Paper Value Innovation Value Innovation : The Strategic logic of High Growth mianly focus on some important views go over without any examples to explain deeply
The Paper(cont’d) Why Why do some campanies achieve sustained high growth in both revenues and porfits while some can’t? companies’ fundamental, implicit assumptions about strategy seek to make their competitors irrelevant through a strategic logic
The Paper(cont’d) Contrast Contrast the strategic logic of this approach to that of conventional approaches to strategy
The Paper(cont’d) Here Here is no what competitors are doing. not take industry conditions as given not focus on beating the competition but on creating a quantum leap in value so as to dominate the market
The Paper(cont’d) Value Innovators look for the commonalities in what customers value will to let some customers go as they target the mass of buyers refuse to be constrained by their existing assets and capabilities think in terms of a total solution for customers,even if that means crossing industry boundaries
The Paper(cont’d) Three Platforms Three Platforms Product A Service B Delivery C
The Paper(cont’d) Four Questions Which factors raised shoule be raised well above the industry’s Standard ?Raise Which factors reduced shoule be reduced well below the industry’s Standard ? Which factoer should be created created that the industry has never offered ? Which of the factors that the industry takes for granted Shoule be eliminated eliminated ?Eliminate Reduce Create Position Be Heading
The Paper(cont’d) AD If you have fallen into a tight focus on what your competition is up to, a quick read of this 10-page paper may be just the tonic to refresh your strategic thinking.
The Paper(cont’d) Conclusion While less successful companies concern themselves with beating the competition, the more successful companies pay little attention to competitors, instead making them irrelevant through “value innovation”.
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