Core Capabilities & Core Rigidities, Leonard Barton (1992) (Article) Flashcards
Capabilities are considered core if…
they differentiate a company strategically
What is an alternative name for core capabilities
Distinctive competencies
Institutionalised capabilities may lead to what in the face of environmental changes
Incumbent inertia
Technological discontinuities can
Enhance or destroy existing competencies within an industry
All innovation necessarily requires:
Some degree of ‘creative destruction’ (Schumpeter, 1942)
What is the paradox?
Core capabilities simultaneously enhance and inhibit development
Development projects reveal…
Friction between technology strategy and current corporate practices + spearhead potential new strategic directions
In a knowledge based view of a firm, what are the 4 dimensions to a knowledge set?
1) Knowledge and skills
2) Technical systems
3) Managerial systems
4) Values and norms
What does VRIN stand for?
Value
Rarity
Imitatability
Non-substitutability
Strategic capabilities are of value when they:
take advantage of opportunities and neutralise threats,
provide value to customers
provide potential competitive advantage
at a cost that allows an organisation to realise acceptable levels of return
Rarity
Rare capabilities = possessed uniquely by one organisation or by a few others only.
e.g. a company may have patented products, have supremely talented people or a powerful brand.
Rarity can be temporary.
Eg: Patents expire, key individuals can leave or brands can be de-valued by adverse publicity
“Think of the success of Sir Alex Ferguson?”
Inimitability
Those that competitors find difficult to imitate (copy) or obtain
Competitive advantage can be built on unique resources (e.g. a key individual or IT system) but these may not be sustainable.
Non-substitutability
Threat of substitution.
Product or service substitution from a different industry/market.
For example, postal services partly substituted by e-mail.
CDs and MP3s
R&C substitution, e.g. a skill substituted by expert systems or IT solutions.
Benchmarking
Means of understanding how an organisation compares with others.
What are the 2 main approaches to benchmarking?
Industry/sector benchmarking
Best-in-class benchmarking
Name tools that can be used:
financial ratios (CORE);
systems analysis;
value chain analysis
Who coined Value chain analysis?
(Porter, 1985)
What is value chain analysis?
A tool that maps the sequence of events that lead to the company’s competitive advantage
What does VCA do?
Helps determine strengths & weaknesses
Focuses on how activities add (lose) value
What are 2 different approaches to VCA?
Cost advantage
Differentiation advantage
Cost advantage
Used when organizations try to compete on costs and want to understand the sources of their cost advantage or disadvantage and what factors drive those costs.
Differentiation advantage
Firms that strive to create superior products or services use differentiation advantage approach
The Value Chain analysis prompts 4 fundamental questions worth asking:
1) Do the support activities truly add value?
2) Should we buy or make?
3) What linkages in the chain truly provide more than competitors ?
4) How can the chain be reconfigured to either lower costs or increase customer benefits ?
