The authors argue that top executives need "to identify, cultivate, and exploit the core competencies that make growth possible - indeed, they'll have to rethink the concept of the corporation itself." Top executives need to rethink the corporation as a portfolio of competencies instead of a portfolio of businesses. On the third page, the authors finally define core competencies: "Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies." The authors base this definition on the fact that a company's short-run competitiveness derives from the price/performance attributes of current products, but that long-run competitiveness derives from an ability to build, at lower cost and more speedily than competitors. Core competence is about the organization harmonizing streams of technology, communication, involvement, and a deep commitment to working across organizational boundaries. And the authors claim that unlike physical assets, core competence does not diminish with use. Than the authors continue with an important issue of describing what core competence is NOT. There are three tests to identify core competencies in a company: (1) potential access to a wide variety of markets; (2) significant contribution to the perceived customer benefits of the end product; and (3) it should be difficult to imitate. The authors provide insights into how to make the distinction between core competencies, core products, and end products. They also compare the traditional strategic business units with core competence, whereby they note that competence building does need a corporatewide strategic architecture in order to enable exploit competencies.
This article was a landmark in the strategic management field and was probably the most influential published in the 1990s. The authors followed this article up with their 1994-bestseller 'Competing for the Future'. Although the principle of 'core competence' is difficult to understand, it has a strong impact on diversified organizations. I sometimes wonder the relationship with Porter's 'Competitive Strategy' (1980), in particular the generic focus-strategy. Highly recommended to all managers and MBA-students. A true classic. The authors use understandable business US-English
