The final question about the notion of core competencies is very practical how can management identify and develop them?
Definition and measurement:
There is no widely accepted definition or method of measurement of competencies whether technological or otherwise. One possible measure is the level of functional performance is a generic product, component or sub system; for example performance in the design development manufacture and performance of compact high performance combustion engines as a strategic technological target for a firm like Honda. This obviously makes sense. But its achievement requires the combination of technological competencies from a wide variety of fields of knowledge the composition of which changes (and increased over time twenty years ago), they included mechanics (statics and dynamics) materials heat transfer combustion, fluid flow. Today they also include ceramics, electronics, computer aided design, simulation techniques and software.
Thus, the functional definition of technological competencies by passes two central tasks of corporate technology strategy first, to identify and develop the range of disciplines or fields that must be combined into a functioning technology. Second and perhaps more important to identify and explore the new competencies that must be added if the functional capability is not to become obsolete. This is why a definition based on the measurements of the combination of competencies in different technological fields is more useful formulating innovative strategy and is in fact widely practiced in business.
Richard Hall goes some way towards identifying and measuring core competencies. He distinguishes between intangible assets and intangible competencies. Assets include intellectual property rights and reputation. Competencies include the skills and know how of employees, suppliers and distributions and the collective attributes which constitute organizational culture. His empirical work based on a survey and case studies indicates that managers believe that the most significant of these intangible resources are company reputation and employees know how both of which may be a function of organizational culture. Thus, organizational culture; defined as the shared values and beliefs of members of an organizational unit and the associated artefacts becomes central to organizational learning.
Sidney Winter links the idea of competencies with his own notion of organizational routines in an effort to better contrast capabilities from other generic formulas for sustainable competitive advantage or managing change. A routine is an organizational behavior that is highly patterned is learned derived in part from tacit knowledge and with specific goals, and is repetitive. He argues that an organizational capability is a high level routine or collection of routines and distinguishes between zero level capabilities as to how we earn our living now and true dynamic capabilities with change the product process scale or markets, for example new product development. These dynamic capabilities are not the only or even the most common way organizations can change. He uses the term ad hoc problem solving to describe other ways to manage change. In contrast dynamic capabilities typically involve long term, commitments to specialized resources and consist of patterned activity to relatively specific objectives. Therefore dynamic capabilities involve both exploitation of existing competencies and the development of new ones. For example, leveraging existing competencies through new products development can consist of de linking existing technological of commercial competencies from one set of current products and linking them in different way to create new products. However new product development can also help to develop new competencies. For example an existing technological competence may demand new commercial competencies to reach a new market or conversely a new technological competence might be necessary to serve an existing customer.
Source: Managing Innovation