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DIALOG(R)File 15:ABI/INFORM(R)(c) 1996 UMI. All rts. reserv.00933020 95-82412How to identify and enhance core competenciesSimpson, DanPlanning Review v22n6 PP: 24-26 Nov/Dec 1994 ISSN: 0094-064XJRNL CODE: PLRAVAILABILITY: Fulltext online. Photocopy available from ABI/INFORM 11084.00 Article Ref. No.: B-PLR-44-5WORD COUNT: 2226TEXT: The following exchange of opinions at The Planning Forum's International Strategic Management Conference was condensed from the "Dilemmas of Planning" session, chaired by Dan Simpson, Director of Strategy and Planning, The Clorox Company. The panelists were: Paula Cholmondeley, Vice President, Business Development and Global Sourcing, Owens Corning Fiberglas; Jean-Yves Gueguen, Vice President, Corporate Planning and Development, American Express; Brian Marsh, Head of Planning Consultancy, Shell International Petroleum (London); Pete Schavoi, IBM Director of Strategy (retired), The IBM Corporation; and Gordon Shaw, Executive Director, Planning and International, 3M. The opinions expressedare the personal ones of panelists. Part I appeared in theSeptember/October issue.DAN SIMPSON, Moderator (Clorox): Core competencies is an issue that seems to make a lot of conceptual sense. But true core competencies are hard todefine precisely and are often discovered retrospectively. That is, as you experiment, you define your competencies by simply describing your successes and failures. The lessons are often costly.Core competencies are exaggerated by some managers and underestimated by others. Some think everything they do is a core competency. This is especially true at successful companies, which get kind of cocky. Whatever department you talk to, the head of that department will say, "My area is acore competency of the corporation."Other companies really don't understand what particular competencies make them successful in a marketplace. The reason is that competencies are sometimes so ingrained they're unapparent. They might be brand equities built up over time or a network of relationships--the infrastructure insidethe company and the relationships built with customers and suppliers. Those kinds of competencies tend to be poorly understood.Any advice, any counsel on how you identify true core competencies and how you leverage them?BRIAN MARSH (Shell): The core competency concept makes sense in one's gut. Businesses large and small succeed only if they have the ability to meet customers' needs at a profit. Core competencies have something to do withthis ability.The way I define core competencies is that they're those few things thatyou do together with the customer that create value. You and the customer together create value by exercising your core competencies. By value, Imean you're able to deliver an offering at a price or a cost that gives youa margin over and above what your competitors get. And it's that marginthat you're able to reinvest and feed back into your business to sustainthe things that produce this value. It's this holistic feedback loop, adynamic arrangement, a dynamic system that ensures your organization's survival and growth. I believe that if you want an organization to surviveand grow you need to identify these core competencies.I also believe that you need to identify what for you is a unique set ofcore competencies. Not that they're individually unique, but that you've somehow or other acquired a set that is unique. Because it's that very uniqueness that enables you to create a margin greater your competitors'.If you don't create that margin, if you're not able to acquire the incremental return to reinvest in the business, your competencies willsuffer in three ways. The three "E's" to avoid are:* Erosion. Your competencies actually erode over time, depreciate in value,and become less able to deliver value.* Emulation. The competition sees what you do and through emulation eliminates the competitive advantage that you had.* Emigration. The environment changes, customers change, customers move onto other services or become interested in other new products, or have other desires they wish to fulfill. So you find yourself investing in competencies that no longer yield value. Peter Drucker describes this as "investing in yesterday's breadwinners."If you want to enhance your core competencies you have to start thinkinglike your customers. Also, you have to start putting yourself in your competitors' shoes. The best way of trying to think like the customer isactually going to talk to them. Too many managers think that core competency is inside the company, that there's some internal analysis thatyou have to do deep inside your core.In fact, I think, the prime thing that you need to do is get out there andask your customers why indeed they are customers of yours. What is it aboutyou that they actually find attractive? It might be because you're justnext door. It might be because you produce a better product. It might be because your whole offering--the augmented product--is something they find attractive. It might be because the government just doesn't allow anybodyelse to compete with you in your marketplace. There must be something thatthe customer actually likes about you, and it's a jolly good idea to findout just what that is.To learn to think like our competitors, we sometimes invite the chief executive in a team workshop to play a little game: "You've just woken up,and surprise, you've lost your job. But now you're the chief executive ofyour most feared competitor. Knowing what you know about your company, what would you do to hit it hard? Where would you strike to beat the company you worked for yesterday?" That kind of discussion unearths the areas whereyou're likely to be emulated.So core competencies should be identified in terms of what customers likeabout you and what your competitors see as vulnerabilities. And since these definitions clarify the dynamics of the system that creates the value,understanding core competence is essential to the survival and growth ofyour business.PETE SCHAVOIR (IBM): IBM got into the core competencies game courtesy of Gary Hamel. His Harvard Business Review article made a big impression at IBM, and I asked him to come lead a seminar for our top management. We spent three hours of intense, fascinating discussion during which Gary managed to poke his finger in almost everybody's eye. But they agreed thathe had an important message, and we should look at our core competencies, strengthen the critical ones, and cover ourselves in the areas where wewere weak.Each operating unit was asked to identify their core competencies. Someunits paid lip service to the concept, claiming that everything they didwas a core competence. But the units that did a good job then used their findings as a lever to change the culture within their organization.Our technology division, now called the IBM Microelectronics Division, was probably the best. In the course of their work they identified procurementor purchase of semiconductors as a core competence. This is a semiconductor manufacturing division that was captive to the needs of IBM at that time.As a result of that finding they totally reorganized themselves, trying to strengthen that core competence. Recently, IBM concluded that it needs to centralize procurement for efficiency, and because of this previous work,the nucleus of a core competence was in place.Several lessons can be drawn from this experience. Requirements for success are: Senior management and operational leadership; the willingness of operating people to work hard on a set of issues; some good facilitation;and a willingness to extend core competencies across boundaries and intoother parts of the business.JEAN-YVES GUEGUEN (American Express): One issue that doesn't get much attention is, "What are we using competencies for?" At Amex, we're finding competencies analysis helpful during our major reengineering of our business. We're trying to cut a lot of excess cost out of our businesssystems. One of the dangers, obviously, is to mistakenly cut into themuscle tissue as opposed to just cutting the fat.I think it's extremely useful to know what your core competencies are, totry to stay away from cutting into your major sources of competitive advantage. Any company that is doing a very extensive reengineering exercise probably could derive some benefit from analyzing its competencies.We use competencies analysis to help rank our initiatives. In other words,core competencies can serve as a useful guide for identifying new business opportunities in which we have a realistic chance to be successful.Gary Hamel makes a vital connection between strategic intent and core competencies. What competencies are missing today that we'll need to beable to develop to achieve our strategic intent? Hamel stresses that yesterday's core competencies are not the same as the ones that will allowyou to realize your strategic intent.GORDON SHAW (3M): Because we at 3M are driven so much by technology, we try to classify technologies as either core technologies, or enablingtechnologies. The core technologies tend to be ones that provide unique properties that are of real interest to the customer That's where we put alot of investment.For a disk drive, for example, the bearing technology and the spindlesmight each be a core competency. For the disk media, the core competencycould be in the particles themselves, and the enabling technology could bethe resins or the coating system that holds it all together. So we try tokeep current on which competencies are the ones that we should continue toinvest in, that are really uniquely our own. Those technologies that we canobtain from outside of the company we consider enabling competencies. SIMPSON: Gordon, are the core competencies at 3M mostly technology based? SHAW: 3M is strongly technically driven in so many of our businesses that technology is the area where we put most of our emphasis. That's where the competency identification has been made most clearly. I think we could perhaps do a little better job of looking for core competencies in areasoutside of technology.PAULA CHOLMONDELEY (Owens-Corning): We had an experience similar to 3M's. We also talked to Gary Hamel and consultants at the Boston Consulting Group, and asked them to help us identify our core competencies. But afterhaving them work with our senior management, leading them through some group exercises, we really had a mess on our hands. We could not internallydefine what was core as opposed to non-core, and what was a competency as opposed to some process or offering "we just did well."So the conclusion we came to was that, because we are a technology-driven company, instead of having core competencies we had core technologies. The technology competencies that we could identify as core cut across the company. They would provide guidance about which new businesses to get into and which new businesses not to get into. Core technologies have a distinctive capability that a competitor can't copy.But when we attempted to look at core competencies from a marketing perspective, it was more difficult. We have a very strong brand for ourFiberglas insulation--the Pink Panther. Is this cartoon character a core competency? Is maintaining him a core competency? We decided that, no,that's just something we do really well. We have super marketing people,but our core competency is fiberizing glass. I think the answer to the question, "What are your core competencies," really depends on knowing thetype of company you are. That knowledge gives you guidance and points youin the directions you ought to explore.MARSH: I can give you a context for seeing the Pink Panther as a core competency. Core competencies come in four boxes:* One box is labeled "brand reputation," and your Pink Panther is in it. Ifthe brand reputation is something the customer admires and associates with benefits, and the customer is prepared to pay more for that product, thenit's a core competence. So I don't see why your Pink Panther can't be acore competence. It has unique value that the customer is prepared to payfor. Coca-Cola protects its brand name by vigorously fighting offlook-alikes. Not long ago a minor impurity discovered in some shipments ofPerrier caused sales of its mineral water to plummet. Nevertheless, it managed to recover a considerable amount of market share because of its brand equity. So I think reputation is core.* The second box in the set of core competencies is labeled "sunk assets."If you've invested a lot of time, or sunk money in real estate or in hardware that gives you a competitive advantage that you can use in the marketplace, and that fights the competition and achieves higher margins, then those assets are a core competence as well.* The third box is labeled "embedded knowledge." I think this category is avery powerful but highly misunderstood feature of any organization. Deeply embedded knowledge is revealed by the idea that, "We just know how to run a business, and we just happen to be good at what we do." It defies definition. If it were easy to define, it would be easy to emulate andyou'd lose the competitive advantage. Embedded knowledge means, "We know the people, and we know how the system works."* The fourth box incorporates legal/regulatory advantages. If you're in theoil business, you're in a powerful position if you have the rights to prospect in large chunks of Alaska, as British Petroleum discovered. If youhave a monopoly position, it's worth a lot of money on the bottom line. Nobody wants a level playing field, everybody wants the playing fieldtilted their way, and if you've got it tilted your way, hang on to it.That's a major source of competitive advantage.THIS IS THE FULL-TEXT. Copyright The Planning Forum 1994。
Init. ID#ORG01 - Customer Development Initiative:Define Critical Process Flows1.0Identify all critical processes and related activities20 (5 to 7per area)Relating to new organizational structure1.1Generate list of critical processes and activitiesthat support new organization structure1.2Map critical processes1.3Identify value added activities1.4Rank/prioritize critical process activities1.5Gain understanding of how processes areinterrelated1.6Achieve consensus from stakeholders/key processowners2.0Benchmark recommended process designs withAA experts 8Identify similar businessprocess designs within andoutside of industry2.1Confirm with AA marketing experts3.0Identify barriers/enablers to achieve new processdesign 5Determining barriers regardingthe flow of critical processesthat will hinder performance3.1Conduct brainstorming session to identify barriers3.2Identify potential impacts on processes3.3Conduct brainstorming session to identify enablers3.4Utilize Expert/Best Practices information3.5Confirm action plans and primary responsibilities4.0Finalize recommended processes withstakeholders/key process owners104.1Ensure understanding of critical process flows4.2Achieve consensus from stakeholders/key processownersInit. ID#ORG01 - Customer Development Initiative:Define Critical Process Flows5.0Communicate redesigned processes toorganization 10Communicating the transitionto the future organizationalstate5.1Develop information materials for organization5.2Customize communication plan5.3Communicate process design to organization6.0Integrate revised processes5Merge initiative with initiativesin other focus areas6.1Coordinate with other implementation teams6.2Identify implementation dates for redesignedbusiness processesInit. ID#ORG02 - Customer Development Initiative:Define Roles/Responsibilities1.0Review organizational needs based on projectfindings 2Assess the current availabilityand positioning of resources1.1Identify resource gaps 1.2Prioritize resource needs2.0Identify jobs and associated roles/responsibilitiesneeded for new organization design 15Managerial, professional,clerical (Key Acct. Mgrs, E/WMgrs for W&R, VP CD, DirCS, Inside Sales people, W&RMktg Mgrs)2.1Identify key positions2.2Detail all positions and determine staffing totals byposition/job type2.3Define reporting relationships (particularly cross-functional)2.4Assess the ability to relocate non-value addedactivities to support functions2.5Communicate the necessity to reduce non-valueadded activities3.0Develop draft job descriptions103.1Identify skill requirements for all key positions3.2Assign "weighting" ranks3.3Provide clearly defined and understoodresponsibilities and accountabilities4.0Identify all stakeholders/key process owners3HR involvement4.1Review list of key positions4.2Confirm job assignments as determined by skillsassessment initiative5.0Identify and allocate resources (FTEs & $s) to thecritical processes 5May follow skills assessmentphase5.1Confirm primary (high-impact or high resource)business processesInit. ID#ORG02 - Customer DevelopmentInitiative:Define Roles/Responsibilities5.2Allocate FTEs and associated $s based onidentified roles/responsibilities and findings fromthe skills assessment26.0Gain consensus from stakeholders/key processowners6.1Ensure understanding of organization structure6.2Finalize roles/responsibilities needed for newprocess design7.0Communicate roles/responsibilities to organization5Communicating the transitionto the future organizationalstate7.1Develop communication plan7.2Communicate roles/responsibilities to organizationInit. ID#ORG03 - Customer DevelopmentInitiative:Perform Skills Assessment1.0Conduct employee focus groups and interviews51.1Confirm necessary and desired skill sets1.2Confirm skill weightings1.3Review and utilize initial project interviewinformation1.4Conduct management and non-managementinterviews for additional information2.0Create skills assessment survey52.1Use focus groups and interview results to designsurvey2.2Review designed survey with stakeholders3.0Perform skills assessment203.1Conduct one, or a combination of, the followingskills assessment techniques:To be filled out by supervisors, and Departmental employeesA) Skills assessment survey (See workstep 3.0)Those surveyed may be askedto rate the organization andthemselves against theirperception of competitorcapabilities - Supervisory evaluation- Peer evaluations- Interdepartment evaluations- Self-assessmentsB) Individual skills assessment based on historicalperformance reviews, and downward and upwardevaluation trends3.2Identify gaps in skill sets3.3Identify positions that provide a strong fit withindividual's skill sets3.4Identify candidates that need training to fit certainpositions (trainable)3.5Identify candidates that should be assigned toother areas (non-trainable)Init. ID#ORG03 - Customer DevelopmentInitiative:Perform Skills Assessment3.6Assess need to procure outside resources/skills3.7Assign individuals to key positions4.0Communicate findings34.1Analyze survey and assessment findings4.2Finalize recommendations of personnel that arebest suited for each position4.3Review with stakeholders/key process owners4.4Finalize development opportunities for personnel5.0Plan curriculum35.1Identify improvement options to addressdevelopment needs5.2Stakeholders ensure that development candidatesare trained in the need areas6.0Develop coaching program5Build into organization duringimplementation phase6.1Create personal development instrument todetermine employee's strengths and developmentopportunities6.2Launch a coaching programInit. ID#ORG04 - Customer Development Initiative:Develop Performance Measures1.0Review corporate mission, vision, strategies, andKPIs 2Information from Strategyarticulation and KPI session1.1Confirm that overall corporate strategy issupported by new process design2.0Set performance targets for CustomerDevelopment, Marketing, and Customer Service 20Focus groups from keystakeholders2.1Align customer needs and develop objectives2.2Align targets to critical process flows2.3Develop performance measures that aremeasurable, actionable, linked to objectives,controllable, simple, credible, and integrated2.4Review effective performance measures fromother organizations2.5Prioritize the performance measures2.6Ensure that performance measures are balancedwith respect to cost, quality, and time2.7Review first draft of measures with stakeholders3.0Identify performance barriers53.1Identify skills, attitudes, and behaviors3.2Confirm clarity of roles3.3Determine communication effectiveness4.0Overcome performance barriers54.1Assign responsibility for overcoming barriers4.2Develop action plans to overcome barriers4.3Implement continuous learning plan4.4Leadership development4.5Develop communication model5.0Finalize performance measures with stakeholders55.1Gain consensus, and refine if necessaryInit. ID#ORG04 - Customer DevelopmentInitiative:Develop Performance Measures6.0Determine tools to monitor and evaluate10performance6.1Track results vs. targets6.2Manage future performance6.3Take corrective action7.0Reward and coach107.1Review existing performance appraisals7.2Integrate new performance measures intoappraisal process7.3Reward and incent desired behaviors7.4Review the coaching process for effectiveness7.5Develop recruiting and selection process criteria8.0Conduct cross-functional working sessions to5refine performance measures and developconsensus9.0Compensation review20Primary involvement from HR9.1Review existing compensation practices Key Account Mgrs, E/W MgrsW&R, Inside Sales people,DSMs, VP CD9.2Review Best Practices/alternatives9.3Design new compensation plans9.4Review with stakeholders9.5Determine transition plan9.6Roll-out。
Methodology: Activity Based ModelingOverviewActivity Based Modeling is the methodology for building activity-based information and integrating it into a company ' s management reporting system. The following objectives arepart of this methodology:- Identify the type of activity-based system needed (the business issues to be addressed.)- Identify the software best suited to run the system.- Gather data and develop cost model(s).- Integrate the system with the data sources into the client epo'rtisngmsaynsategmem. ent r Questions1. What is the General Ledger structure?2. On what system does the GL reside and how can the data be transferred to the PC?3. Where does the driver data exist? In what form?4. What will you do with information on every product (customer), that you cannot do with information on every productline? (Why do you think you need so much detail?)5. Have you identified business processes in your company? Do you have process owners?Hints- There is no single formula for Activity Based Modeling- Each project is unique and should be structured around the client ' s business objectives - Decentralized operations take more effort than centralized- The client ' s business objective may be served by a simple rather than complex system- Prioritize opportunities, recognizing that they will change over time.- Utilize experience consultants (either as a team member or in a QA role)IssuesThe following “ Pitfalls ” are specific to Activity Based Modeling and taken frAormthurAndersen's Lessons from the ABM Battlefield :3. Failure to Understand the Three Views of Costs4. Financial Person Heading the Project7. Lack of Training8. Consultant Did Everything9. Lack of Cost Management Expertise11. Failure to Do a Pilot First12. Too Much Detail13. Too Little Detail14. Problems in Collecting Activity Data15. Inaccurate Assignment Costs16. Unavailability of Detailed Data17. Assignment of Costs to the Wrong Year18. Software Problems26. Lack of Understandable Reports27. Problems with Reporting Frequency28. Not a Profit Center30. ABM is Too Costly to Maintain* The “ 30 Pitfalls ” along with experienced advice is described completely in the first three chapters and outlined in Appendix I of Arthur Andersen ' s Lessons from the ABMBattl efield (contact Shannon Hagerty in St. Charles for a copy of this book.)OtherEstimating Guidelines- Software selection should be carried out with the full client team, as part of the engagement.- Small pilot projects should be completed first to better understand modeling requirements as well as system requirements.- Software and training typically fall outside of the engagement. Explicitly include or exclude these costs in your proposal. - Depending on the skills on your team, you may be able to integrate the training into the project, reducing the overall costof training and increasing the impact of that training. (JIT or OJT training.)FeesPilot projects range from $20,000-200,000 depending on the size of the pilot, the level of participation with the client, an d the client ' s resource commitments.Risk ManagementThe biggest risks in building models is that you try to build a model to “ do it all.client ' s key objectives and don ' t let the model become an answer to every conceivable question.Remind clients that models will evolve. The first model will not answer all of their questions, but the model can be changed as needs change (or multiple models can be built.)Phase 1: Requirements AssessmentOverviewDuring the Requirements Assessment phase yo u should identify the client ' s needs, clarify and confirm project expectations, and tailor a Workplan to the clients needs and resources. It is at this phase you will determine if the client would benefit from an ABC or ABM approach. Time well spent in t his phase should reduce rework in future phases: “ How fast you are going is not as important as making sure you are on the right road. ”Objectives for this phase are:- Identify business objectives- Define project scope- Identify project resources- Develop project workplanQuestions1. Is the mission ABC? ABM? or a combination of both?2. Will activity-based budgeting be part of this project? If not now later?3. Is senior management committed to the project?4. Does the project team have the right skill set to make the project successful?5. Are the due dates on the workplan reasonable?6. Do the team members understand their role?7. Is there a need for subject matter training?Hints- Requirements include not only what information is desired, but how it will be used and by whom.- It often has its own set of requirements. Capture these early.- Data collection always takes longer than expected. Allow enough time and start early.。
