Established model
Core competence
Prahalad & Hamel · 1990
The few things a company knows how to do that open more than one market and are hard to copy.
Its place in the frameworkBusiness Core›Core Competencies
What it does
A competence qualifies on three tests: it gives access to a range of markets, it makes a real difference to what the customer perceives, and it is difficult for competitors to imitate. The argument behind it is that companies compete on capabilities long before they compete on products, and that treating business units as independent hides them.
- Reach for it when
- When deciding what to keep inside the company and what can safely be bought or outsourced.
- Where it stops
- Almost anything can be argued into the definition after the fact. Applied to yourself it flatters; the tests are only useful if someone is allowed to fail them.
C. K. Prahalad & Gary Hamel, “The Core Competence of the Corporation”, Harvard Business Review, 1990.
Why it sits at Core Competencies
The things the organisation does better than most, that customers value and competitors struggle to copy. Not everything it is good at — only the few that produce advantage.
A model is only useful when you reach for it at the right moment. This one answers a question that arises here — so it is filed here, and nowhere else. These are the working areas it serves:
- IdentificationPrahalad and Hamel’s original three tests: access to markets, contribution to customer benefit, and difficulty of imitation.
- Testing for advantageBarney’s VRIO framework, the standard instrument for separating a strength from a source of sustained advantage.
- BuildingThe build-buy-partner decision in strategy and in transaction cost economics.
- ProtectingWork on the distinction between individual and organisational capability, and on knowledge embedded in routines rather than in people.
What it touches elsewhere
Nothing in a business is decided on its own. A conclusion reached with this model at Core Competencies lands in these other cores, whether or not anyone follows it there.
- Goal CoreA strategic goal that requires a competency the organisation lacks is a decision to build or buy it.
- Market CoreRarity is judged against competitors, not against the organisation’s own past.
- Brand CoreA positioning claim unsupported by a real competency is one the operation cannot keep.
- Business CoreWhat is not core is a candidate for partners or for the supply chain.
Filed at the same place
These answer questions that arise at Core Competencies too. Where they disagree with this one, the disagreement is the useful part.
- VRIOFour questions that decide whether something a company has is an advantage or just an expense.
Elsewhere in Business Core
- Tuckman’s stages of group development
- Belbin Team Roles
- Herzberg’s two-factor theory
- Jobs to be done
- The Kano model
- The value proposition canvas
- The business model canvas
- The Van Westendorp price sensitivity meter
- Value-based pricing
- The resource-based view
- The theory of constraints
- Lean thinking
- Co-opetition and the value net
- Transaction cost economics
- Stakeholder theory
- The power–interest grid
- DuPont analysis
- Break-even and cost–volume–profit analysis
- Unit economics
- The Kraljic Matrix
- The bullwhip effect
- The SCOR Model
- On-time in-full
- Overall equipment effectiveness
- Value stream mapping
- The three lines model
- ISO 31000 risk management
- Maslow’s hierarchy of needs
- Kotter’s eight-step change model
- Situational leadership
- The Lean Startup
- Design thinking
- Porter’s value chain
- The McKinsey 7S framework
- The growth–share matrix
- Six Sigma and DMAIC
These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.
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