'Core Competency' is one of the most misused words in the Information Technology domain and maybe in other domains too. This short note attempts to explain what it is actually. For a more detailed note one must read the HBR article by C K Prahlad and Gary Hamel ' The core competence of the corporation'.
The main objective of an organization is to develop some competitive advantages. This is because competitive advantages actually leads to better sales and higher profits. But to develop a competitive advantage managers must first understand the industry in which the company is operating. Say for example if the company is a FMCG (Fast moving consumer goods company) then managers can drill down to some factors that are essential to survive and grow in that industry. For example for FMCG industry in India some of the factors are
- Strong distribution or channels
- An efficient Sales force
- Economies of scale
- Quality of product
- Media advertising etc . There can be many more. But which one of these are absolutely critical and essential for success ? These are called Key Success Factors . The Key Success Factors , if handled properly provide competitive advantage to the firm. But that is not enough. Some of these advantages are easy to duplicate or substitute. If a company is able to communicate to the customer about its superiority then customers are actually able to see the value position.
For example a company developed a soap that is of high quality( Quality being a Key success factor in that industry). But other companies can copy quality. Where is the advantage then? Well , this company is able to communicate to its customers about the excellent quality and consumers actually perceive this soap to be of better. This perception is difficult to copy and this is called Sustainable Competitive Advantage. There can be different ways to achieve Sustainable competitive advantage but the value must be communicated to customer in different ways.
- Better Product
- Assets of the Company
- Capabilities of the Company
- The market itself can create barriers
- Synergy etc.
Hold on ! What is Synergy ?
Well different firms and different business units of a firm collaborate together to make a product or provide a service. We can say Synergy is achieved when the ultimate product or the outcome of the service is better than the sum of the individual parts.
For example consider Airtel and MChek. If the alliance has strength then Airtel will be able to offer its huge customer base a very useful mobile payment service. On the other hand MChek , a new company will be able to access potential a few million customers of Airtel. This is synergy. Provided separately users could have still gone ahead and installed mchek. But penetration would be more difficult that way.
Similarly Synergy can be obtained within a firm for different business units.
So we now see the link between Key Success Factors. How Key Success factors if implemented and communicated properly to customers can provide the company with Sustainable Competitive Advantages. We can also see that Competitive Advantages can be enhanced by Synergy.
Now lets see what are the assets or capabilities that lead to synergy. As we can guess assets are easier to share if there is a feasible way to share it. Capabilities are more difficult to share. For example the same distribution warehouses can be used to distribute product items. Similarly the salesman's selling expertise can be used to sell two different products if he has the expertise on both. So we can say that the distribution framework of warehouses and the salesman's capabilities are something that provides advantages to both product lines. Hence this is a core asset or a core capability.
This asset and capability that can be shared by multiple units of a firm or different businesses in an alliance is called the core competency.
Prahlad and Hamel suggested a tree structure where the core competency is the root. The branches are the major products or services. The leaves and flowers are the end features or smaller products.
This is why many companies , for example Infosys/Wipro etc major services companies developed a framework or knowledge base of skills that can be used across the domains, verticals, business units, clients etc. While the movement of engineers may be easy the difficult part is to map it to Synergy and finally Sustainable Competitive Advantage.
The top down approach for a mature company would be
- Determine the Key Success factors in the business ( well try to stick to a few important ones - use research methods like factor analysis , conjoint analysis etc to drill down to few factors)
- Find out what are the competitive advantages that have developed or can be developed. Note , Key Success Factor to Competitive Advantage is a many to many mapping. Many factors can lead to single competitive advantage. Similarly one factor can contribute to different types of advantages.
- Determine whether the competitive advantage is sustainable or not ( Be honest in this evaluation. Please note while skills in a particular programming language may be a Key Success factor , it doesn't provide any sustainable competitive advantage. All companies have such programmers. Companies sometimes use patents to show value to customers. Well if patents are collecting dust its not sustainable competitive advantage. The strength of a patent or its level of implementation, reference in other implementations or patents is what give sustainable advantage.)
- Once the factors for sustainable competitive advantage is determined all that is left is to see which internal strengths lead to that advantage. For example a set of different factors like experience , domain knowledge, skills in programming languages etc can emerge. While it is not necessary but companies can actually try to figure out those competencies ( assets and capabilities) that provide synergy. If a company can identify these core competencies at a business unit level for large companies and maybe at company level for smaller ones that will help them to nurture further growth. This time it will be a conscious decision.
For a smaller company, maybe in the inception of its life cycle, just trying to survive it may not make sense to have a top down approach. Rather they can identify core competencies at base level , then at firm level easily with a bottom-up approach.
The last but not the least is the development of core competencies. Well the core is the smallest part and what's outside the core is still important. I feel companies should focus on Key Success Factors which will lead to Competitive advantages and competencies. rather than trying to develop the core develop natural competencies and let the core develop itself. This would be a conscious development and a controlled one, but not a force fit.
Friday, April 22, 2011
Tuesday, April 19, 2011
Level 5 Leadership : From Good to Great
Level 5 Leadership, from Good to Great is a wonderful book by Jim Collins. It talks about good companies that went on to become great by virtue of their leaders.
It is not the objective to evaluate how good the book does in finding Level 5 Leaders. There are some points that Jim Collins did not give examples of Good Companies with similar results that never reached the greatness , and the leadership was the only difference from the great companies. Studies like this are hardly conclusive , but the spirit of the book is in the theme. One can aspire to be a Level 5 leader , immaterial of whether he's the CEO of an organization or not. Perhaps one day a great organization will be created.
So how is this hierarchy defined ?
Level 1 : Capable individual
At this level people concentrate on skills and good work habits. Values are important and knowledge management is critical for success.
Although all of this may sound very simple but people often forget the values of discipline and diligence and cause harm to the organization.
Level 2 : Team Member
An individual has to be part of a team sooner or later to achieve objectives that cannot be done alone. It is important to be in sync with the team and be an excellent team player. The speed of the team is the best speed of its slowest member.
This also sounds simple but how often do we see business units falter because teams do not share information, cooperate or see the larger gains with respect to their individual objectives. Typical Principal Agent issues hamper the greater goals of the organization.
Level 3 : Manager
At this level a person changes gears and starts managing a team of which he was once a member. The change is not abrupt and most organizations promote people who have already displayed their managerial acumen.
The manager's job is very important and he/she has to guide the team according to the organization objectives. At the same time a manager has to take care of aspirations of the team.
This is a very crucial role and probably the first real scope to exhibit one's real leadership skills. A manager has to know the limits set by the organization objectives, yet has to rise above those to pursue the aspirations of the team.
Level 4 : Leader
Very few managers actually elevate to a leadership position. At this stage the manager becomes a visionary and develops the skills required to motivate and stimulate a unit.
This transformation is not a very obvious one. There are several hierarchical managerial levels and when a person becomes a Vice President or a director or maybe the CEO they like to believe that they have reached Level 4. But the truth is that there is an immense inertia to get objectives and work on objectives like a manager. Well that is important because a Level 4 is encompassing the values of all the previous levels. But beyond that the leader must have the vision to cross the boundaries, redefine the boundaries and motivate others to see the same vision.
Level 5 : Final
The author stresses the point that this is an empirical finding and not an ideological one. But for aspirational persons like me perhaps an ideal position is more interesting. So what is Level 5 ?
A level 5 leader has two great qualities , humility and will. Personal humility lets a person relax and see the point of view of others. Whereas professional will lets a leader stay on course of his vision and objectives, they do not quit easily. The author goes on to explain several scenarios of behavior of a Level 5 leader. One can try to find out by self assessment what will he/she do in the same scenario.
It is not the objective to evaluate how good the book does in finding Level 5 Leaders. There are some points that Jim Collins did not give examples of Good Companies with similar results that never reached the greatness , and the leadership was the only difference from the great companies. Studies like this are hardly conclusive , but the spirit of the book is in the theme. One can aspire to be a Level 5 leader , immaterial of whether he's the CEO of an organization or not. Perhaps one day a great organization will be created.
So how is this hierarchy defined ?
Level 1 : Capable individual
At this level people concentrate on skills and good work habits. Values are important and knowledge management is critical for success.
Although all of this may sound very simple but people often forget the values of discipline and diligence and cause harm to the organization.
Level 2 : Team Member
An individual has to be part of a team sooner or later to achieve objectives that cannot be done alone. It is important to be in sync with the team and be an excellent team player. The speed of the team is the best speed of its slowest member.
This also sounds simple but how often do we see business units falter because teams do not share information, cooperate or see the larger gains with respect to their individual objectives. Typical Principal Agent issues hamper the greater goals of the organization.
Level 3 : Manager
At this level a person changes gears and starts managing a team of which he was once a member. The change is not abrupt and most organizations promote people who have already displayed their managerial acumen.
The manager's job is very important and he/she has to guide the team according to the organization objectives. At the same time a manager has to take care of aspirations of the team.
This is a very crucial role and probably the first real scope to exhibit one's real leadership skills. A manager has to know the limits set by the organization objectives, yet has to rise above those to pursue the aspirations of the team.
Level 4 : Leader
Very few managers actually elevate to a leadership position. At this stage the manager becomes a visionary and develops the skills required to motivate and stimulate a unit.
This transformation is not a very obvious one. There are several hierarchical managerial levels and when a person becomes a Vice President or a director or maybe the CEO they like to believe that they have reached Level 4. But the truth is that there is an immense inertia to get objectives and work on objectives like a manager. Well that is important because a Level 4 is encompassing the values of all the previous levels. But beyond that the leader must have the vision to cross the boundaries, redefine the boundaries and motivate others to see the same vision.
Level 5 : Final
The author stresses the point that this is an empirical finding and not an ideological one. But for aspirational persons like me perhaps an ideal position is more interesting. So what is Level 5 ?
A level 5 leader has two great qualities , humility and will. Personal humility lets a person relax and see the point of view of others. Whereas professional will lets a leader stay on course of his vision and objectives, they do not quit easily. The author goes on to explain several scenarios of behavior of a Level 5 leader. One can try to find out by self assessment what will he/she do in the same scenario.
Sunday, April 10, 2011
Negotiators Checklist
I was reading a wonderful HBR article by James Sebenius. He talks about the habits of negotiators that often result in a failed negotiation, financial and non financial losses and a lot of frustration.
Generally at the start of a negotiation process negotiators have a few things ready. Out of those the most important thing is the BATNA(Best Alternative To a Negotiated Agreement). Thus it is very important to analyze and deduce the BATNA of the other party. Any negotiation that goes below the BATNA is a no-deal.
Eventually however the process of negotiation can become personal. After all the agreement may be between two companies or governments or organizations but it is humans sitting at the table doing the negotiation.
James Sebenius points out six mistakes that negotiators do
1> Neglecting the other side's problem -> I feel that an important quality that all negotiators should possess is empathy. That will let them understand the other side's problems
2> Let Price Bulldoze Other Interests -> Sebenius calls them "reverse Midas" negotiators. In a strong urge to drive a hard bargain they often fail to notice a potential joint gain. A very important quality at this level is a person's ability of Fairness or Justice. It may seem vague but combined with empathy ability to judge a situation fairly limits the damage of a price based negotiation.
3> Letting Positions Drive out Interests -> A very common situation where the negotiators overlook their interests or issues and take positions based on a common criteria like price. The people at the negotiating table must be flexible and show genuine signs of resolving the issue or meeting the interest.
4> Searching Too Hard to find the Common Ground -> With different people having different interests it is often hard to find common ground. the negotiators must have the ability to engage deeply in dialogue and drill down to the actual interests and concerns. There must be an active effort to find out the exact differences. The next step will be to prioritize the differences.
5> Neglecting BATNA -> This is especially true from the perspective of hard facts. All deals necessarily have some pros and cons and the negotiators should have the the BATNA in front of them to avoid making mistakes. Probably this is the easiest part to prepare before the start of the negotiation process.
6> Failing to correct Skewed vision -> Evaluating the BATNA of the person at the other side of the negotiation table is equally important. Although there may be a certain amount of uncertainty and information asymmetry the negotiators must have the ability to judge.
Thus we see negotiations that are successful and beneficial to both parties are indeed due to the exceptional personal capabilities of the persons at the negotiation table. In short it can be said that effective negotiators should be soft on the people but hard on the target.
Generally at the start of a negotiation process negotiators have a few things ready. Out of those the most important thing is the BATNA(Best Alternative To a Negotiated Agreement). Thus it is very important to analyze and deduce the BATNA of the other party. Any negotiation that goes below the BATNA is a no-deal.
Eventually however the process of negotiation can become personal. After all the agreement may be between two companies or governments or organizations but it is humans sitting at the table doing the negotiation.
James Sebenius points out six mistakes that negotiators do
1> Neglecting the other side's problem -> I feel that an important quality that all negotiators should possess is empathy. That will let them understand the other side's problems
2> Let Price Bulldoze Other Interests -> Sebenius calls them "reverse Midas" negotiators. In a strong urge to drive a hard bargain they often fail to notice a potential joint gain. A very important quality at this level is a person's ability of Fairness or Justice. It may seem vague but combined with empathy ability to judge a situation fairly limits the damage of a price based negotiation.
3> Letting Positions Drive out Interests -> A very common situation where the negotiators overlook their interests or issues and take positions based on a common criteria like price. The people at the negotiating table must be flexible and show genuine signs of resolving the issue or meeting the interest.
4> Searching Too Hard to find the Common Ground -> With different people having different interests it is often hard to find common ground. the negotiators must have the ability to engage deeply in dialogue and drill down to the actual interests and concerns. There must be an active effort to find out the exact differences. The next step will be to prioritize the differences.
5> Neglecting BATNA -> This is especially true from the perspective of hard facts. All deals necessarily have some pros and cons and the negotiators should have the the BATNA in front of them to avoid making mistakes. Probably this is the easiest part to prepare before the start of the negotiation process.
6> Failing to correct Skewed vision -> Evaluating the BATNA of the person at the other side of the negotiation table is equally important. Although there may be a certain amount of uncertainty and information asymmetry the negotiators must have the ability to judge.
Thus we see negotiations that are successful and beneficial to both parties are indeed due to the exceptional personal capabilities of the persons at the negotiation table. In short it can be said that effective negotiators should be soft on the people but hard on the target.
Sunday, April 3, 2011
Managers and Leaders
Employees are often confused when their organization talks about leadership. They assume that leadership automatically comes by virtue of seniority in an organization and the power of their designations. But this is not true.
When an organization talks about leadership it has to nurture the young talents and groom the future leaders. It must create an organization that allows new ideas and revolutionary thinking. The organization cuture will determine if the right people are recruited , or if they are awarded and encouraged.
But first it is necessary to understand the difference between managers and leaders. These are some of the important differences
1. Managers are by virtue of seniority and leaders are by by virtue of of their abilities.
2. Managers are for coping with complexity whereas leaders are for coping with change.
3. A managers core competencies are planning and budgeting, organizing and staffing,communicating, delegating etc. On the other hand a leader is like a visionary who sets the direction and has the ability to motivate the people to see the same vision.
4. The managers scope of work is limited to his project or his direct or indirect reportees. But the leader's scope of work can span beyond than to peers ,bosses and maybe even outside the organization or the sphere of work. Does all of this seem too vague ? Maybe, yes. It is not necessary to evaluate whether someone exhibits leadership behavior or not. The manifestation itself may be rudimentary. It has to be seen whether there is potential in a candidate.
There is a wonderful article by Daniel Goleman which talks about the skills that make a leader. He called it the emotional intelligence. There are 5 components of this emotional intelligence Self-Awareness - The most important factor here is the ability to do realistic self assessment. First one must know the limits , then they can hope to go beyond it.
Self Regulation - Human beings behave are impulsive. There are moments of glory and moments of dejection. But leaders have an inherent capacity to stop and think. They are able to suspend judgement before taking action. They are able to control their impulsive actions Motivation - Leaders can assess themselves and then they have a strong urge, a compelling feeling to achieve something more. This urge generates a passion ,something telling in the mind to go for it.
Empathy - At different stages there are chances of alienation from peers , followers or near and dear ones because of a leader's continuous optimism and urge for achievement. It is necessary to be able to understand the emotional state of the others who contribute to this urge. Thus sensitivity to others and a genuine concern for relationships add to the ability to empathize. Social Skills - This is about belief in oneself and the ability to make others see the same dream. Great leaders were by virtue of their great followers.
So you see what an organization means when it talks about leadership? Well maybe sometimes the organizations are themselves not aware of it themselves and merely harp on the popular rhetoric. But the truth is there is a leader and a follower in every human being each to a varying degree of capacity. Keeping aside the jargons , both these roles are equally important. While a leader may be enshrined in his own vision , the follower may have the emotional quotient to follow multiple visions. Both of these comprise a total human being.
When an organization talks about leadership it has to nurture the young talents and groom the future leaders. It must create an organization that allows new ideas and revolutionary thinking. The organization cuture will determine if the right people are recruited , or if they are awarded and encouraged.
But first it is necessary to understand the difference between managers and leaders. These are some of the important differences
1. Managers are by virtue of seniority and leaders are by by virtue of of their abilities.
2. Managers are for coping with complexity whereas leaders are for coping with change.
3. A managers core competencies are planning and budgeting, organizing and staffing,communicating, delegating etc. On the other hand a leader is like a visionary who sets the direction and has the ability to motivate the people to see the same vision.
4. The managers scope of work is limited to his project or his direct or indirect reportees. But the leader's scope of work can span beyond than to peers ,bosses and maybe even outside the organization or the sphere of work. Does all of this seem too vague ? Maybe, yes. It is not necessary to evaluate whether someone exhibits leadership behavior or not. The manifestation itself may be rudimentary. It has to be seen whether there is potential in a candidate.
There is a wonderful article by Daniel Goleman which talks about the skills that make a leader. He called it the emotional intelligence. There are 5 components of this emotional intelligence Self-Awareness - The most important factor here is the ability to do realistic self assessment. First one must know the limits , then they can hope to go beyond it.
Self Regulation - Human beings behave are impulsive. There are moments of glory and moments of dejection. But leaders have an inherent capacity to stop and think. They are able to suspend judgement before taking action. They are able to control their impulsive actions Motivation - Leaders can assess themselves and then they have a strong urge, a compelling feeling to achieve something more. This urge generates a passion ,something telling in the mind to go for it.
Empathy - At different stages there are chances of alienation from peers , followers or near and dear ones because of a leader's continuous optimism and urge for achievement. It is necessary to be able to understand the emotional state of the others who contribute to this urge. Thus sensitivity to others and a genuine concern for relationships add to the ability to empathize. Social Skills - This is about belief in oneself and the ability to make others see the same dream. Great leaders were by virtue of their great followers.
So you see what an organization means when it talks about leadership? Well maybe sometimes the organizations are themselves not aware of it themselves and merely harp on the popular rhetoric. But the truth is there is a leader and a follower in every human being each to a varying degree of capacity. Keeping aside the jargons , both these roles are equally important. While a leader may be enshrined in his own vision , the follower may have the emotional quotient to follow multiple visions. Both of these comprise a total human being.
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