In a previous post I delved into the often-misunderstood theory of disruption by Clayton Christensen, emphasising its relevance in the age of AI. Today, I want to explore another strategic concept that needs to be understood: core competencies, as defined by C.K. Prahalad and Gary Hamel.
AI is an open door for innovators to challenge slow-moving incumbents, often too wedded to their existing business models and technologies. This seismic shift makes understanding Christensen's disruption theory alongside Prahalad and Hamel's concept of core competencies more crucial than ever.
When Prahalad and Hamel's work was popularised, many organizations embarked on misguided quests to 'discover' their core competencies, treating the process like an archaeological dig. They missed the crucial point: core competencies are about strategic direction and choosing capabilities that can be world-class differentiators, not just areas of existing proficiency.
Consider Honda's approach: their core competence isn't just manufacturing vehicles but designing and powering a diverse range of products, from motorcycles to industrial generators. This strategic focus on engines has been their key differentiator in a crowded marketplace.
As AI transforms the business landscape, organisations must think proactively about their future core competencies. It’s not possible to claim AI as a core competence in a generic sense unless you happen to be OpenAI, DeepMind, Anthropic, etc. Instead, organisations must focus on exploiting these AI 'engines', adapting swiftly to their advancements and learning from continuous implementation.
AI is foundational in creating and iterating business models for startups today. For established organisations, the challenge is to adopt a startup mindset, rethinking and continually adapting their approach to integrate AI meaningfully into their core competencies.
In an era where AI is reshaping every aspect of business, understanding and strategically redefining core competencies is not just about staying relevant; it's about leading the charge in a rapidly evolving digital world. New and established organisations must embrace this shift, leveraging AI as a tool and a central component of their strategic vision and competitive edge.