The first point of view when companies embark on technology strategic planning is to make a distinction between strategic planning and strategic intent. The work by Gary Hamel and CK Prahalad underscored these differences. In their early work they attacked the application of concepts such as strategic fit (which they defined as a trade-off between resources and opportunities), generic strategies (i.e. low cost versus differentiation versus focus), and strategy hierarchies (i.e. goals, strategies and tactics). They argued that focusing on strategic intent would lead a company to better planning and resource deployment. The “Approaches to Developing Strategic Plans” figure outlines these differences.
They pointed out that the two concepts are not necessarily mutually exclusive but do represent a difference in emphasis. Through their eyes the focus of traditional strategic planning was on refining ambitions to match available resources, whereas their strategic intent process focused on a vision and how to leverage resources from all parts of the organization to reach it. Their strategic intent focus also emphasized the need to accelerate organizational learning such that it outpaced competition as a source of competitive advantage. Since the time of their original paper (Strategic Intent by Gary Hamel and CK Prahalad)R&D and business development organizations have learned, not surprisingly, that there is a time and a place for each model. When it is incremental change that is needed, oftentimes the Traditional Strategic Planning model generates a better result whereas clearly the Strategic Intent model outperforms the former when it comes to next-generation and clearly breakthrough business strategies.
Gary Hamel went on to further view the process as strategy as a revolution (“Strategy as Revolution”, by Gary Hamel). The following six elements are trade-offs that demonstrate his viewpoint. He was viewing the processes in either procedural versus creative, reductionist versus expansive, extrapolative versus foresighted, positioning versus inventing, elitist versus inclusive, and easy versus demanding. Most companies who are members of the Industrial Research Institute have since found that the most important elements of these six are (1) to be creative in the process, (2) be expansive in the inclusion of world trends including business model considerations, and (3) be inclusive of all parts of the organization including demanding inputs from competitive intelligence and intellectual property.
Another term coined when planning for an unpredictable future is “strategic flexibility”. The strategic flexibility approach draws upon scenario building and real options concepts to help managers formulate and implement strategy in high uncertainty environments. Projects that will be valuable in multiple future scenarios win over those that are not.
The reason why these elements are so important to address upfront has to do with the tyranny of companies’ Strategic Business Units. Tyranny is a strong word but it’s used for reason. When it comes to planning, people with the money get the biggest votes. What this often means is that members within an existing business unit who may be quite far up a technology and business maturity curve get to have the work that they want done undertaken by the corporation. The problem is that resources should actually be withheld from such organizations and redeployed to new products and services that are positioned much earlier in their growth curve. This is where the technology leverage is going to be. The planning methods that follow attempt to compensate for this traditional strategic planning defect to ensure that the portfolio meets the needs of the corporation’s stakeholders, not those of a powerful business unit team. The contrast is shown in the “Traditional Strategic Planning Versus Core Competency Viewpoints” figure.
In large corporations the roots of competitive advantage often come from synergy between the core competencies of the corporation that can be leveraged in products by multiple business units. However, by the late 1990s it was shown that disaggregated businesses would outperform those that stayed together. The bottom line, although it was predicted decades before, was that only those portions of a corporation that really ought to be internal are those were the competencies are interdependent, synergistic and incapable of being delivered through more than one entity. Thus on the one hand, outsourcing of a corporations “structural capital” operations often creates a more profitable corporation. On the other hand, core competencies that support multiple businesses should be kept internal. See the example from CK Prahalad and Gary Hamel shown in the “Flow of Competencies to End Products” figure.
This figure shows multiple end products being produced from different business organizations within a large corporation. In the “Flow of Competencies to End Products” figure the competencies are only supporting one or the core products and those core products are supporting multiple business units. Real synergy occurs when the competencies support more than one core product line. Such an overlap and leverage is most apparent in technology strategy maps which map technology versus product function versus market (below).
Drilling deeper, core competence is defined as a combination of skills and experience vested in people, supported by technology, processes, assets, and values. Core competence is integral to an organization’s success because it yields a fundamental customer cost benefit and provides competitive differentiation. Another definition of core competence is a combination of skills or experiences that can create a sustainable competitive advantage.
A test to determine if a set of skills comprises a core competence has four sub-tests. The first sub-test is one of “customer value”. Does the proposed competence make a disproportionate contribution to customer perceived value (functionality and/or integrity)? Can a company realize a significant price premium or cost advantage in delivering this value? The second sub-test of a core competence is a “reality” test. Are we distinctively better than our competitors? Core competences are often defined as ones and make a distinctive difference in doing things as compared to competition. The third sub-test of core competences regards “defensibility or sustainability”. Is the corporation’s level of competence competitively unique? Would it take competitors significant time and resources to replicate or close the competence gap? A practical way to test for this is to look at the cycle time of new products and services being offered in a company’s industry segment. If the competitor can reproduce the product or services in less than 20% of the cycle time it’s not a core competence. Final sub-test of a core competence is “leveragability and criticality”. Can the corporation leverage the competence into an array of new products? Is a competence critical to the company’s industry position? Is a competence an important gateway to the future? The “Example of Disney Core Competencies” figure shows a hypothetical set of skills, technologies, and assets that lead to Disney’s core competencies of storytelling and set management.
This listing of customer benefits, consumer products and services, core competencies, and skills and technology is not meant to be complete, but rather illustrative of the role core competencies play in delivering consumer benefits to customers. Seen in this matrix is how core competencies tie together many different skills and technologies and deliver them to consumer products and services. Knowing a corporation’s core competences gives real guidance to technology planning. In this Disney example one knows how the skills and technologies that are being developed are benefiting not just the Disney product and services, but also the way in which they enable either storytelling or set management to become unique in design or cost advantage. It is highly recommended that this matrix be used as a template as any company embarks on putting together its technology strategic plan. A blank representation is shown the “Core Competencies Template” figure and a worksheet sheet leading up to this graphic is shown in the “Core Competencies Worksheet” figure.
Importance of core competencies in technology strategic planning can be further understood when one also thinks about “hidden” competencies. To illustrate core competencies that may be hidden in a company, the “Examples of Core Competency Areas” figure provides some ideas on what they might be and where to look for them.
Planning for the technologies around the next generation of Intel’s micro-processor is perhaps straightforward. But thinking of the brands of Coca-Cola and were innovation will play in their future it becomes a little bit different. For example, in 2001 the Coca-Cola brand was being taken into many different regions of the world. Drink customization was a critical success factor. Hidden core competencies that Coca-Cola was leveraging to support their initiative were manufacturing line innovation, business model innovation, service innovation, and information technology innovation.