Core Competencies & Strategic Fit | Strategic Management Explained Ai Era (Business Concept 40/100) — Transcript

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1. 0:00Have you ever thought that why some
2. 0:02companies dominate the industries while
3. 0:04other disappears in few years? The
4. 0:07reason behind this is core competencies
5. 0:09and strategic fit. In today's lecture,
6. 0:12we will be discussing about core
7. 0:13competencies and strategic fit. And we
8. 0:15will also discuss how in the age of AI
9. 0:18as a business student, as a business
10. 0:20professional, as a business owner, you
11. 0:22can uh learn these core competencies.
12. 0:24Thank you. So this is our 40th lecture
13. 0:27in 100 series for individuals,
14. 0:30professionals and businessmen that the
15. 0:32core business concepts that will help
16. 0:34them in life to be a better person to be
17. 0:37a successful person and a wealthy
18. 0:38person. Uh
19. 0:41core competencies were first time
20. 0:42introduced by CK Pearl and Haml in 1990s
21. 0:47and core competencies are unique
22. 0:49strength of an organization that
23. 0:51differentiated from others. They provide
24. 0:53the sustainable competitive advantage.
25. 0:56What is core competency? Core competency
26. 0:59mean a collective learning capability of
27. 1:01the organization and uh it is difficult
28. 1:04for the competition to understand that
29. 1:07and if they understand it it is
30. 1:08difficult for them to compete with it.
31. 1:11Core competency basically provides
32. 1:13access to multiple multiple markets to
33. 1:16the multiple segments and it adds
34. 1:18significance
35. 1:20to the customers by adding value for
36. 1:23them. So the core competency what we we
37. 1:25get in the organizations in the
38. 1:28individuals it is about when they know
39. 1:30how to work as a team when everybody
40. 1:32brings the best on the table then it
41. 1:34becomes a core competency and if your
42. 1:37organization if you yourself as with
43. 1:39your colleagues with your teammates can
44. 1:41have this thing that becomes a core
45. 1:43competency which is difficult to compete
46. 1:46three tests for the core competency
47. 1:48uh do you have the core competency
48. 1:50abilities or not you need to have three
49. 1:52tests first is provide access to wide
50. 1:54variety of the markets. If it gives you
51. 1:57access then you have that ability
52. 1:59contribute significantly to the customer
53. 2:01benefits. If it is giving benefits to
54. 2:03the customer then you have the core
55. 2:05competence difficult for the competitors
56. 2:07to copy. So if we see the Apple, Amazon,
57. 2:11the Toyota these companies have core
58. 2:13competencies. This is the reason they're
59. 2:15surviving from decades. And core
60. 2:18competencies versus competitive
61. 2:20advantage these two are different
62. 2:22things. Core competency is about
63. 2:24internal cap uh internal capability uh
64. 2:26internal compatibility internal synergy
65. 2:29creation while the competitive advantage
66. 2:31is about the market outcome and
67. 2:34competencies enable the sustainable
68. 2:36advantage. So sometimes because of the
69. 2:38markets as the war is going on something
70. 2:41is going on companies pop up but when
71. 2:44the competition realize that they do not
72. 2:46have internal uh capabilities they
73. 2:49they're not synchronized then they do
74. 2:52not have a core competency eventually
75. 2:54these kind of companies disappear. So
76. 2:56examples examples of the core competency
77. 2:58we can see Apple design and ecosystem
78. 3:00integration. We can see Toyota they have
79. 3:02lean manufacturing excellence. We can
80. 3:04see Google they have data analytics and
81. 3:06AI algorithm. We can see Amazon they
82. 3:08have logistics and cloud infrastructure.
83. 3:11Core competency versus distinctive
84. 3:13competence. So somebody might be
85. 3:15thinking that what is distinctive
86. 3:16distinctive competence? How it is
87. 3:18different from the core competence? Core
88. 3:20competence is internal strength.
89. 3:21Distinct distinctive competence is
90. 3:24recognized by the market's priority. So
91. 3:26it is something that emerge from the
92. 3:29competition. Strategic fit uh is
93. 3:31extremely important uh thing in our this
94. 3:33lecture. Strategic fit refers to the
95. 3:35alignment between the strategy and the
96. 3:38environment.
97. 3:39It ensures that the internal
98. 3:41capabilities match external
99. 3:43opportunities and it improves the
100. 3:45organizational performance. So types of
101. 3:48the strategic fit are basically three.
102. 3:50External fit alignment with market
103. 3:52conditions. Internal fit it is aligned
104. 3:54alignment among the resources and the
105. 3:56activities. The strategic alignment kind
106. 3:58of combines these two external fit and
107. 4:01the internal fit. Remember we made one
108. 4:03video on the strategic management where
109. 4:04I talked about the environment, the
110. 4:06external factors, the internal factors,
111. 4:07the organizational value factors and
112. 4:09then the decisions. If they are made by
113. 4:12ensuring that the external factors are
114. 4:13also taken care of, internal factors are
115. 4:15also taken care of, strengths,
116. 4:17weaknesses are taken care of, then
117. 4:18company eventually made better decisions
118. 4:20which are strategic fit. So internal fit
119. 4:22needs to be explained. Internal fit is
120. 4:24basically consistency among strategy
121. 4:26structure, culture and systems. All
122. 4:29activities, sport, competitive
123. 4:31positioning. No internal conflict is the
124. 4:34objective of the as we have explained
125. 4:36that core competencies are internal
126. 4:38capabilities but they must be aligned
127. 4:41with the external fit. When we talked
128. 4:43about the porter five forces analysis,
129. 4:46we have a complete lecture where we
130. 4:47talked about the power of the
131. 4:49bargainainers, the power of the
132. 4:50suppliers, the market situation. So
133. 4:53environmental scanning is compulsory for
134. 4:55the core competencies. Fitness, internal
135. 4:58fit, strategic fit and value chain. All
136. 5:00activities reinforce each other in in in
137. 5:03the strategic fit. Operational fit
138. 5:05improves cost efficiency. Strategic fit
139. 5:07enhances the we are aware of the
140. 5:10resource-based view where in the
141. 5:12perspective of the resource based that
142. 5:14the human capital is a resource in an
143. 5:16organization. The assets are resource
144. 5:19but still the core competencies slightly
145. 5:21explain it in VR IN method VR framework
146. 5:25we can also call it that the resources
147. 5:27must be valuable rare uh immutable and
148. 5:31nonsubstitutable
149. 5:33when it comes to the human resource when
150. 5:35it becomes an asset it's
151. 5:36nonsubstitutable when the companies
152. 5:38build the core competencies they must
153. 5:41meet the VRIN criter so let us see the
154. 5:44VRIN criteria in more detail because it
155. 5:47needs an explanation. We mean valuable
156. 5:51that any competency that adds the value
157. 5:54that adds the value for the company for
158. 5:56the customers bring more profit. Second
159. 5:59is rare that is not widely possessed for
160. 6:02so we can say in resource-based view
161. 6:05that any asset is a resource but in VRIN
162. 6:08method when we say rare it means that
163. 6:10only our company has it our our company
164. 6:13own only owns it. So the other thing is
165. 6:15initutable that is difficult to copy
166. 6:18something that is strategic and the last
167. 6:20one is nonsubstitutable no al uh
168. 6:23nonsubstitutable
169. 6:25that means there's no alternative
170. 6:26available so this vin framework makes
171. 6:30the company's strategic fit
172. 6:33sometimes the companies become strategic
173. 6:35misfit and they it happens when the
174. 6:38capabilities do not match the
175. 6:39environment for instance we can say the
176. 6:41fords was producing highly uh
177. 6:44competitive what we would what we say
178. 6:46safe cars but they were not fuel
179. 6:48efficient and all of a sudden the market
180. 6:51demanded the fuel efficiency and Fords
181. 6:53were out of the business. Uh and the
182. 6:55some when companies uh not fit with the
183. 6:57environment strategically that leads to
184. 7:00the poor performance and ultimately it
185. 7:02requires restructuring and re. Now that
186. 7:05we understand how much important core
187. 7:08competencies are and what are the core
188. 7:10competencies we must focus on building
189. 7:12the core competencies. The companies
190. 7:15must invest in research and development.
191. 7:17There's no way that you develop
192. 7:19something innovative, innovative,
193. 7:21something uh rare that is difficult to
194. 7:23copy without research. So research is
195. 7:25must. Secondly, the companies must
196. 7:27encourage the organizational learning so
197. 7:29that employees all the time think about
198. 7:31bringing making something extremely
199. 7:34important for the organization. And for
200. 7:37fourthly, what we can say the human
201. 7:39capital must be developed. They must be
202. 7:40trained. is complete lecture of core
203. 7:43concept of human resource management and
204. 7:45lastly the companies must protect the
205. 7:47intellectual property because that is
206. 7:49the core thing where the internal
207. 7:51capabilities where the core competencies
208. 7:53come from. So coming towards the next
209. 7:56thing so when companies develop the core
210. 7:58competencies they must look for the
211. 8:01diversification so that they fit in the
212. 8:03strategic uh fit. So what they can do
213. 8:06they can make the related
214. 8:08diversification going into the field
215. 8:09that is relevant to them. For instance
216. 8:12IBM collaboration with the Microsoft for
217. 8:14instance collaboration of the Apple with
218. 8:17the relevant AI related companies open
219. 8:19AAI working with Microsoft merging with
220. 8:21Microsoft. So that is the
221. 8:23diversification that when the Microsoft
222. 8:26went to the open AI so it fits there
223. 8:29that that is the related
224. 8:30diversification. So unrelated
225. 8:32diversification may weaken this the the
226. 8:35synergy. So you must do the
227. 8:37diversification always where two things
228. 8:39are creating value for you as the
229. 8:42synergy improves overall performance.
230. 8:45What can be the core of core
231. 8:47competencies for the companies in the
232. 8:48age of AI. Uh AI capabilities as new
233. 8:51core competency can be the core
234. 8:52competency of the companies. Datadriven
235. 8:54decision systems use useful decisions
236. 8:57that support the companies to grow.
237. 8:59Digital transformation in the age of AI
238. 9:01can be a core competency and
239. 9:02innovvenriven in advantage is a core
240. 9:05competency of the companies in the age
241. 9:07of AI. For the students they must be uh
242. 9:10able to define the core competencies
243. 9:12explain three test method link the RBV
244. 9:15and VIN and explain strategic fit with
245. 9:18the example. This is what student must
246. 9:20understand. The real world must
247. 9:22understand the examples [snorts] the
248. 9:24illustrations that are bringing core
249. 9:26competencies. For example, Tesla battery
250. 9:28technology is their poor competency. So,
251. 9:30no one is can meet them. This is
252. 9:32something they have rare and this copy
253. 9:35is difficult to make. Strategic fit
254. 9:37between innovation and EV market demand.
255. 9:40This is the reason the Tesla comes into
256. 9:42being and alignment drives the global
257. 9:44expansion. And common mistakes people
258. 9:47make while uh doing the strategic fit.
259. 9:50They confuse the resources with
260. 9:51competencies, overestimate the internal
261. 9:53stance, they ignore the environmental
262. 9:55shift. These are the common mistakes
263. 9:57people make and managial implications of
264. 9:59the core competencies that identifying
265. 10:01and nurturing core strengths. Whenever
266. 10:04you identified that these are your core
267. 10:05strength, you must nurture those. Ensure
268. 10:07alignment across business units
269. 10:09regularly assess the strategic fit and
270. 10:11adopt the technological disruption. This
271. 10:13is core thing. Ignoring technology will
272. 10:15eventually make you misfit.
273. 10:18Discussion questions which you can tell
274. 10:20me in the comment section if you
275. 10:21understood this lecture is core
276. 10:23competencies can become obsolete. Can
277. 10:25they become obsolete? How does AI
278. 10:26reshape this strategic fit? And is
279. 10:29diversification always beneficial? See
280. 10:31you in the next lecture. The core things
281. 10:33we took from this lecture is that the
282. 10:34core competencies drive sustainable
283. 10:36advantage. Strategic fit ensures
284. 10:38alignment. Uh RBB explains the internal
285. 10:41strengths and in the AI era demand
286. 10:43capability renewal. See you in the next
287. 10:45lecture. Thank you.