'Core Competence' Lessons from Apple, Microsoft

SMITH BRAIN TRUST — "Core competence (as a bedrock management principle) is dead," Fast Company proclaimed in 2013. But at least one Forbes writer disagreed. "It has not died," he wrote. "It has loosened up." That exchange followed the release of Michael O’Neil’s book, "The Death of Core Competency: A Management Guide to Cloud Computing and the Zero-friction Future.”

In an apparent nod to Forbes, a writer for "Expanding Opportunities: A Resource Guide for Maryland's Small, Minority- and Women-Owned Businesses," recently approached Smith School professor Anil K. Gupta to give strategy lessons from a "core competence" perspective. The concept, popularized in a landmark 1990 paper by C.K. Prahalad and Gary Hamel, refers to the combination of pooled knowledge and technical savvy that allows companies to compete and grow in the marketplace, while significantly benefiting customers.

Gupta, the Michael D. Dingman Chair in Strategy and Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business, used examples from Apple and Microsoft to illustrate his advice for readers of the guide, produced by the Daily Record on behalf of the Maryland Governor's Office of Minority Affairs. Here is Gupta’s full response in one of the guide's articles, “Developing Your Core Competency”:

“No company can do well if it does not have a competitive advantage so that the customer can conclude that what they are getting is better or cheaper." The way companies create that advantage “is to have a core competency that is proprietary — that is, not easy to replicate or neutralize,” said Gupta.

The capability that provides the competitive advantage can come from a company’s culture, organization, people, a breakthrough product or discovery and often is a combination of such factors. Consider, said Gupta, “What was it about Apple that allowed it to create transformational products?”

Clearly, top leadership matters, said Gupta, noting that Apple co-founder Steve Jobs, the mind behind iPod, was thinking through his vision for the iPhone, which came later, for six to eight years. Business leaders need to be students of human nature, consumers, technology and trends, Gupta said.

Applying what they learn, business leaders must envision what customers want and what their business will need to offer customers in the future.

Charles Darwin’s finding that survivors are not always the most intelligent or the strongest, but those that best respond to change, “absolutely” applies to businesses, Gupta said. Even to giants such as Microsoft. Microsoft’s operating system — first MS-DOS, then Windows — was the core of that company. And Windows, which emerged as a success in 1995, did not become a hit overnight. “Work on Windows started around 1984 — it took 11 years to get it right,” Gupta noted.

How can a company stay committed for 11 years? "Conviction and persistence," Gupta said.

Now, the Windows operating system is a commodity and people go to a browser, Gupta said. So “companies need to look at core competencies in a dynamic rather than static manner, Gupta said, and that is even more true today” when companies are less vertically integrated.

“No company lives in a vacuum, and competing in a market requires integrating your competencies with those of your business partners, Gupta said. For example, smartphones use applications created by many companies. Taiwan-based manufacturer Foxconn makes Apple’s iPad and iPhone, plus electronics products sold by other companies.

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