Gary Hamel & C. K. Prahalad

Introduction Gary Hamel and C.K. Prahalad have been recognized as one of the leaders of the theory of Strategic Management in the western management theory field.

Gary Hamel is a professor of strategic and international management at London Business School and chairman of Strategos, a strategy-consulting group.

C. K. Prahalad is the Harvey C. Fruehauf professor of Business Administration and a professor of corporate strategy and international business at the Graduate School of Business Administration, University of Michigan.

As consultants, they have worked in companies around the globe(1).

Hamel and Prahalad has changed the world of strategy management by their contribution on the subject. The strategic intent, core competences, the foresight has changed the strategic thinking dramatically. Their articles are of the highest quality - insightful, well written, informative and challenging. The Strategic Intent and one year later Core Competence of the Corporation have both won the Mc Kinsey award, and the Competing for the Future has even more successful,(2) which could be seen from the following comments:

More than 250,000 copies in print! Featuring a new preface by the authors. If there is room for only one management book on your reading shelf each year, this is it. —The Washington Post

The year’s best management book. —Business Week

[Hamel and Prahalad are] arguably the two most influential thinkers on strategy in the Western world. —Peter M. Senge, author of The Fifth Discipline

[Hamel and Prahalad] seek to rehabilitate strategy by virtually reinventing it. —Industry Week (1)

Main Works

Strategic IntentThe historical founding moment of their strategic management could be traced back to the publishing of the article "Strategic Intent", in May-June 1989. Hamel and C. K. Prahalad whom as Hamel’s co-author assert that in order to gain strategic leadership on a global scale, organisations have to take a long term (10 - 20 years) view of their purpose and goals, and set out the way of getting there. They quote Canon, Honda and as samples who have gone down this path.

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(1) http://www.hbsp.harvard.edu/products/press/books/hamel.html(2) http://www.strategosnet.com/articles/crashcourse.htm(

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Hamel and Prahalad also distinguish 'strategic intent' from 'strategic fit' in their model of contemporary strategic leadership and strategic vision in this article. They argued that 'strategic intent' may be more appropriate for leaders of organisations in dynamic global operating environments, as it permits more organisational flexibility than traditional strategic management models. Traditional strategic management involves a search for the strategic fit between business portfolios, market niches and products, customers and distribution channels. Emphasising financial targets and containing strategy implementation within resource parameters maintain sustainable advantage. Strategic intent, on the other hand, is an organisational ambitious at a strategic level, and requires entrepreneurial business leaders who seek new rules for business strategies, focussing on strategic challenges rather than financial targets, and obtaining resource leverage to achieve goals rather than constraining goals within apparent resource constraints. They develop portfolios of core competences in the organisations, and emphasise rapid learning within the organisation (Hamel and Prahalad, 1989). The degree of 'strategic intent' was contingent on the level of industry competition, organisational history, level of resource control, and strength of external strategic alliance networks, etc.(3)

Core Competence of the corporationOne year later, following or even copying the footprint of the previous article “Strategic Intent” that had won a McKinsey award, Hamel and Prahalad went on to argue that companies cannot be defined by what they do, but by what they know in "The Core Competence of the Corporation", a seminal article on core competencies in May-June 1990. In the second McKinsey award article, Hamel and C. K. Prahalad accurately predicted that "an obsession with competence building" would mark out the global winners of the coming decade.

The organisational core competencies have been defined as “An organisation’s major value-creating skills, capabilities, and resources that determine its competitive weapons.” (Hamel and Prahalad, 1990) The core competencies are part of the result of organisational analysis, which internal analysis provides the organisation’s specific assets, skills, and work activities, among which the core competencies are exceptional or unique. (S.P Robbins and M. Coulter, 1996)

According to Hamel and Prahalad, winning companies has a good grasp of tomorrow's new business opportunities, and this theme has been developed in their bestseller Competing for the Future.

Competing for the FutureHamel and Prahalad start their most popular work, Competing for the Future, with some questions. “Does the senior management have a clear and broadly shared understanding of how the industry may be different ten years future?” “Is the task of regenerating core strategies receiving as much top management attention as the task of reengineering core process?”[pp3-4] They indicate, by those questions, how largely senior managements of corporations devote their efforts to maintain and improve only present business, such as restructuring and reengineering. The book, then, shows the limits of those actions for the future success.

Hamel and Prahalad accomplished their theories in this masterpiece. The pair say management executives should act differently from others, so that they could make their new future, which represents new industry, new value, and new market; rather than maintaining or improving present market or present product. It can be, they say, first of all, having a good ‘Foresight,’ secondly, designing a ‘Strategic architecture’; and finally creating ‘Strategic intent’ and rebuilding ‘Core competencies’, which will pull a corporation to the future (fig.1).

Foresight

For competing for tomorrow, Hamel and Prahalad insist that the first thing should be done is to develop foresight. Foresight is prescience about the size and shape of tomorrow's opportunities, such as, new types of customer benefits or new ways of delivering the benefits. They explain forgetting the present market, the present product, or the present business units, or the organization. For instance,

“Motorola dreams of a world in which telephone numbers will be assigned to people, rather than places; where small hand-held devices will allow people to stay in touch no matter where they are; and where the new communicators can deliver video images and data as well as voice signals. [pp79-80]

(3) http://www.law.flinders.edu.au/research/00-7main.htm

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FUTURE

Foresight StrategicArchitecture

Fig. 1

CoreCompetencies

StrategicIntent

Strategic A rchitecture To bring a corporation to real future from foresight, the two theorists say it is the next action should be done to craft a ‘Strategic Architecture’ instead of strategic planning. Strategic architecture should describes “which new benefits, or ‘functionalities’ (not present product) will be offered” for the future, and “on what new competencies will needed to create those benefit,” and “how the customer interface will need to change to allow customers to access those benefits most effectively”.[p118] They also indicate it is impossible to create a detailed plan for a ten- or fifteen-year competitive, which is traditionally considered in a strategic planning. They cite NEC, a Japanese electronic company, as an example of a strategic architecture. NEC, initially a supplier of telecommunications equipment, dreamed being a leader in ‘C&C,’ computers and communication in 1980s. The company identified three streams of technological and market evolution.

-Computing would evolve from large mainframes to distributed processing (now called “client-server”)-Components would evolve from simple integrated circuits (ICs) to ultra large-scale ICs -Communications would evolve from mechanical cross-bar switching to complex digital systems.

The strategic architecture brought the company to $26.2 billion sales in 1992 from $3.8 billion in 1980.

Strategic Intent and Core Competence The two guru describe how to achieve the future in creating ‘strategic intent’ and rebuilding ‘Core competencies’, which had been developed in their works before the book.

Strategic intent is something “ambitious and compelling” that “provides the emotional and intellectual energy” for the future. They explain “Strategic architecture is the brain; strategic intent is the heart [p141].” J. F. Kennedy’s statement, “Going to the moon,” was a strategic intent. The easily understandable and emotional dream reminded the people in U.S. is to be a frontier and get them out from realistic “feasibility sieve” of any kinds of strategic planning.

They insist the most actually providing gateway to the future is “core competence.” Competencies are integration of skills and technology, they defined. Competencies of a corporation can be ‘core,’ which provide a value to customer, are different from competitor, and are extendable in new products or services. To get to the future, core competencies should be founded, rebuilt, and developed. Motorola found, rebuilt, and developed their competencies in digital compression, flat screen displays, and battery technology, and the company made their foresight to the real future.

Influence of the Theories

On Management Area

Organisational Learning: Along the change of the type of the work from manual to knowledge work, the knowledge has become one of the crucial parts of the organisational core competence. (Choo, 1998)The capability of gaining newest, up-to-date knowledge, the capability of digesting the new knowledge and sharing the knowledge within the organisation have become part of the efforts from the organisation to gain competence based on the strategy. Hamel and Prahalad (1993) suggest that it is a firm’s ability to learn faster and apply its learning more effectively than its rivals that give it competitive advantage.(4)

Strategic PlanThere are two stages for the two theorists to give comments on strategic plan. In the previous stage, the two has argued about the contents of strategic plan that should contain not only the goal, the aim, the target, the dream of the organisation, as which has been done in the earlier time; but also the way to reach the goal, the dream, the competence which must been sustainable during the approaching the goal. Therefore, conventional strategic planning approaches act as a “feasibility sieve.” Hamel and Prahalad (1989) suggest that “Strategies are accepted or rejected on the basis of whether managers can be precise about the ‘how’ as well as the ‘what’ of their plans”, demanding that the “how” of the plan must be clear before taking action that limits the organization to what it can do, or has done. It essentially prevents the organization from stretching for goals for which no conventional approach is ready available.(5)

(4) http://www.dcu.ie/business/research_papers/no33.html(5) http://www.summitstrategies.net/Fitto.htm

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The second stage of their comments on the strategic planning is when the traditional notions of strategic planning have come under severe attack by many in the business community. One of the understandings is strategic planning often takes an already agreed upon strategic direction and helps strategists decide how the organization is to be configured and resources allocated to realize that direction. Because of this, one of the most common critiques of strategic planning is that it is overly concerned on the situation of the present and the past, while opposed to focussing on how to reinvent the future (Hamel and Prahalad, 1994). Furthermore, Fahey and Prusak (1998), for example, have identified this predisposition to focus on the past and the present rather than on the future as one of the eleven deadliest sins of knowledge management. In addition, by being too over-focussed on analysis and extrapolation rather than creativity and invention, strategic planning tends to create the illusion of certainty in a world where certainty couldn’t be guaranteed. Strategic Architechture in Hamal and Prahalad’s work Competing for the Future replaces the phrase “strategic planning”, which has been described in the previous part of this paper. (6)

Re-engineeringThe two say, “Restructuring seldom results in fundamental improvement.” [p11] British manufacturing surrendered global market share while they had decreased the number of employees 37% and increased the output 10% during the early and mid 1980s. Reengineering, the most common key-word of executives remarked by Hammer in 1992, is much better than restructuring, Hamel and Prahalad say “Reengineering aims to root out needless work and get every process in the company pointed in the direction of customer satisfaction, reduced cycle time, and total quality” [p12] However, they indicate reengineering is catching up the predecessors in the present industry. U.S. care companies succeeded in its reengineering but they could not make new competitive value such as “breathtaking engine performance” or “ razor-edge handling,” which were set by their Japanese rivals. Thus, the pair developed their theories focusing on how to in the future rather than the improvement of the present situation.

On Facility Management

Limitation of facility strategy In a Japanese FM textbook, ‘Facility Management Guide Book’ (Uzawa, M.1998) the primary Job of facility manager should be to establish long-term strategic action plan of their facilities. Indeed, IBM-Japan, the leading model of this book, had 15-year strategic plan. However, they could not predict the rapidly depression of Japanese real estate market in the middle of the 1990s. HP-Japan also had a fine long-term strategy based on the one of their parent company. However, the plan could not include the company’s division into “Agilent Technology” and new “HP.” It seems it has been impossible to make long-term plan, as Hamel and Prahalad write in their book [Competing for the future p119]. Recently, many facility managers have been referring to ‘flexibility.’ They have thought workplace portfolio of a company should absorb organisational changing. ‘Alternative officing’ seems to be a ‘Strategic Architecture’ of facility management. This idea shows the foresight of workplace as worker can work anywhere they want(7). The idea release workplace from being reflected of organisational structure. It can be flexible how many people use the workplace and where they want to use. The workplace must be provided highly organised information network and on demand services. It means facility department must has competencies which will provide suitable services for the workplace.

Your sore is Our core After Hamel and Prahalad showed the idea of ‘core competencies,’ managements have been more considering outsourcing their none-core functions, such as facility management. Managers think not only reducing the number of employees (restructuring) but also what core competencies is that should be remained in-house and what is not. On the other aspect, facility management department also ask to themselves “what is our core competencies? What should we do?” As a result, there have been a stream that facility department did management-buy-out. The facility management department of IBM UK spun out to Procode in 1991 and it developed into Johnson Control IFM, and CBX was emerged from Rank Xerox in 1994. Freling, the director of FM Schiphol, said their slogan “Your sore is Our core.” (Freling G.1997)

CriticsThere are also some critics to the theory of Hamel and Prahalad. Micklethwait (1998), the business editor of The Economist and Wooldridge, its management correspondent, write that being the first is not necessary elements or is not the sufficient elements for the grantee of future success. They point out that the content of the strategy for

(6) http://www.psc-cfp.gc.ca/prcb/rd/pdr/docs/strathink_e.htm(7) http://www.fmlink.com/

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an organisation is not always including the presumption of position on the market; while Hamel and Prahalad think it is necessary. The future market discovery, or the new product or service, is not as important as Hamel and Prahalad said. For instance, Microsoft won the market while Apple had expressed their vision of ‘friendly computer’ first. More prove could be found from the development history of many Japanese companies, which are not the first of the market, or not the first who invent the technology, but the biggest winner in the market.

Treacy and Wiersema(1998), a consulting firm CSC Index, write ‘core competencies’ is not enough for success. For example, Briggs & Stratton has competence in small engines like Honda, which Hamel and Prahalad take up as an example of core competency, but the company had not succeeded.

ConclusionHamel and Prahalad are the two gurus who influenced the strategic management field greatly. They focus on discovering the key of how to be success in the future for the organisations, and portrait the their strategic vision ahead of the strategists. To lead to the future, they insist the importance of ‘strategic architecture’ as a highway map, not strategic planning like a city map. The strategic intent has been described as an emotional driving force, while the core competencies is the actual resources to gain the future. Core competencies has become a common term appearing almost in every new management theories, whatever it is about human resource management or knowledge management.

The two gurus revealed the limitation of the improvement of present situation such as restructuring or reengineering. The ideas also suggested to facility management to think different way of strategy and its core competencies, and as an example or rather as a result of their theory, we could see the acceleration of the outsourcing business in facility management area.

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Reference:

Choo, Chun W. (1998): The Knowing Organization; New York, Oxford University Press

Fahey, L., & Prusak, L. (1998). The eleven deadliest sins of knowledge management, California Management Review ,

Freling G (1997), the Presentation of FM Schipol in FM International Seminar, Nov 1997 in Tokyo Japan

Hamel, G.H. and Prahalad, C.K. (1989), Strategic intent, Harvard Business Review,

Hamel, G.H. and Prahalad, C.K. (1990), The core competencies of the Corporation, Harvard Business Review,

Hamel, G., Prahalad, C.K. (1993), Strategy as Stretch and Leverage, Harvard Business Review

Hamel, G.H. and Prahalad, C.K. (1994), Competing for the Future, Boston, MA: Harvard Business School Press.

Hamel, G.H (1996), Strategy as Revolution, Harvard Business

John Wiley and Sons (1993), International Review of Strategic Management, Volume 4 D E Hussey, editor

Joseph Boyett and Jimmie Boyett (1998), The Guru Guide, John Wiley & Sons, Inc.

Stephen P. Robbins and Mary Coulter (1996), Management, Prentice Hall

Uzawa, M, (1998), Facility Management Guide Book -2nd edition-, Nikkankougyoshinbusha, Tokyo Japan

http://www.strategosnet.com/articles/crashcourse.htm Last Modified: October 29, 1998

http://www.hbsp.harvard.edu/products/press/books/hamel.html

http://www.law.flinders.edu.au/research/00-7main.htm Last Modified: June 16, 2000

http://www.dcu.ie/business/research_papers/no33.html Last Modified:1998

http://www.summitstrategies.net/Fitto.htm Last Modified:1997

http://www.psc-cfp.gc.ca/prcb/rd/pdr/docs/strathink_e.htm April, 27 1999

http://www.fmlink.com/ The Work place It isn't what it used to be..., online 12 Oct 2000

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