Core Competence Theory

Core competence theory, introduced by C.K. Prahalad and Gary Hamel in a widely cited 1990 Harvard Business Review article, holds that a corporation's long-term competitiveness derives from its ability to build, at lower cost and more quickly than competitors, a small number of core competencies, the collective knowledge and skills that allow it to deliver a stream of related products and services. Prahalad and Hamel argued that companies should organize strategy around identifying and nurturing these core competencies rather than around individual business units or products alone. The theory influenced widespread corporate restructuring around distinctive capabilities during the 1990s and remains a standard reference point in strategic management.