Core Competence ASP

1 Introduction

The greatest challenge today for SME, Small and Medium sized Enterprises, is globalization. A customer can today easily import goods from wherever in the world and there is no need to keep manufacturing locally. This is a bigger threat because manufacturers choosing to move production into other geographical areas, which has a negative effect on local business and general growth for a region. One new way to combat this challenge is national initiatives, that have been spawned in different nations. Examples of such initiative are, but not limited to, MAID, Make in India, Industries 4.0, and the Swedish variant named Production2030. They all have the focus on assisting manufacturers to make sure the industry can remain strong regionally and/or nationally.


One way to face such a challenge is to band together and pool resources. There are different theories about how to do this and how that kind of collaboration could work. Examples of some of those are Open Innovation (Chesbrough 2004), Strategic Alliances (Niederkofler 1991), Ecosystems (Moore 1993). The former mentioned national initiatives can assist in creating and maintaining such constellations, and Production 2030 has done so by providing support for a formation of a network of companies providing automated solutions for manufacturing purposes. The older prominent term for such a network is cluster (Porter 1990), and a newer take on the same idea of a network is Ecosystem (Moore 1993).


These type of ecosystems, clusters of Small and Medium-sized Enteprises (SME), tend to not form naturally (Vanhaverbeke 2001). In this paper the case is a cluster of 20, the number varied over time, companies all working with automated solution for manufacturing customers. This cluster was formed in 2011 by the initiative of one company and the local municipally, and has received funding over the years from the initiative Production 2030. Rather quickly after the formation; several companies, both collaborators and competitors, where invited along side of researcher to help support each other in the endeavor of creating a cluster that could support a larger ecosystem. An ecosystem itself can only create a greater value if the companies in the ecosystem have the proper core competence that will add to other companies core competence. Therefor it is needed to define the core competence of the companies that are the backbone of this network, the ones providing the automated solutions for manufacturing purposes. To be able to provide a competitive edge it is important to know the core cource of the innovation capability, which is the core competence of these companies working with automated solutions for manufacturing purposes. Dynamic capabilities (Teece et al., 1997) is the way a company can use both their own competence and external sources of competence to adapt to a changing environment. Which means a definition needs to be made of what the core competence of a company is so it can be nurtured.


Core competence is also a central part for obtaining a competitive advantage (Jiangwei, 2009,; Agha, Alrubaiee & Jamhour, 2011; Mappigau & Hastan 2012; Yang 2015). Core competence is a concept that explains what the core skill and knowledge that a company have, and that has a positive effect on the fiscal year. It is important to know what this is, so it can be managed and developed to assist in expanding a business and handle a changing market (Ahuja 2011). Knowing the core competence also assists in choosing the proper partners for an ecosystem, to bring a greater value to the customer.


The aim of this paper is to explore and describe what the core competence of SMEs, Small and Medium sized Enterprises, working as Automation Solution Providers is. BY doing so it is easier to both develop their current offering, but also understanding their role in the ecosystem and find more beneficial partners in the ecosystem.

2 Method

This paper was part of a larger study, and that larger study contained several workshops with the companies in the cluster but also two rounds of interviews and smaller get together for morning meetings and an annual conference. The larger study helped in building a relationship with the companies, to both gain their trust but also understand them better. This deep relationship is paramount for the ability to gain more knowledge and insight into a case study (Jensen & Sandström 2016).


The specific study that this paper is based upon is the second round of interviews conducted in 2015. During that interview round it was a focus on what they seek in collaborating with others, and why others choose to collaborate with them. It was also asked why customers keep coming back to them. These three areas were then used as a way to triangulate what the core competence might be for the automation solution providers. By mapping out what they seek and gain from others, it is possible with a deductive approach to deduce what they themselves are bringing into the collaboration. Adding to that answer, the answer to why customers keep coming that might help with providing a more nuanced answer to the core competence that customer seek when searhcing for new manufacturing solutions.


As an addition to the triangulation mentioned it was asked about the educational background of the managers, that were interviewed, but also what competence they need to hire to future proof the company. This was asked as a way to try to understand both the knowledge background and the expected knowledge-input from future employees. Knowledge is only a part of a competence, but a rather important part when it comes to hiring. An employee needs enough knowledge to be able to develop the specific core competence the company needs.


3 Literature Review

The importance of Core competence has been known for a long time (Prahalad & Hamel 1990; Vanhaverbeke 2001). Core competences are closely linked to core capabilities (Prahalad & Hamel 1990), in this paper core competence is used to explain what is the core that the organizations focus on in their constant learning to create core products essential to the companies. The competence itself is skills or knowledge acquired by the company. Core competence can be defined as the capacity to combine many individual techniques into one, excluding fiscal properties (Hamel 1994).


Depending on which research-stream to look at, the competence might be in the form of entrepreneurship (Hee & Daisy 2016), which is the competence to see where the market is heading and choosing the proper strategy to expand in the right direction. Even though that is an important competence to have for SMEs, there are other competences as well such as Product Development (Holahan et al. 2014) and more. This paper did not search for a specific competence; instead the intent was to describe whatever competence was found to be the core competence for automation solution providers.


Core competence it self is also a topic of some controversy, where if you focus too much on your core competence you might become too rigid (O’Driscoll et al. 2001). It is important to use a clear definition of what competence might mean, and in this paper it means the skills and knowledge of the managers of the companies that are being investigated. It is important to know what the competence is, and how to develop it without becoming rigid (O’Driscoll et al. 2001).


Looking at the core competence of a company, it is also important to realise that the ecosystem itself do need some sort of strategy and management (Vanhaverbeke 2001). This part was not studied in this paper, but this paper indicates that Automation Solution Providers might be that kind of company that can handle the management of the final offering towards a customer, which might indicate that project management is a core competence or at least mean that their core competence might contain or rely on project management.


Core competence is also linked to Dynamic Capabilities (Teece, Pisano & Shuen 1997). Dynamic capabilities can be seen as a way to measure how companies adapt to changing circumstances, and this is especially interesting looking at SMEs with on the job training instead of high academic background. It is possible to assume that people with a high academic background are able to adapt at a faster rate, due to having more options within their knowledge base, than someone whom have been in the same business and not expanded their knowledgebase. So how are dynamic capabilites effected by people who tend to draw from vast experience and on the job training, instead of academic knowledge.

4 Result

Several of the companies are family owned and have been past down a generation or the owners have recently hired their kids in the company. This means that some of the interviewed managers have grown up in the company and have deep knowledge about how the company operates. It is possible to guess that these people probably went and got a good education on the topic, but that is actually false. The interviewed managers all had a background as High School diploma engineers, which mean a basic technical background. Some of them did state that they have some night classes of economy as well, and all of them of course keep up to date by going to their suppliers to learn about the latest technology. So as a knowledge background the managers, which are also the workers in the company, have an understanding of technology but lack a formal higher education in any topic related to the company’s main offering.


It was then asked what competence they are looking for, and what kind of competence they are hiring. The answer was here still the same between the companies, more of the same that they already have. The only higher education requested was for mechatronics, and that was one company that later on hired two of the sons of the manager with this specific competence. The same manager was also a bit emotional regarding mechatronic education, due to it being cancelled as a higher education programme. According to that manager it is a competence that has been, and will continue to be needed for any automation company. There is no mentioning of expanding into the realm of digitalization or similar important competence to future proof the business model at any of the companies. One company have made the move towards digitalization by wokring together with a supplier of production software.


This line of reasoning did not bring the study any closer to the conclusion, so it was asked why these companies choose to collaborate with others, based on the answer given by one company regarding digitalization. What is the value that others bring to the ecosystem might assist in explaining what value is left for the automation solution providers to bring, or at least how they view their own need.


Two questions were asked, first one about what reasons they have for choosing a partner for collaboration, and the second question was about what they gain from collaborating. Figure 1 shows the answers for the first question. Grey means that the companies answered this as one out of several options.

Figure 1: Reasons for collaborating


It is possible to answer several reasons, so the focus is on what option got picked the most. In this case it means that the companies looked for other companies that could bring the latest technology into the ecosystem. The other options were picked by some companies, but to a lesser degree and almost all of them did pick access to new technologies. This means that always having, or developing, new technology is not a core competence for automation solution providers because they choose to collaborate to get access to that competence instead.


The question was then turned around, to ask what are the benefits of collaborating. It is displayed in figure 2, with the same visualisation as figure 1. It becomes obvious that yes, they choose to collaborate to gain access to new technology and this is also what the get back from the collaboration.



Figure 2: Benefits of collaborating


Another thing that they also gain is increased knowledgebase. It seems that they use the opportunity to access new technology to learn more when they are collaborating. They are using the collaboration to better gain an understanding themselves of how a manufacturing system might work and be improved. They are not actively seeking out this new internal knowledgebase, but they do take the opportunity to learn as much as possible.


So by this triangulation it is clear that the companies develop their competence by increasing their knowledgebase from other companies on the latest technology. It is still left to answer what their core competence is. Being able to answer that requires a walk around their workshop floor, which was done and with a more informal form of interview.


After the interviews in the meeting room were finished a walk was held around the workshop floor. The main question asked here was what are they working with at the moment, and then follow up questions regarding how they think about it, choices they make and so on. Due to what they are working on being business secrets it is not possible to explain specifics, but overall they discussed their current work as being proposed with a problem, and rather quickly gaining an idea on how it could be solved. After a short ideation phase they start to build and test their idea out, and on this version of prototyping they then built a finished product. They do have a head start knowing their speciality of goods, but they move quickly into testing new version and ideas to make a unique offering for their customer.


Their core competence seems to be their ability to quickly learn new things, incorporate new technology, and then prototype it fast. They are skilful prototypers.


5 Conclusions

Each specific company could be cited having a core competence relating to their historically core business, such as a machine builder stating that their core competence would be building machines and so on. Upon further investigation and analysis it was found to not be the truth of it. The main goods are still an integral part of the business model and important part of their offering, but it is not part of the core competence.

The core competence of automation solutions providers is being skilful prototypers. These companies have vast experience working with many types of manufacturing equipment, but much less formal education in the area, so they have almost a sixth sense of which solutions will work. This means they can rapidly start to build prototypes in their workshops, but their customers to help out in a live environment as production engineers and solve everyday kind of problems also usually trust them.


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