Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development

1. Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development Author: Dorothy Leonard-Barton Strategic Management Journal (1992), Vol. 13, pp. 111-125 Presented by: Bradley Skousen

2. Purpose and Key Definitions • Purpose: This paper examines the nature of core capabilities and the interaction of such capabilities with new product and process development projects. • Core Capabilities: The author defines core capabilities based on a knowledge-based view as “the knowledge set that distinguishes and provides a competitive advantage.” • Paradox: Core capabilities can simultaneously enhance and inhibit development projects. • Knowledge Set: There are four dimensions to a knowledge set: • (1) Employee Knowledge and Skills • (2) Technical Skills • (3) Managerial Systems • (4) The Values and Norms

3. Knowledge Sets • (1) Knowledge Embedded in Employee Knowledge and Skills: Encompasses both firm-specific techniques and scientific understanding. • (2) Knowledge Embedded in Technical Systems: Knowledge that is accumulated, codified, and structured. This form of knowledge set constitutes both information (e.g. databases) and procedures (e.g. proprietary design rules). • (3) Managerial Systems: Represents formal and informal ways of creating and controlling knowledge. • (4) Values and Norms: The value assigned by a firm to the content and structure of knowledge and controlling knowledge. • According to the author, “all four dimensions of core capabilities reflect accumulated behaviors and beliefs based on early corporate successes,” and “may be represented in very different proportions in various capabilities.”

4. The Four Dimensions of a Core Capability • As illustrated below, a core capability is an interrelated, interdependent knowledge system. Each knowledge set will have a different level of importance to a firm.

5. Interaction Between Capabilities and Projects • As seen in the figure, projects may interact with a core capability (Project B, C), multiple core capabilities (Project A) or no core capabilities (Project D). • In the study, 5 firms identified a core capability and a project that aligned at each extreme with the firm’s core capability.

6. Projects Analyzed

7. The Upside and Downside of Core Capabilities (The Paradox) • Upside: Based on the authors review, core capabilities can offer significant support and benefits to projects. Further, they can contribute to the creation of new products and processes as the firm attempts to apply its accumulated knowledge base. • Downside: The core capabilities that added value in previous projects may in fact be the very capabilities that hinder the success of a project. The author defines such capabilities as “core rigidities” or inappropriate sets of knowledge.

8. Managing the Paradox • The severity of the paradox that the manager faces depends on: • (1) the number of knowledge sets • (2) the types of knowledge sets • The four dimensions vary in ease of change. From technical to managerial systems, skills and then values, the dimensions are increasingly less tangible, less visible and less explicitly codified. • In the projects identified in the study, managers handled the paradox in four different ways: • (1) Abandonment • (2) Recidivism • (3) Reorientation • (4) Isolation

9. Conclusion • Projects can identify core rigidities. Identification of such rigidities can pave the way to organizational change. • The author stresses that the development of a new core capability must address all four knowledge sets and their interactions. • The author’s findings have managerial (e.g. behavioral, learning), and strategic implications (e.g. project choice, product development, innovation). • The article contributes to the concept of “absorptive capacity” (Cohen et al. (1990).