Friday, 12 September 2008

On the semantics of corporate blabla

One of the most annoying terminologies in Strategic Management blabla I find the words “core activities”. They’re the most easiest and flimsiest of excuses to do or not do something, without having to provide any logical rationale why.

“They are losing money because they are not focusing on their core activities”. Come on, cut the BS; why are you calling certain activities “non core” anyway? Yep, because they’re not making any money. That’s makes it a bit of tautology, doesn’t it? Had they been hugely profitable I am sure these activities would not be regarded so “non-core” after all.

“We decided to divest businesses X and Y because they weren’t our core activities”. Get real; you’re probably divesting them because they’re not making you any money (and therefore you call them “non-core”). And even if you did have some other reason for wanting to get rid of them – whether the reason is any good or not – the hollow “explanation” (“because they are not core”) tells us as much as doodly-squat.

If you give me a good logical explanation why certain activities or products do not mix, or at least do not give any advantage in terms of combining them in one organisation, I am with you, but the label “core” or “not core” itself doesn’t say a darn thing at all.

Often, fluffy terminologies seem to be used, making far-reaching strategic decisions, to provide some sense of semi-security by means of an apparent logic which in reality is nothing more than a semantic construction.

“Capabilities”; what are they anyway? Stuff you’re good at? “We have to build the capabilities necessary to execute our vision”. What do you mean: You have to become better at it in order to become good...?

But the most annoying discussion in management speak I find the long-standing debate on what are “capabilities” and what are “competencies”. Let me solve this debate for you: They are words!! And words mean what we say they mean. These things are not some objective reality, to be discovered through careful corporate archeology or so (“we have dug up some capabilities and some competencies, analysed them in a CT scanner and applied CO2 analysis and now have conclusive evidence that they are different things”). If you can tell me why it is necessary or at least useful to make a distinction between two different concepts – one which we can call “capabilities”; the other one we’ll name “competencies” (or “zoggers and zaggers”, “dinkies and donkies”; whatever), I am with you, but without such an explanation of why the distinction is useful, I cannot be interested in debating the semantics of some random words that happened to find their way into our business vocabulaire.

So leave me alone and go annoy someone else with your corporate word games.


Christian Bieck said...

This is the first blog entry where I don't quite agree with your standpoint.

Core or non-core are not about whether it makes money or not, it is about whether you need industry knowledge and skills to do the job. For the insurance industry, where I come from, e.g. underwriting is core (you have to know a lot about insurance) and ITC is not.

You actually may make quite a lot of money in non-core activities. The value of the distinction IMO lies in when your ressources are overstretched: strategically it makes more sense to do the core stuff, because in the non-core anybody can come in to compete (or be brought in to outsource). And core is also where you should put your long term efforts - after subprime, many insurers are wishing they had paid more attention to their core (i.e. insurance) business.

Agree on the competencies/capabilities bit, though.

Freek said...

Christian: That's indeed the prime idea of the "core competence of the corporation" logic, and part of what is known in academic research as "the resource-based view of the firm".

The idea is that there are certain activities that you're good at, to the extent that they give you a competitive advantage - call them capabilities if you wish. You may be able to extent these activities and advantages into different lines of business. Together, you could call these your "core activities", because they build on the same set of core competencies/competitive advantages.

Activities you undertake or lines of business that you operate in that do not build on these core competencies one could label "non-core".

So my (inarticulate) point is not that the terminology is inherently incorrect, it's that how the usage of the terms has evolved over time - and how it is currenty used by many people - has become detached from its original ideas, and consequently meaningless. The original ideas and meaning I still think were good!

fran said...

"So leave me alone and go annoy someone else with your corporate word games".

Prof Vermuelen, you rock! I'll remember these words tomorrow as I walk into the office. I might even get a t-shirt printed.

thank you.
fran (LBS MBA2008)

Maayke said...

The blabla is necessary to help people to innovate and change! It helps them to use their imagination, because not one soul really understands the meaning of it all, and let go of the old 'words' and ways - which for you might be less disturbing cause you are used to them? It is the slang of organizations, better get used to it and try to understand it. Most of the times it is not about the exact definition of the meaning of words – like love – but what it will create in the minds of people using and listening to them.

Christian Bieck said...

Freek: Ok, I see your point now. You are right, a lot of (once sensible) terms have been overused to the point of nonsense - see e.g. innovation. We excuse that with how fast paced today's busines world is, but in fact it is just lazyness, in not stopping to think about what you are saying.

Maayke: Actually, exactly the opposite happens. Most people don't really understand the terms, but think they do - so they are in their comfort zone of not having to change!

Anonymous said...

hmm, i think competencies are things your are competetant at, whereas capabilities are what you are capable of, but not necessarily compentent at.

So a distinction needs to be drawn which ties with your view about core and non-core activities.

Competant capabilities = core activities, and non-core activities = .... yup! - things that arent what your business is compentant at, but sure you have the capability - e.g. IT - non-core, but a capability for a business, however not their core business, hence not a competency. - just an enabling capability to leverage the core competancy.