A tribute to a business genius

Last month the world lost one of its most influential business-management thinkers. Coimbatore Krishnarao (CK) Prahalad died in San Diego California, aged 68, after a short illness. In the world of business his name is synonymous with some of the most valuable and respected business concepts which have often become conventional wisdom. His thinking quite literally changed conventional business thinking.

CK (as he preferred to be called) was an academic - a professor of Strategy at the Ross School of Business (Michigan) since 1977 - and a business advisor to some of the biggest global businesses.

He naturally had a doctorate in business administration (DBA) from where else but Harvard University. He was twice ranked as one of the world's most influential business thinkers, most recently in October 2009, by the Thinkers 50 list of the top 50 management thought leaders in the world published by the consulting firm CrainerDearlove.

Just in case you are not making the connection: do the terms "core competence" or perhaps "fortune at the bottom of the pyramid" ring any bells? CK's major works include the following: The Core Competence of the Corporation (1990), Competing for the Future (1994), The Fortune at the Bottom of the Pyramid (2004) and The New Age of Innovation (2008).

As someone who specialises in business, I consider these works as seminal. To me they challenged previously held assumptions and opened up my mind to new way of conceptualising and understanding business. I am particularly fond of the work Competing for the Future" which Prof. Prahalad co-authored with Prof. Gary Hamel. This is a sample of what Prof. Prahalad wrote some 15 to 20 years ago:

"[Businesses] need to imagine new markets for tomorrow, and to build new core competencies that will give them an advantage in those markets. So it's about creating a virtuous cycle in the organisation, where you are continuously increasing the capacity for leverage and profitability within existing businesses, but you are also continuously redeploying resources to invent new sources of profit - new strategic growth opportunities. Senior managers should therefore be spending less time looking inward and backward, and more time looking outward and forward."

I find this approach still highly relevant and refreshing, and that is why CK is a genius in the world of business thinking! Obviously, by only quoting a snippet it is difficult for the reader to appreciate the context and deep meaning of his works.

In my consultancy work, I frequently find myself repeating CK's words of wisdom to clients. For instance, when a local clothes retail group not so long ago invested thousands of euros in purchasing new retail outlets, I asked them the pointed question: What business are you in exactly? Are you in the retail business or in the property business? What is your "core competence"? My point at the time was that it made little sense to invest hard-earned cash in bricks-and-mortar when you were in the business of selling clothes. There clearly was an opportunity cost to this (unwise) "investment" decision such as slower growth prospects because of more restricted cash flows which could have been used better to improve the competitive position of the business.

CK would argue a business should identify and be aware of its core competence(s) since this provides the business with a quality of focus which in turn maximises its chances of being the best at what it does. All too often companies lose focus, become the victim of their own success and scatter their energy/resources, which ultimately undermines their own competitive position. In fact, business history shows us that very rarely does a top rated company last longer than 25 years at the top. Look at the FTSE100 or Fortune500 of a few decades back: who is still on the list? The truth is that companies can't sustain their competitive advantage over several decades because they tend to lose focus, over-stretch and/or forget what their core competence is.

Alternatively, how often do businessmen assume that the "poor" are never an attractive customer segment to target? I've all too frequently observed this in my consultancy work. For instance, local businessmen assuming that the "best" customers (whatever this means) are those coming from the "well off" segment.

Wrong! Every customer has his/her own buying priorities. Put another way, we all go that extra mile or make that extra effort for something we consider important irrespective of our disposable income. Nokia has made a "fortune at the bottom of the pyramid" with sales of "cheaper" mobile phones in China for instance. CK saw this and those who listened to him made a fortune.

In an article (appearing on 18 April) in the Financial Times, which paid tribute to CK, two quotes caught my attention and make a fitting end to this article: Charles Handy, a fellow business thinker, said: "His upside-down thinking inspired us all, and his friendliness charmed us. He is one of the few whose ideas will long resonate around the world of organisations and, indeed, of governments". Whereas Vindi Banga, a director of Unilever, is quoted to have said: "CK saw the world differently from us all. His ability to simplify complexity was absolutely awesome as was his ability to fold in the future."

Thank you CK!

Mr Fenech is managing director of Fenci Consulting Ltd.

www.fenci.eu