Competence-based diversification: A conceptual approach for evaluating the attractiveness of new market opportunities

Technological competences are the central and success-determining factors for the competitiveness of every technology-oriented company. In this context technology management has become a vital and crucial discipline not only to anticipate technological changes and to ensure a sustainable technological base but also particularly to identify new market opportunities towards future company growth e.g. through competence-based diversification. However, companies find it more and more difficult to evaluate different diversification options and to select the most suitable one(s) due to the lack of a systematic evaluation methodology. As a result decision making is often based on intuition rather than on resilient evaluation criteria. In this paper, the authors present a conceptual approach to develop a methodology to systematically support and facilitate the process of evaluating different diversification options. This is done by introducing a quantitative measure - the so called competence-fit - which indicates the attractiveness of a specific diversification option. In a first step a diversification target system is derived from the company's characteristic attributes and its specific diversification objectives. Then a procedure model is developed to systematically carve out a company's competence profile from its specific tangible and intangible resources. In a next step the target system model and the competence profile model are used to consistently describe the identified diversification options and to derive a requirement profile for each option. The degree of overlap between the competence profile and the requirement profile finally represents the attractiveness of a specific diversification option.