Your Patents Know More About Your Company Than You Do
There is a paper from 1990 that, if you are in any way involved in corporate strategy, you have either read or pretended to have read. It is called _The Core Competence of the Corporation_, written by C.K. Prahalad and Gary Hamel for the _Harvard Business Review_ (HBR, May–June 1990). And despite the fact that it is over 35 years old, it contains an idea so fundamental to how companies succeed or fail that I think about it constantly. Especially when I think about patents.
The core argument is simple, even if the implications are not. Prahalad and Hamel say that the most powerful companies do not think of themselves as collections of separate business units. Instead, they think of themselves as portfolios of _core competencies_, which are defined as the collective knowledge an organization holds about how to coordinate diverse production skills and integrate multiple streams of technology (Prahalad & Hamel, 1990, p. 4). In other words: the things a company is genuinely, deeply good at, underneath all the product lines and revenue streams, are the things that actually matter.
The Tree
Prahalad and Hamel use a metaphor that has stuck with me since the first time I encountered it. They ask you to imagine a diversified company as a tree. The trunk and major limbs are what they call _core products_. The smaller branches are business units. The leaves, flowers, and fruit are end products, the things consumers actually see and buy. But the root system, the thing that nourishes and stabilizes the entire structure, is core competency (Prahalad & Hamel, 1990, p. 4).
And here is the part that gets people into trouble: you can completely miss the strength of a competitor if you only look at their end products. Prahalad and Hamel put it plainly. You miss the strength of a tree if you only look at its leaves (Prahalad & Hamel, 1990, p. 4). It is the same reason that, in the late 1980s, a company like NEC could seemingly come out of nowhere to dominate semiconductors, telecommunications, and mainframe computers all at once. NEC did not stumble into those markets separately. It built deliberate competencies in things like VLSI and systems integration, then deployed them across business units (Prahalad & Hamel, 1990, pp. 2–4). Meanwhile, GTE, which started the decade in a stronger position, slowly divested itself of the very capabilities that could have kept it competitive. GTE saw businesses. NEC saw competencies.
So What Does This Have to Do With Patents?
This is where it gets interesting, and where I think most companies are leaving a massive amount of value on the table.
If core competencies are the root system of a company, then patents are, in many cases, the most detailed and searchable record of what those roots actually look like. Every patent a company files is a signal. It tells you what technologies that organization is investing in, what problems it considers worth solving, and where it believes the future is heading. A single patent might look like a narrow invention. But when you analyze the full body of a company's IP filings, patterns emerge. You start to see competencies.
Prahalad and Hamel outline three tests for identifying a core competency. First, it should provide potential access to a wide variety of markets. Second, it should make a significant contribution to the perceived customer benefits of the end product. Third, it should be difficult for competitors to imitate, particularly because it involves a complex coordination of individual technologies and production skills (Prahalad & Hamel, 1990, p. 7). Now think about how you would actually go about applying those tests. Where would you look for evidence of coordinated technologies? Where would you find proof that a company has been building a particular capability over time?
The patent database. That is where you would look.
The problem is that analyzing IP at this level is brutally difficult. It is not just a matter of reading a few patents. The United States Patent and Trademark Office alone contains millions of filings. Academic journals add hundreds of millions more data points. Trying to manually trace the thread of a competitor's core competency through that volume of information is the kind of project that takes a team of analysts weeks or months to complete. And even then, the results are often incomplete because humans can only hold so many variables in their heads at once.
Where Paseo Comes In
This is the problem that Paseo AI was built to solve. Paseo runs a 360-degree analysis on an idea by comparing it against over 200 million patents and journal articles, and it does it in under 10 minutes. That speed matters, but speed alone is not the point. What matters is what Paseo does with that analysis.
When you submit an idea to Paseo, it extracts the core concepts of your invention and assigns weights to each based on your description (Paseo Feature List, Concept Extraction). It then compares those concepts against the full patent database at the USPTO, identifies the most similar prior art, and organizes it from most to least similar, with direct links to each patent (Paseo Feature List, Novelty Analysis). It also runs an obviousness analysis, checking whether your idea could be considered an obvious combination of features already present in existing patents (Paseo Feature List, Obviousness Analysis). And it maps the competitive landscape, showing which companies are working on similar concepts and where the white spaces are, the areas where the market has not yet seen a product (Paseo Feature List, Prior Art Landscapes).
Think about what that means through the lens of Prahalad and Hamel. If you are trying to identify your own company's core competencies, or if you are trying to understand a competitor's, Paseo gives you a way to do it that would have been unthinkable in 1990. You can see not just individual patents, but the patterns underneath them. You can see where technologies overlap, where investment is concentrated, and where opportunities exist that no one else has claimed yet.
The Risk of Not Knowing
Prahalad and Hamel are very clear about what happens when companies fail to understand their own competencies. They describe how businesses that are organized strictly around independent strategic business units, or SBUs, tend to underinvest in the capabilities that cut across those units (Prahalad & Hamel, 1990, pp. 10–11). They also describe how competencies become "imprisoned" when talented people are hoarded by individual divisions instead of being deployed where they can do the most good. And perhaps most critically, they describe how companies can lose core competencies entirely by outsourcing or divesting businesses without realizing that those businesses were the carriers of a vital capability (Prahalad & Hamel, 1990, pp. 7–8).
The Chrysler example from the paper is a case in point. Between 1985 and 1987, Chrysler more than doubled the number of engines it outsourced, going from 252,000 to 382,000 (Prahalad & Hamel, 1990, p. 7). Honda, by contrast, would never have considered outsourcing engine design and manufacturing to another company. Engines were not just a component to Honda. They were the core competency that connected motorcycles, cars, lawn mowers, and generators into a coherent strategic whole.
The IP layer of this story is what goes untold. Companies that do not systematically analyze their patent portfolios, or those of their competitors, risk making the same kinds of mistakes Prahalad and Hamel warned about over three decades ago. They risk divesting the very capabilities that make them competitive, because they never mapped those capabilities in the first place.
Making It Practical
I realize that "analyze your core competencies through the lens of IP" sounds like the kind of advice that is easy to give and hard to follow. And historically, it has been. But that is exactly the kind of bottleneck that Paseo was designed to remove. The platform does not just tell you whether your idea is novel. It tells you where it sits in the broader competitive landscape. It identifies the industries and companies likely to acquire or license your IP (Paseo Feature List, Technology Analysis). It shows you what products and services your invention could be a component of (Paseo Feature List, Potential Products and Services). It maps global markets where your product is likely to succeed (Paseo Feature List, Geographic Analysis).
In other words, Paseo gives you the tools to do what Prahalad and Hamel said every company should be doing: thinking about competencies, not just products. Seeing the roots, not just the leaves.
And if you are not doing that right now, someone else probably is.
Sources
Prahalad, C.K. and Hamel, Gary. "The Core Competence of the Corporation."
_Harvard Business Review_
, May–June 1990. Reprint 90311.
https://hbr.org/1990/05/the-core-competence-of-the-corporation