I have helped many companies identify and leverage their core competencies through the years, and doing this can
Core competencies fall into two categories; those which the organization possesses today and those you aspire to have. It can be helpful to identify both. In addition, unlike a core value, which is something you should discover (not aspire to have), you can develop strategies to add new core competencies that you can leverage in order to create a sustainable competitive advantage.
Example: Honda’s core competence in engines and power trains gives them a distinctive advantage in car, motorcycle, lawn mower, and generator businesses.
You first need to brainstorm a list of business competencies relevant to the core of your business. One way to do this is to articulate the strategic intent that could define your company as a leader in the markets it serves and identify which competencies are needed to dominate your market based on that intent. Once you develop the list of core competencies, make sure that you develop a way to improve these business competencies so that they remain a distinct competitive advantage. If you don't keep improving on them, you are leaving space open for competition.
Next, identify which of these competencies are core. Prahalad and Hamel provide us with these questions to get us started:
After asking these questions, narrow your first list down to the ones you believe are possible core competencies.
Example: 3M has a few widely shared core competencies like substrates, coatings and adhesives and leverages them to create a wealth of new products each year.
The final step is to test your core competencies.
Once we create a list of candidates, there are three tests to help us confirm we have identified true core competencies:
Expert Tip: Keep your core competencies down to just a few, certainly no more than five or six. If you have identified more than this, they are probably not all valid.
The authors tell us we must continue to develop and nurture our core competencies to ensure they are relevant and effective.
Here is a short list of competencies to get you thinking about leveraging your core competencies:
Once you have identified your core business competencies, it is important to protect them from your competitors. Growing up in manufacturing and experiencing the shift to global sourcing, I have watched as many companies gave away their core competencies, only to destroy their business a few years later. Cannondale was a company in my own backyard which did this like many other manufacturers in the bicycle industry. They developed proprietary technologies to cut, fixture and weld thin wall aluminum frames, then began to share these technologies with manufacturers in China to outsource the frames. Today, there are very few Cannondale bicycles actually made in the USA, not to mention, very few other brands. The companies that adopted these technologies soon began to make products under their own brands and undercut the innovators.
Remember that core competencies are something that may be effective today, but table stakes tomorrow or something replicated by a competitor. Spend time in your “Think” sessions evaluating your core competencies to ensure they are still working for the company while looking for ways to enhance, retire and identify new ones.
Companies that take the time to identify differentiating core competencies have the ability to create more value for their customers and increase their pace of growth. It also allows you to sell on value, rather than margin, which adds to the bottom line.
Good luck with the journey as you grow with purpose, Alan
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