Core competencies are a set of unique internal skills processes and systems that provide you with a competitive advantage in the market. A core competency fulfils three key criteria:
- It must not be easy for competitors to imitate.
- It can be widely leveraged to your products, services and markets.
- It must contribute tangibly to customer benefits.
A ‘questioning’ perspective:
- Does the activity provide unique or valued potential access to the market?
- Does the activity add value to the real or perceived customer benefits?
- Is it difficult for your competitors to emulate the activity?
Core Competency Analysis
The starting point for analysing core competencies is recognising that competition between businesses is as much a battle for competence mastery as it is for market position and market power. You cannot focus on all activities of a business and the competencies each activity requires. So your aim should be to concentrate on competencies that really impact your competitive advantage.
- In what activities or skills does your company add value better than competitors?
- Are you better at research?
- Marketing or Selling?
- Or perhaps manufacturing?
- In what functional disciplines does your company add value for the customer?
Core Competency Analysis provides an opportunity to critically evaluate the skills, processes and systems of your company.
It facilitates identifying the need for improvement in key strategic activities, practices and systems. When completed the core competency analysis divides those strategic functions best delivered internally and those that may be considered for outsourcing.
The activities kept inside are those strategic activities that your company does exceptionally well and, significantly, add real or perceived value to your business and give your business a competitive advantage.
Core competencies should not be seen as being static. Core competencies should change in response to changes in the company’s environment. As your business evolves and adapts to new circumstances and opportunities, your core competencies may have to adapt and change.
In each company or industry there are different sets of core competencies that are important to the success of the business. In most instances the list of important competencies is relatively short. However core competencies when well selected and developed provides the opportunity to build strategy advantage for the company. Having the discipline to keep the list trimmed to a few highly valued competencies will increase focus on the important activities and add to the value of these distinctive competencies.
While the core competencies vary by industry and by company, here is a selected list of skills, processes or systems that might be considered as core competencies:
- Service levels
- Efficient systems
- Product innovation
- Product development
- Supply chain
- Speed to market
- Sales force
- Customer service
- Strategic alliances
The more distinctiveness and uniqueness that can be built into your core competencies the more market leverage and margin performance you stand to gain. And customer loyalty will also improve.
Benchmark your organisation against your competitors as far as you can. Even if the initial results are disappointing, they will highlight the aspects of the business that need to be addressed. Consider the following areas – customer service, innovation, quality, speed to market, availability, costs, market share, etc.
Do you match your competitors in these areas, or exceed them? To be world class this benchmarking must be done against not only local competitors but the best in the business.
To be a world class company you must continue to benchmark yourself against your competitors regularly. If you fail to do this, your company will slip from the position it has achieved to be replaced by one of your competitors – staying world class is just as hard as becoming world class, if not harder.