The core competencies of any one company are typically few in number and focus on areas where the company must achieve preeminence, provide unique value to the customer and maintain control of the business. By concentrating investment and energy on what the company does best, the company can decrease risks, shorten cycle-times and create better responsiveness to market opportunities. Core competencies are best leveraged by using them as core capabilities imbedded in the value delivery chain.
The benefits of leveraging core competencies are:
- They create sustainable competitive advantages for a company.
- They help the company branch into a wide variety of related markets.
- They enhance the company’s image and build customer loyalty.
- They preserve core strengths even as management expands and redefines the business.
Be careful, however, of the "Tyranny of Core Competency". If the organization has a core competency that is not needed and does not add value to the products or services provided, then they should invest no further in that competency - or even divest it. It is not uncommon for a breakthrough technology to render a core competency useless.
One example is the case of Polaroid: its major core competency was rapid, in situ film development to obtain an instant photo. They continued to invest in that competency long after that need for it was overshadowed by digital photography, resulting in a huge devaluation of the company. Another example is Versalog - the slide-rule company. Their core competencies were precision machining and metrics, which became irrelevant upon the birth of the hand-held calculator in the 1970s. Could they have survived if they realized they were in the calculator business and traded their core competency?
Core competencies must be constantly evaluated for relevance to the business. Conversely, if the company is missing one or more core competencies that are critical to its value proposition, it should invest heavily or partner to obtain it.
Ask yourself these questions: What are the two or three most important Core Competencies in your organization? How do they help your customers? What barriers do they pose for your competitors?