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Business professors Bateman and Snell offer this answer: Simply stated,
core competence is something a company does especially well relative to its
competitors. Honda, for example, has a core competence in small engine
design and manufacturing; Sony has a core competence in miniaturization;
Federal Express has a core competence in logistics and customer service.
Typically, a core competence refers to a set of skills or experience in some
activity, rather than physical or financial assets. 1
Strong core competencies: are well-organized special skills,
technologies, processes, knowledge, expertise, or abilities. are
typically achieved by long-term development processes and experiences.
create customer value because they are considered by your customers to be
unique and distinguishable, and they are not equally accessible to all
competitors. are extremely difficult for other companies to imitate, if they
can at all. can be transferred to other markets.
Microsoft has the core competence of designing office software products
that are user-friendly. PepsiCo has a core competence of mass production and
distribution of bottled drinks. Polaroid has a core competence in
manufacturing immediately self-developing film. Ernst & Young has the core
competence of performing audit functions for Fortune 500 corporations. One
of Wal-Marts core competencies is their massive real-time information
system.
There are many different types of core competencies that make
companies unique. Identifying and developing your company's core
competencies are management keys to sustaining your company s long-term
competitive advantage.
Your company's core competencies can be applied to the development of
new and creative products or services and markets. Take Polaroid for
example: before there was video recording, they could have hypothetically
tried to develop an instantly developing video camera film from their then
existing core competence. Microsoft could use its core competence to develop
user-friendly video games. PepsiCo could use its core competence of bottling
and distribution to bottle and distribute medicines or hair care products.
Ernst & Young could use its core competence to develop a CPA review course.
There are many different ways to develop your core competencies. In today s
environment of intense global competition, your business must focus its time
and resources on developing core competencies and then creatively applying
them to an ever-changing market, to remain competitive.
So your core competence is what sets your company apart from other
companies. What is your company's core competence? Think about the
underlying skill, ability, knowledge, experience, technology, or process
that enables your company to provide its unique set of products or services.
How can you use your company s core competence to develop strategic
responsiveness in order to gain competitive advantage? These are the kinds
of practical questions that astute executives need to ponder.
The overall value delivered to your customers and the uniqueness of your
company s products or services are derived from your company s core
competence. Your company s core competence enables you to develop new
products or services to meet ever-changing market demands. Thus, your core
competence is like your secret to success.
At the highest level, a company develops new core competencies as well as
expanding existing ones in order to enter new and future markets. A company
at this high level of functioning recognizes the needs and wants of
customers in new and future markets and develops the competencies necessary
to meet those needs and wants.
Nokia is a good example of a company performing at the highest level.
Nokia, which traditionally manufactured rubber boots, developed new core
competencies, ventured out, and now produces mobile phones. Nokia has been
able to open up new markets by using their innovative technologies.
Nike is one of the most well known companies in the world. Its famous
swoosh logo can be seen all over the world. The company learned a painful
lesson in the 1990 s when its market share dramatically fell in the United
States. Joyce, Nohria, and Roberson summarized the lesson learned by Nike:
Even the most successful strategy will fail unless it is continuously
monitored and refreshed to meet changing market conditions. 2
Some companies are finding that they can more easily expand core
competencies and develop new ones by hiring a diverse workforce that
reflects the population demographics of the nation. Employing a diverse
workforce can give an edge in keeping a pulse on the emerging demands of
future markets. The pursuit of diversity enables companies to expand their
potential talent pool, capitalizing on the full range of aptitudes, skills,
and sub-cultural expertise available in the labor market. Presently,
minorities and immigrants comprise one-fourth of the U.S. labor market,
nonwhites account for 35% of the labor growth rate, and women make up about
47% of the workforce.3
Sheila Heinze is the president of SM Consulting, an IT consulting firm
that has grown 625% in the past five years compared with an industry growth
rate of only 31%. What sets SM Consulting apart from most other IT
consulting firms?
Heinze would tell you that it is the time invested in research. SM
Consulting sales staff members are required to know as much as possible
about a prospect before they even pick up the phone. They are to find out
the problems and challenges that the customer s company is going through.
These practices have become even more important as SM Consulting started
targeting new customers in a different industry segment.
We were able to gain instant credibility by having knowledge of what his
pains might be and some potential solutions to those pains, Heinze explained
after her sales team met with a potential customer. One contact alone
brought a $250,000 project that Heinze described as a great potential for
add-on business.
SM Consulting keeps developing core competencies as they expand into new
industry segments. Having knowledgeable sales personnel who do their
homework allows SM Consulting to obtain a competitive advantage and
considerable success in a changing industry environment.4
These examples illustrate the crucial business dynamic we call Build on
Your Core Competencies. Although Nokia started out as a manufacturer of
rubber boots they constantly were building on their core competencies and
are now known for their mobile phones. How can your company build on its
core competencies?
Through years of identifying the best practices of leading companies, 33
Dynamics, LLC has identified 33 essential dynamics for managerial
excellence. These dynamics are grouped under 6 major goals which address
such realities as leadership, creating loyal employees, and achieving market
dominance, just to name a few.
The staff of 33 Dynamics Consulting is interested in helping people in
their given profession to become leaders in commerce by implementing sound
business principles in these 33 areas of management.
There's no need to live from job to job or pay check to pay check. There
are ways to get from survival mode to success, and the 33 Dynamics team can
help you get there! Whether your company is struggling or solidly
performing, the first step to moving up to even higher levels is to rate
your own company in these 33 areas of business dynamics. This practical
rating tool is included in our book, There's Room at the Top, available at
www.33dynamics.com or www.amazon.com.
John Hammond, a sales executive was once quoted saying, From where I
stand, the elevator to the top is, has been, and always will be out of
order. In order to get to the top, you'll have to take the stairs and you'll
have to take them one at a time.
Now is the time to consider the steps that will take you to the top of
your game!
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Build on Your Core Competencies was excerpted from There's Room at the
Top: 33 Dynamics for Managerial Excellence, 2004, pages 172-175.
Copyright 2004, by Uxbridge Publishing Ltd. Co. All rights reserved.
1 Bateman & Snell, 2002, page 124.
2 Joyce, Nohria, & Roberson, 2003, page 258.
3 Bateman & Snell, 2002, pages 344, 348-350.
4 INC Magazine, The Inc 500 America s Fastest-Growing Private Companies, 6
ways to outrun the competition, October 15, 2002, page 58.
