Cover of "Competing for the Future"Cover of Competing for the Future

Core competencies – there is a lot written about them but what are they?

Core Competencies where developed by Prahalad and Hamel in a series of articles in the Harvard Business Review followed by their book – Competing for the Future. Their central idea is that over time companies may develop key areas of expertise which are distinctive to that company and critical to the company’s long term growth.

These areas of expertise may be in any area but are most likely to develop in the critical, central areas of the company where the most value is added to its products.

Core competencies are those capabilities that are critical to a business achieving competitive advantage.

  • Competencies are things that company execute well across several business units or product sectors.
  • Firms usually have few competencies, but these are usually less liable to change rapidly.
  • The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power.
  • Senior management cannot focus on all activities of a business and the competencies required to undertake them.
  • So the goal is for management to focus attention on competencies that really affect competitive advantage.

Core competency is something that a firm can do well and that meets the following three conditions:

  1. It provides consumer benefits
  2. It is not easy for competitors to imitate
  3. It can be leveraged widely to many products and markets.

Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Few companies are likely to build world leadership in more than five or six fundamental competencies.

A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.

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.

Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company’s environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.

  • We need to understand what we are good and what makes us better and to hone these advantages and to develop new ones to underpin the business strategy.

Identifying Core Competencies Core Competencies table Prahalad & Hamel

A competence which is central to the business’s operations but which is not exceptional in some way should not be considered as a core competence, as it will not differentiate the business from any other similar businesses.

Therefore, resources that are standardised or easily available will not enable a business to achieve a competitive advantage over rivals.

You should check out this article – some really good examples:

Build on Your Core Competencies

In order to be successful, your company must identify and build on a few core competencies. Precisely what do we mean by the term core competence?

by Matthew G. Rekers
Contributing Author

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.

Read more of the article here … http://www.powerhomebiz.com/vol144/competencies.htm

And this one is similar:

Build On Your Core Competencies

In order to be successful, your company must identify and build on a few core competencies. Precisely what do we mean by the term “core competence”?

by Matthew Rekers, M.B.A.

George Rekers, Ph.D., M.B.A.

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.”

Read more of the article here … http://www.businessseek.biz/article-directory/article-223.html

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