This is part two of a four-part series on how to use your innovation toolkit to consistently win in business. Read part one here.
Take a moment to think about a business you love. Now ask yourself, what are their core competencies—the resources or capabilities that comprise their strategic advantage? For me, a few come to mind.
McDonald’s has standardization. It serves nine million pounds of French fries every day, and every one of them has precisely the same taste and texture.
Apple has design. The intuitiveness of its devices and their interfaces gives them an edge over other competitors.
Google has powerful algorithms, high-end software engineering, and an amazing office culture with a drive to innovate.
Walmart has buying power. The sheer size of its buying operation gives it the ability to buy cheap and undersell competitors.
And when you think about it, almost every successful company has at least one core competency that helps it stand out from the rest. Netflix is the prime streaming service because it has prioritized the development of content. While its competitors are releasing a new show every week or month, Netflix is releasing one almost every day!
Put simply, a core competency explains what a business can do better than anyone else, and why. It can be a product, process, service and more.
To live up to its name, a core competency must accomplish three things:
- It must provide superior value or benefits to the consumer.
- It must be sustainable long-term and fit into the overall strategy of the company.
- It must be difficult or cost prohibitive for a competitor to replicate.
According to C. K. Prahalad and Gary Hamel, the academics that introduced the idea of core competence to business, core competencies lead to collective learning and an organization’s ability to coordinate and integrate multiple parts of the company.
Through my own experience championing growth within multinational and entrepreneurial businesses internationally, I have identified three key actions an organization can adopt in order to achieve sustainable growth and surpass their competition: define, cultivate and monetize.
Quite possibly the most important step, defining your core competencies will inform everything else you do. A core competency should deliver superior value to the consumers, employees, and all other stakeholders of your company. It is strategic, meaning it has a long-term impact on your business, and ownable, meaning you have a competitive advantage—you can execute it better than anybody else. It should also be sustainable and built to last.
This step in the process is focused on practicing your core competencies and integrating them into your business model until they become part of the “muscle memory” of your organization. At this stage, you should strive to develop, improve, and protect your core competencies. Development and improvement are driven by feedback received from those within and outside of the business. Protecting your core competencies involves retaining both talent and intellectual property within your organization.
This final step focuses on three stakeholders that are affected by your core competencies: customers, vendors and employees. For customers, your core competencies allow them to distinguish your products and services from “the pack,” often enabling you to charge a premium for them. With vendors, you can often negotiate better terms and pricing based on the uniqueness of the product and the quantities that you are ordering. For employees, your core competencies can become a source of pride and passion.
Taking advantage of your core competencies is a wholly forward-thinking approach that can encourage your company to experiment with new ideas and foster innovation. Understanding them will provide you with new insights into how and what needs improvement, while also paving a clearer path forward for your company.
One of the greatest advantages of a core competency is its resiliency during hard times. A company that has well-defined core competencies has a clear sense of the value it can provide, even during uncertainty.
Do be cautious, however: missing the mark when identifying core competencies can mean that you waste time, resources and money focused on the wrong thing. And while core competencies can be built over time, if they are not nurtured, they can just as well wane.
At the end of the day, this key element of your business should contribute to the process of continuous improvement you aim to realize for your company.
Reach out to me at email@example.com if you’d like to talk more about how you can take advantage of your core competencies and maximize your company’s potential for future growth.
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