Core competencies allow small businesses to deliver value to their customers, but what are core competencies? The litmus test is that it is hard for competitors to copy or develop. For example, the core competency of a technology company could be the design of high-speed microprocessors or efficient Internet search algorithms, both of which are difficult to replicate. Businesses can develop core competencies by identifying key internal strengths and investing in the capabilities valued by their customers.
Innovation of Cutting Edge Products
Innovative companies have a competitive edge in the marketplace. For example, one of Apple’s core competencies has been its ability to produce cutting edge and “cool” designs. It introduced the iPod as a “cool” way to download and listen to music. However, companies should never stop innovating. Small businesses have become successful against bigger competitors when they are nimble and relentlessly innovative. For example, Google was able to define and succeed with a new computing paradigm even though they were up against formidable opponents.
Quality and Reliability
Quality means reliability and performance. Japanese automakers gradually took over market leadership by making quality one of their core competencies. They deployed new concepts such as just-in-time manufacturing and total quality management to incorporate quality in all stages of design and manufacturing. Leading brands in various industries such as household products, apparel and canned goods have gained their market-leading positions because consumers expect and receive quality products from them. Businesses with a reputation for quality are able to demand higher prices and they usually enjoy customer loyalty.
Exceptional Customer Service
Small businesses that provide exceptional customer service have a competitive edge in the market. For example, one of the core competencies of a successful management consulting company is efficiency the ability to complete client engagements on time and on budget. Similarly, a cable company that cannot respond to customer service calls promptly might risk losing its customers to the competition, and a diner cannot survive if customers have to wait a long time or if the food is served cold.
Stay Flexible to Stay Competitive
Companies must be nimble to stay competitive. For a small business, this could mean exploring market niches that bigger competitors are not pursuing or teaming up with other businesses to gain market share. Big businesses also need strategic flexibility, because rapidly changing customer preferences and business conditions can overwhelm even giant multinationals. Businesses that can leverage their core competencies and simultaneously integrate the complementary capabilities of external partners enjoy a strategic competitive advantage.
Other Core Competencies
Other core competencies that give organizations competitive advantages include strategic customer targeting and a superior internet presence. One of Dell’s core competencies, for example, is to target high-value and low-maintenance customers using database technologies. Dell also needs an easy-to-use e-commerce website that can support its direct-to-customer business model.
A company can have one or more organization-wide core competencies, such as the following:
- Product quality
- Buying power
- Customer-centric omnichannel support
- Design or innovation capabilities
- Sales and marketing ecosystem
- Automated workflows and processes
Each competency is a positive characteristic that contributes to the company’s unique positioning. Having and using those matters because they can make it quite difficult for competitors to exactly duplicate the company’s offerings or replicate its success. This is why identifying core competencies is a crucial step in strategic planning.
Core competencies are the resources and capabilities that comprise the strategic advantages of a business. A modern management theory argues that a business must define, cultivate, and exploit its core competencies in order to succeed against the competition.
A company’s ability to stand out in those competencies, and ideally uniquely combine them with other competencies, can give it competitive advantage over its industry peers.
A variation of the principle that has emerged in recent years recommends that job seekers focus on their personal core competencies in order to stand out from the crowd. These positive characteristics may be developed and listed on a resume. Some personal core competencies include analytical abilities, creative thinking, and problem resolution skills.
Utilizing Core Competencies
A variety of resources, such as talent pool, physical assets, patents, and brand equity, make a contribution to a company’s core competencies. Once it understands those competencies, the company can properly focus all of those resources. It may even outsource activities that are outside its core competencies in order to devote its resources to what it does best.
The business should use its core competencies in every facet of its operations, from advertising to growth strategies, to sponsorship, to its reputation. The advantage will be that these core competencies will lead to longevity for a firm.
Even if a firm comes out with a unique product, if it is easy to replicate, once the patent expires, it will find itself with numerous competitors in the market eating away at its once-dominant market share.
To prevent this, a company will have to rely on other core competencies, such as customer service, quality control, advertising, and innovation to stay ahead of the new entrants in the market.