What is Core Competency
Those things that define what is special about an organization, what sets it apart from other organizations. Competencies are those things the company or organization does well. Core competencies are those things that are fundamental to the organization. Without those core competencies the organization would not be the same organization.
Core competencies of organization provide the organization a competitive advantage in the marketplace. For example, Dell's efficient, just in time manufacturing system is an core competency that provides Dell a competitive advantage in the marketplace.
It fulfills three key criteria:
- It provides consumer benefits
- It is not easy for competitors to imitate
- It can be leveraged widely to many products and markets.
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.
Core competency originates from C. K. Prahalad and Gary Hamel in their 1990 paper “The Core Competence of the Corporation.” Prahalad and Hamel highlight core competency as a source of uniqueness that a company can do uniquely well, offering a competitive advantage as competitors can’t quickly copy. A core competency can take various forms: know how, process, manufacturing, relationship, development methodology, culture, talent management, branding, marketing, distribution, research & development, …
Prahalad and Hamel emphasize 3 conditions to test if a competence is true core competence. It is possible to have core competency that doesn’t meet all the required criteria, however any competitive advantaged gained will only be temporary.
- Must be relevant : Core competence must be uniquely valued by your customers, so that they will not only choose your product but be willing to pay more for them. If not, it has no effect on your competitive position.
- Difficult to imitate: Core competence must be difficult for competitors to imitate, as it ensures your products are better than your competitors. It also enables you to sustain your competitive position as you continue to improve your competency.
- Leveraged to many products and markets: Core competency must enable entrance into new markets to sustain growth.
