Core competency: essentially what a business does well that distinguishes it from other businesses. Now, this is a very general core competency definition. However, a broad definition is necessary as the term moves into general usage and is applied to businesses of all sizes. The original definition applies only to large businesses.
In The Core Competence of the Corporation (1990), they describe core competence as something that a firm can do well that meets three conditions:
It provides consumer benefits;
It is not easy for competitors to imitate;
It can be leveraged widely to many products and markets.
The 3rd definition here would be difficult for a small business to meet, but fortunately, over time, the concept of core competency has evolved. All definitions, however, include the concept of competitive advantage.
The basic concept that we want to get across here is key abilities or strengths that a company has developed that give it a competitive advantage over its peers and contribute to its long-term success is what matters. Core competencies are difficult for competing businesses to duplicate.
Take note that a business may have more than one core competency.
Here are two examples of Businesses with Strong Core Competencies
Walmart is the largest retail department store chain in the world, with global sales of over 480 billion dollars in 2015. The company has more than 11,000 stores worldwide. Walmart’s core competencies include:
~ Massive buying power
~ Supply chain management
Apple is the largest company in the world by market capitalization. In fact, if Apple was a country and its market capitalization was converted to GDP it would be the 20th largest country in the world. It has over 100,000 employees worldwide and generated $233 billion in revenue in 2015. Apple has very strong core competencies:
~ Brand recognition – fans of Apple products tend to be extremely loyal to the brand.
~ Marketing – Apple is a consistent winner of awards for marketing excellence.
I have broken Core Competencies down so everyday folks can understand it.
~ Flexibility. Willingness to change direction, do what it takes, let go of personal agenda, and swallow pride, all for the greater good and the overall health of the business.
~ Honesty. Courage to look people – especially customers and authority figures – straight in the eye and tell them the genuine truth, regardless of consequences.
~ Leadership. This is not as complex or subjective as you might think. Leadership is the ability to encourage people to follow you, especially when they don’t have to.
~ Accountability. Willingness to take responsibility, own a problem, and be held accountable over the long haul, regardless of the risk.
~ Intelligence. Everything else can be learned, but not this. Forget old notions of book smart versus street smart. You have to be both.
Remember that no matter how small your business is, this concept of Core Competency is foundational.
There all different kinds of core competency, such as a core competency in marketing, customer service, or human resources, so do not get hung up on that it has to be just one in particular.