Are Your Core Competencies Coming – Or Going?

A phrase that we often hear being bounced around the offices we visit at this time of year is “core competencies”. This is because we’re getting into annual business planning or budgeting (or anything else you call it) time.

And, as any good book on business strategy will tell you, “core competencies are a potential foundation for a new or revised strategy.”¹ Why, because they are what the company is uniquely good at.

But there are 2 important caveats. To confer advantage they must be valued by the company’s customers and they must make the company better at what they do than its competitors.

1. Beauty and the eye of the beholder

If customers stop valuing what a company is good at the owner will know quickly enough because sales will fall. While a sudden drop grabs attention, a slow decline is easier to overlook – and, therefore, more dangerous.

But how does a company know if its core competencies are more highly valued than those of its competitors? The answer, at the risk of sounding glib, is to ask.

Let me back up a step, however. Owners and their management teams have been known to identify the company’s core competencies based solely on their own opinions. But beauty, as they say, lies in the eye of the beholder.

I’m not saying they can’t do it. What I am saying is that they have to get some external, objective, third party input to confirm that they actually have hit on the core competencies. That input can be in the form of customer surveys done either by the company or by consultants on their behalf.

2. Relative performance but………

The next step is to list the core competencies, come up with a rating scale and the names of 2 or 3 key competitors. Now the business owner can get a reading on the company’s relative strength in these key areas that confer advantage.

The best assessment of where the company is strong or weak compared to its competitors will use a blend of input from employees, customers and people who know the industry. This type of assessment is comprehensive, thorough and, hopefully, objective. And it may be adequate.

However it has one important shortcoming. It represents a snapshot in time. And so it may disguise areas for concern.

It can, for example, show that the company is rated more highly than its competitors in one or more key competencies. But the competitors may be gaining ground.

3. Now you have it

So the assessment should be strengthened by the addition of a question about the trend in each company’s performance. Are the competitors getting stronger – or weaker in key areas?

Then the business owner knows not only what the company is good at, but how good they are and if they’re getting better or worse. Invaluable input to the annual business planning or budgeting (or anything else you call it) process.


¹ I happened to choose “Strategy: Create and Implement the Best Strategy for Your Business”, Harvard Business School Press, 2005


Tags: business, company, competitors, consultants, Core competencies, Jim Stewart, owner, Planning, ProfitPATH, strategy

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