Wednesday, July 25, 2012
The essence of core competencies
The notion of a core competency requires that leaders think much more carefully about which of the enterprise's activities either create unique value as executed internally or which activities that could be more effectively executed by external parties. In my observation of large enterprises in the financial services vertical, I have observed true core competencies being comprised of:
Skill or knowledge sets, not products or functions: Executives need to look beyond the products the enterprise produces and focus on the intellectual skills and management systems that actually create a sustainable competitive edge. Products, even those with valuable legal protection, can be too easily back-engineered, duplicated or replaced by substitutes so intellectual property designation is not a proper filter.
Flexible long-term platforms: Let's be real for a minute. You can really call anything performed by IT as a core competency especially when it is not capable of adaptation or evolution. Focusing on narrow skills which they currently excel such as product-oriented skills is truly core. The real challenge is to consciously build dominating skills in areas that the business and their customers will continue to value over time. This isn't achieved by protecting employees with narrow skills but amplifying those within the enterprise that have flexible skill sets that are capable of tuning and adjusting accordingly.
Limited in number. Are you aware of the fact that Nike outsources almost 100% of the manufacturing of sneakers? They only focus on a few things that truly matter. Care to guess whether they are product focused or more interested in maturing their supply chain?
Intellectual leadership. Many companies are too quickly to label its rock stars as being academic in approach. Knowledge-based core competencies become even harder to overtake as knowledge bases tend to grow expoentially in value with investment and experience.
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