2.1 THE STRATEGIST IN YOU: Core Competence Analysis

(SHORT NOTES FROM STRATEGY TOOLS:

Competitive Advantage at http://www.mindtools.com)

 

Core Competences: The Value of Uniqueness

"Core competences" is one of the most important business ideas.  Businesses are concentrating their efforts on things they do well and outsource as much as they can of everything else.

The starting point for understanding core competences is understanding that businesses need to have something that customers uniquely value if they're to make good profits.  C.K.Prahalad and Gary Hamel, in their key 1990 paper "The Core Competence of the Corporation", argued that "Core Competences" are some of the most important sources of uniqueness: These are the things that a company can do uniquely well, and that no-one else can copy quickly enough to affect competition.

There are 3 test introduced by Hamel and Prahalad to see whether the core competencies are true:

1.    Relevance

·        must give your customer something that strongly influences him or her to choose your product or service

2.   Difficulty of imitation

·        should be difficult to imitate

·        continually working to improve these skills, means that you can sustain its competitive position

3.   Breadth of application

·        something that opens up a good number of potential markets

STEPS TO IDENTIFY CORE COMPETENCES
1	Brainstorm the factors that are important to your clients ·        identify the factors that influence people's purchase decisions ·        move beyond just product or service features
2	Brainstorm your existing competences and the things you do well
3	Screen own competences against the tests of relevance, difficulty of imitation, and breadth of application
4	Screen factors that are important to clients to see if they could be developed as core competences
5	Review the two screened lists ·        identified core competences ·        build them as far as sensibly possible ·        look at ones that you could develop, and work to build them
6	Think of the most time-consuming and costly things that you do either as an individual or a company