Another fascinating question from one of my strategy network forums: What is a company’s core competency? It sounds easy enough, but from some of the responses provided, it seems clear to me that there’s a lot of confusion around what a company’s core competency is, let alone how to go about identifying it!

This could be tremendously detailed and complex, but it sounds like the colleague posing the question is looking for a basic answer to a basic question: how does a company identify what its core competency is? If a company only does one thing, then it’s pretty easy, but as organizations are growing they often take on many different activities, and can lose sight of what they started out to do. Often some of these ‘extra’ activities are necessary in the early days to support the key activity, but over time, as practices, structure and expectations grow around these activities, the ‘extras’  take on a life of their own. I could probably write pages on this tangent alone, but here’s my simple answer to the basic question:

A company’s core competency is whatever it is that they do that no other company can do the same way, and that can’t be outsourced to anyone else. (Some would add that there should be a customer/client demand for the product or service as well, but there’s also the argument that if you have a unique product/service, you can always create a market!)

I’ve told clients and colleagues in the past: if you’re doing something that someone else can do better, faster or cheaper, then get out of that business – that’s not your core competency, no matter how much you may like to do that or how long you’ve been doing it. Once a company knows what it exists for and clearly understands their core competency, making strategic decisions becomes a much easier activity!

What about your company – does this simple rule apply and if not, how would you define your organization’s core competency?

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