What are Core Competencies?
A Core Competency of a Company is what a Company does better than its Competitors.
- Maybe not the absolute Best at it, but better than Average.
A Core Competency is Something that a Business (or Individual) is very Good at.
Why are Core Competencies Important?
- They allow a Company to Build its Strategy on its Strengths.
- If a Business bases its Strategy on something it is not good at, it is Doomed.
- It allows you to Dodge Strategies that could be based on Weaknesses.
- Common Strategies that may not be right for you.
- It “forces” Companies to analyze their Real Competitiveness in the Market.
- This Analysis is often neglected and is very Important.
Now, before sharing some examples, we want to clarify something.
In case you have read our “Resources and Capabilities” Page, you might be confused about the differences between “Core Competencies” and “Capabilities”.
Core Competencies and Capabilities
In essence, Core Competencies and Capabilities Focus on the same thing: Strengths.
However, we conceive these two Concepts in a difference way:
A Capability is a broad generic Concept.
- What a Company is capable of, is defined by its Operating Results.
A Core Competency can be more easily Pointed out.
- Analyzing Internal Processes and Comparing them with those of the Competitors.
We could say that Capabilities are constituted by different Core Competencies.
You can be Good at Maths: That is a Capability.
You Core Competencies might be:
- You have good Spatial Intelligence.
- You understand Abstract concepts.
- You have a good Memory.
* This can be nuanced, of course, but, we like conceiving this Concepts in this way as it makes things much simpler for Business Analysis.
The best way to understand what Core Competencies are and How you can use them is by sharing some examples with you:
Examples of Core Competencies
In these examples, we’ve chosen different successful Companies and analyzed their Core Competencies.
- What they do much better than their Competitors.
Their Core Competencies will help us Understand why they were Successful.
Let’s see what conclusions we can get:
Disney - Example of Core Competencies
Disney is a Company whose name is synonym with “family“.
You may like his movies or not, but what is certain is that it has almost monopolized the Family Movies sector.
How can Disney be Capable of creating Movies that the whole family like?
Let’s analyze its Core Competencies:
Creating stories in which each member of the family can feel identified.
- Many Disney movies highlight all family roles (Mom, Dad, Daughter, Son, etc).
Creating stories that are Deep yet Easy to understand.
- Disney movies can be understood in many different ways.
Creating Fantasy Worlds that Captivate young and old.
- With made-up languages, planets… And amazing Special Effects.
Creating Stories that Teach something.
- Commitment, Responsibility, Modesty… Are common values in Disney movies.
The list could go on and on.
However, we believe that anything we add would be a combination or a consequence of one of these 4 Core Competencies.
Google - Example of Core Competencies
Google is a curious case: Everybody loves it, but its success seems to be something much more diffuse.
As Google doesn’t offer a “Physical” Product; a Product you can see and touch…
… People don’t wonder too much about it success.
People tend to think: “They created a good algorithm“.
And, although that is true… You need much more to rise a 1.6 Trillion Company.
Let’s analyze its Core Competencies:
Simplifying complex tasks.
- Google has simplified How we use GPS, e-Mail, Web Browser, etc.
Integrating different Tools.
- Google is King in creating new Tools that complement existing ones.
Creating an Innovative Environment.
- Few companies encourage and motivate their employees as much as Google.
Adapt to the way its Users change the way they use Technology.
- Google quickly adapted to Smartphones, Quick searches, Authority Content, etc.
Again, we could go on and on with this list.
A thorough analysis of Google’s Core Competencies would require a team of programmers.
- Which we are not, by the way.
But, we are sure that we could agree that these 4 points have been extremely important in the Success of Google.
Louis Vuitton - Example of Core Competencies
Louis Vuitton is synonym with Luxury.
- No doubt.
The Luxury sector is extremely desired for all Companies as it offers huge Margins.
- But… Being successful is almost impossible.
We’ll examine the Core Competencies of LV to Understand How they did it:
Promoting its Products in a subtle but Powerful way.
- We all know Louis Vuitton… But we hardly ever see any ads of it.
Creating Rare and Extremely expensive products that Rich People want.
- These Wealthy people tend to be the Idols of average LV customers.
Generating Sense of Exclusivity.
- New Collections, Collaborations with other Brands, etc.
Mass manufacturing and maintenance of the perception of Luxury.
- Louis Vuitton combines High margins with Massive sales.
We are sure that we are missing lots of things involved in the Manufacturing Process.
These “Core Competencies” may seem vague, but think about this:
- Every fashion company knows how to make a leather bag.
Louis Vuitton’s success is based on how people perceive its products.
- Not the Manufacture Process itself.
Ford - Example of Core Competencies
Ford Motor Company is a century-old Business.
How is it possible that they not only survived, but remained as one of the most important Automobile companies in the world?
To find out, we’ll now analyze its Core Competencies:
Designing High quality yet Affordable cars.
- Cars whose main purpose is to be Reliable and last for years.
Adapt to changes in Customer Preferences.
- What is common in very old companies.
Designing powerful Engines that are relatively affordable.
- Ford’s engines are well known for being powerful and reliable.
- Ford manufactures the best Pick-Ups in the world.
This last Point is important for the US Market:
- Pick-ups are deeply rooted in the American Economy and Culture.
They have allowed Ford to maintain its American identity.
In the past, practically all cars in the US were American.
But nowadays, things have changed:
- There are lots of European, Japanese and Korean cars.
However, if you want a Pick-Up, nobody beats Ford.