Unlocking the Potential of Organizations Through Core Competencies
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Assessing core competencies should be a top priority for all organizations that want to distinguish themselves from the competition and seek to gain competitive advantage. The concept of core competencies gained traction in the ‘90s, when academicians C.K. Prahalad and Gary Hamel emphasized its importance in an article titled The Core Competence of Corporation, linking its utility to the organization’s evaluation of strengths and weaknesses.
In the article, Prahalad and Hamel assert that managers should consider identifying and evaluating the company’s unique skill sets and the technologies that distinguish them from their competitors to improve resource allocation, leverage current strengths, and select opportunities based on their alignment with those strengths. Thus, the conceptualization of core competencies has led to a rethinking of the concept of corporation, shifting the focus from restructuring and decluttering to identifying, cultivating, and exploiting competencies. Recognizing and leveraging these competencies can be the key to gaining a sustainable competitive advantage, yet this begs the question: how do we evaluate and identify core competencies?
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Defining Core Competencies
Depending on the industry and organization, core competencies can vary among: buying power, company culture, customer service, partnerships, adaptability to product design, low product prices, or niche specializations. However, there are three criteria that Prahalad and Hamel consider of greatest importance when assessing core competencies: rare, challenging to imitate, and beneficial to customers. Those criteria represent the starting point for developing a competency framework.
For example, The University of Newcastle, Australia has developed a competencies framework to map individual competencies for professional staff, with the main competencies evaluated being: communication & engagement; organisational [sic] planning & project management; professional & technical expertise; business understanding & business intelligence; and creative & strategic thinking. Although the same principle applies when assessing competencies at the organizational level, the context is different because the focus shifts from the staff to the organization as a whole, covering processes, activities, technology, products, partnerships, culture, synergies, etc. Building a competency framework can be done in various ways as long as it respects the three criteria mentioned earlier.
Establishing a Core Competency Framework
Start by reviewing the organization’s foundation, like the mission and value statements. Afterward, identify competencies embedded into the foundation, create competency levels, and interview or survey internal staff and major clients. Last but not least, use valuable, rare, imitable, and organization (VRIO) analysis to measure competencies on a scale and determine which of them meet all the criteria to be considered core competencies. The final step should be to validate your core competency framework with both internal and external stakeholders, i.e. top management, managers, supervisors, employees, and partners.
Leveraging Core Competencies
Below are some examples of core competencies identified among globally recognized brands that shaped and consolidated their market position, helping them build an undeniable reputation. McDonald’s managed to stand out and achieve supremacy in the fast-food industry due to positive brand awareness and portfolio of trademarks, Netflix excels in innovation, brand equity, and product mix, while Starbucks’ core competencies include high-quality products, aesthetically appealing locations, and strong market position.
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Here’s the bottom line: knowing where you stand out as an organization can impact the entire business, outlining areas of improvement, contributing to better resource allocation and driving innovation.
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