A core competency is the fundamental knowledge, ability, or a specific subject area or skill set. It can take various forms, including technicality of subject matter know-how, a reliable process and/or unique understanding of material flow from supplier to manufacturer to end customer. It requires technically qualified and dedicated employees with a deep commitment to working across organizational boundaries, good market coverage, leadership support, etc. So, core competencies are the collective learning in organizations, and involve how to coordinate diverse skills: marketing, product design, production, distribution, etc. and integrate multiple streams of technologies. They are the skills that the organization possesses and sets it apart from its competition. They are the sources of competitive advantage as well as the building blocks to future opportunities.
Some examples of core competency are:
- Walt Disney World’s efficient operation of theme parks
- Apple Computer understands the customer needs: iphone, ipad, etc.
Core competency fulfills three key criteria:
- It must not be easy for competitors to imitate.
- It can be re-used widely for various products/services and markets.
- It should lead to core products which must contribute to the end products to meet/exceed customer needs.
Core competency is dynamic and it changes with time as changes occur in technology and market.
Every organization requires certain competencies to operate effectively and carry out their mission. These fundamental competencies are called “table stakes” as per Thomas McIntire. These stakes define the standard level of competency needed to sustain operations. Some of the basic competencies are marketing; product design, development and manufacturing; human resources; fund raising; financial; administration, etc.
Sample detail of some of these activities is:
Marketing skills – where personnel would have knowledge and experience in:
- The activities needed to identify the customer needs and the product characteristics and service offerings that can meet/exceed customer needs and how to package these into the product and/or service offering.
- Determine the price for the product and services offered including discounts, sliding scale fees, etc. and how payment will be accepted.
- Determining how and where the product and services will be offered and by whom.
- Promoting the products and services, communicating with the prospective customers, and selling.
Human resources skills – where personnel with knowledge and experience in:
- Interviewing prospective employees, managers and business leaders.
- Hiring and introducing new hires.
- Determining the compensation for the new hires and establishing the process to pay them.
- Determining their training requirements to perform their jobs and providing or making arrangements to provide this training.
- Reviewing performance and discharging ineffective personnel.
So, how to determine the organization’s core competency? As pointed out in earlier that core competencies require continuous improvement as technology and customer needs are changing. Demands on organizations continue to change and today’s core competencies may be tomorrow’s table stakes. Organizations that provide standard services and are in high demand, organizations that do not operate in a highly competitive environment or enjoying monopolies will usually do not posses or need core competencies. Table stakes are more than sufficient for their success. The examples of these organizations are some basic services such as homeless shelters and soup kitchens. It is almost impossible to find an example of a monopolistic business due to government regulations. Only time you would find some elements of monopolistic philosophy are in a small bank or airline serving a small city.
Organizational competencies require the integration of skills across the functional lines. A core competency is a bundle of skills that enables an organization to provide a particular benefit to customers. For each competency listed in any organization, must be associated with a customer benefit or a significant contribution to the financial health of the organization. For example, the design core competency of Boeing resources are providing the Dreamliner plane (Boeing 787) to meet customer needs and providing significant financial benefits to Boeing.