Core competencies

A core competency is a singular advantage that distinguishes the performance of an organization. A core competency should be exploited to give an organization a competitive advantage in serving its customers; doing so gives an entity the ability to generate an above-average profit over the long term. 

Such a competency could, for example, involve the skill level of employees, a technical capability, or a unique process flow. When core competencies are properly built into a marketing campaign to improve brand recognition, customers are more likely to pay above-average amounts for a company's products and services.

Management should be well aware of the core competencies of a business, and continually strive to protect and enhance them. A management team that is unaware of core competencies is more likely to unknowingly allow them to lapse over time. Conversely, it may not make sense for management to waste time concentrating its efforts on areas of the business that are not core competencies; in such cases, it can make sense to outsource functional areas or processes to third parties.

A core competency should be difficult for a competitor to duplicate, and so yields a long-term competitive advantage. Conversely, a new entrant into a market could focus on the development of its own core competencies, so that it can stake out its own position in the market.

Here are several examples of core competencies:

  • The ability to manufacture custom products to customer specifications within a short period of time.
  • The ability to deliver goods to customers on short notice and to difficult-to-reach locations.
  • The ability to conduct field repairs within a short period of time at any customer location.
  • The ability to design products that resonate with customers.
  • The ability to convert research activities into viable new products.
  • The ability to constantly replace existing products with enhanced replacement products.
  • A production process that massively reduces the number of flaws in finished goods.