Why is it important that an organization takes the time to identify its core competency?

What makes your business unique? What helps your company stand out from your competitors? As the world grows smaller and smaller, brand recognition and differentiation become more important to the survival of your organization. Why would someone choose to work with, spend time with, purchase from, or invest in your company?

This has always been an important question for small business owners looking to raise capital, but differentiation has become even more critical for businesses in the midst of the war for talent. People aren’t just looking for big compensation packages, a fancy title, or stellar benefits. They also want to know that the work they do is aligned with their core values. Employees are looking for a place where they can bring their whole selves to work and grow — both personally and professionally.

Understanding your organization’s core competencies can be a competitive advantage. Your competencies are key to what sets you apart in your market. Keep reading to learn how to distinguish your core competencies — as both a business and as an individual.

What are core competencies?

The idea of core competencies was first introduced in 1990. Researchers and business academics C.K. Prahalad and Gary Hamel published The Core Competence of the Corporation in Harvard Business Review. This piece is still considered to be one of the most influential theories on management and the modern corporation. 

In the article, Prahalad and Hamel assert that in order to capture a market category, a company needs to focus on more than just driving revenue. They need to learn how to either invent a new demand or quickly capitalize on a growing one. 

Companies that can master how to shift “patterns of customer choice” in their favor are poised to be industry leaders. And the same could be said for entrepreneurs, freelancers, leaders, and job seekers. Learning how to differentiate yourself in this way means identifying your core competencies.

What are core competencies?

Core competencies are the skills, services, resources, and other unique advantages that differentiate you fron your competitors. In short, they’re why someone chooses you over someone or something else. These are also known as core capabilities, strengths, or barriers to entry.

If the market has a need, your competencies are the ways in which you fill that need differently, better, or more effectively than another person or company can. As mentioned, both individuals and organizations can define their core competencies. 

Business vs. personal core competencies

Whether you’re a business or a job-seeker, your goal is the same: to have others recognize your value and pay for your skills or services. In order to do that successfully, you need to set yourself apart from everyone and everything else that claims to do the job as well as you can. 

In many ways, we could compare this to how you (as an individual) make any of your own buying decisions. If you’re shopping for coffee creamer, do you reach for the brand you know? The cheapest one? The one from the local, sustainable farm? What if it’s not available? Is there a competitor that would fill the job just as well, or would you leave that store in search of the only brand you trust?

Every brand hopes to develop that kind of loyalty — and some do it extremely well. If we can have that kind of single-minded passion about coffee creamer, we can certainly have it for our businesses and employees. 

Here are some examples of core competencies on both the individual and organizational levels:

Examples of personal core competencies

If you were to describe yourself on a resume or in a bio, what adjectives jump out? What are the things that you’d want others to know about you? If you were hiring for a particular role, what qualities would your perfect fit possess? 

Here are some distinctive competencies that might come to mind, whether you’re a candidate or hiring manager:

• Attention to detail
• Excellent problem-solving skills
• Strong written and oral communication skills
• Good interpersonal skills, leadership, and teamwork 
• Well-organized

Examples of business core competencies

If you’re in business, you’re likely intimately familiar with your competitors — and you likely have some opinions about their products or services. Where do they have you beat? Write it down. 

On the other hand, where do you excel? What do you wish every one of your competitors’ customers could know about you before they make a decision?

Your answers to these questions will help you determine your company's core competencies. Here are some areas where you might stand out:

• Creative thinking, adaptability, and innovation
• Partnerships with other industry leaders
• Providing an excellent customer experience
• Reliability and consistency
• Empowering and unique company culture

Recognizing your core competencies

If you’ve ever put together a business plan or proposal, you might be familiar with the idea of barriers to entry. The term refers to the unique advantages, ways of doing business, or resources your company has that make what you do difficult to duplicate.

If you’re thinking about the concept of core competencies as it relates to human capital, this is what makes you — or your team — different. It could be a skill set, a professional background, experience with a target market, or proprietary information and processes.

To determine your core competencies, you need to identify two things. The first is what you do differently or better than anyone else. The second is how those skills translate to market demand.

Here are 5 steps to determine your core competencies:

1. Think strategically

Take a good look at your organization — or, if you’re a job seeker, at your resume and CV. Ask yourself “What am I known for?” If you have trouble answering this question, ask the people that work with you on a regular basis or your top clients. 

As a business, you can use social media to learn more about what people are saying about you and your brand. Leverage your digital presence — like your website — to understand what people are looking for and what makes them choose you (or not).

2. Test yourself

Once you’ve put together a list of the qualities that make you stand out, ask: Are they really core competencies. In HBR, Prahalad and Hamel list three conditions that a trait must meet to be a true core competence:

1. It must provide potential access to a wide variety of markets 
2. It must make a significant contribution to the customer experience
3. It must be difficult for competitors to imitate

If your differentiators meet these three criteria, then they are truly core competencies. Innovators’ bias can prevent us from taking a hard look at the ideas and initiatives that we’re passionate about. Even if you identify something that is unique to your business or that you do really well, you should take the time to ask these questions. It can save you time, effort, and resources on an initiative that isn’t set up for success. 

If your core capabilities are lacking in one of these three areas, that doesn’t mean it can’t be an area of focus for your business. You may have to do some work to determine how you can expand your market reach, provide a stronger end product, or create barriers to entry in the marketplace. 

For example, if you make T-shirts, you might find yourself up against heavy competition. But if you can fulfill a specific need (quick-dry shirts for athletes) or feature exclusive designs by a well-known artist, you may begin to identify a niche no one else has.

3. Find a need

As you determine your competency, a key part of your strategic planning is to keep your target market in mind. Who is your ideal customer? If they’re buying a product from you or your competitors, how can you create a better experience or solve a problem that no one else has?

There’s a coffee shop that I love to go to in the mornings, and I drive twenty minutes (past several other coffee shops) to get there. Why? It’s comfortable, with plenty of space, free WiFi, great sandwiches, and USB outlets. I could get a cup of coffee anywhere, but they provide an unparalleled customer experience.

4. Connect the dots

Determine how you can position yourself and your services to meet the needs of your target customer (or employer, if you’re looking for a new role). A strong competency model will help you determine how to establish, maintain, and protect your differentiating advantages. 

As a company, this may mean going after new business contracts or reinventing yourself within your established category. Team members may begin (or continue) learning new skills and looking for ways to expand their portfolios and professional reach.

5. Tell everyone

Finally, reinvent yourself! Your core competencies are what you want to be known for. If people are talking about your industry, whether it’s T-shirts, sales, software, or coffee, you want them to think of you. Take the chance to craft messaging and be intentional about what your company is known for.

Make sure, whether as a person or organization, your steps are in alignment with your new direction and branding (so to speak). Rewrite your goals and update stakeholders on your new strategy. If your goal is to be known for exceptional service and quality, your metrics for organizational effectiveness should reflect that. 

Don’t get caught up in trying to be everything to everyone. Be good at what only you can do, and outsource the rest.

Lean into your strengths

When I was young, a shrewd teacher once told me that becoming a successful adult didn’t mean being good at everything. “Everyone has strengths and weaknesses,” they said. “But you should focus on your strengths. If you don’t, then you never get to be great at anything, and all you end up with are strong weaknesses.”

There’s something exhilarating about leaning into your talents. Uncovering your core competencies puts momentum behind your work. It allows your customers to get you at your best — not the version of you that’s trying to keep up with someone else. Knowing yourself and being yourself is your sustainable competitive advantage.

Published March 21, 2022

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