Core competencies are the essential capabilities that create a firm’s sustainable competitive advantage. Based on experience, knowledge, and know-how, they are built up over time and cannot be easily imitated. For this reason, products and technologies are seldom core competencies. The advantage they provide is short-lived, and other companies can readily purchase, emulate, or improve upon them. Core competencies are more likely to be processes. Processes cut across functional lines and departments. Figure 1 shows the processes of product development, order fulfillment, supply chain management, and customer service in contrast to typical business functions such as sales, manufacturing, purchasing, and accounting. As companies become skilled at thinking processes, instead of functional departments or products or markets, a new dimension of strategy opens up. Consider Chaparral Steel, the tenth largest steel producer in the United States, a minimill of less than 1,000 workers that nevertheless has set world productivity records several times and was the first American steel company to receive a Japanese Industrial Quality Certification. Chaparral management allows its competitors to tour its plants at will because “they can’t take (what we do best) home with them.” Although Chaparral is known for its low cost and high technology, its core competency is not technology, but the ability to transform technology rapidly into new products and processes. By the time a competitor copies its current technology, Chaparral is confident they will have moved on to something else. Similarly, the Gap can’t predict what young consumers will wear any better than other retailers, but it can offer them more choices and react quickly when styles or colors “hit.” The Gap’s core competency in sourcing, logistics, and supply chains allows the company to introduce more than twenty new fashion lines into its stores each year. Centering strategy around processes makes it easier to identify core competencies. Do you remember the classic strategy tale of the buggy-whip manufacturer whose primary task of making buggy whips drove him out of business when other modes of transportation came on the scene? Would the buggy-whip manufacturer have succeeded if it had defined itself in terms of the transportation industry and converted to making cars? Probably not. The company had no expertise in internal combustion engines or metal chassis. But its competence in leather fabrication might have positioned it to manufacture leather gloves or handbags. Strategy is led by competencies. As a firm learns more about it competencies, a process orientation allows several interesting options for capitalizing on what a firm does best. Companies can further develop and exploit their competencies by: Enhancing the value a competency provides to customers. As a starting point, companies should determine which processes matter most to their customers and work to improve the competencies related to them. This may lead to new opportunities. For example, Goodyear no longer just delivers tires to Navistar’s warehouse. It operates the tire warehouse for Navistar and mounts and balances the tires on Navistar’s trucks. Federal Express not only delivers small parts and critical supplies for computer manufacturers and medical services, it maintains their inventory levels as well. Transforming an internal competence into a salable item. American Airlines markets its SABRE reservation system to airlines and travel agents, and its maintenance system to other airlines. Trigon of Massachusetts sells its telemarketing services: L.L. Bean markets its customer service process; and Xerox, Westinghouse, AT & T, and others have spun off firms to market their quality-improvement processes. Applying competencies in a creative way to new products and services. H&R Block used its expertise in recruiting and managing short-term employees during...
Please join StudyMode to read the full document