How to guide the direction of new enterprises for the Prefex group by organically using the skills and abilities that it already possesses?
Introduction
Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required to undertake them. So the goal is for management to focus attention on competencies that really affect competitive advantage.
Amplification
A core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria:
1. It provides consumer benefits
2. It is not easy for competitors to imitate
3. It can be leveraged widely to many products and markets.
A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.
Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Few companies are likely to build world leadership in more than five or six fundamental competencies.
The Company
For a software company the key skills may be in the overall simplicity and utility of the program for users or alternatively in the high quality of software code writing they have achieved. Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company’s environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.
Core competencies are the skills that enable a business to deliver a fundamental customer benefit – in other words: what is it that causes customers to choose one product over another? To identify core competencies in a particular market, ask questions such as “why is the customer willing to pay more or less for one product or service than another?” “What is a customer actually paying for?
A core competence should be “competitively unique”: In many industries, most skills can be considered a prerequisite for participation and do not provide any significant competitor differentiation. To qualify as “core”, a competence should be something that other competitors wish they had within their own business.
A competence which is central to the business’s operations but which is not exceptional in some way should not be considered as a core competence, as it will not differentiate the business from any other similar businesses. For example, a process which uses common computer components and is staffed by people with only basic training cannot be regarded as a core competence. Such a process is highly unlikely to generate a differentiated advantage over rival businesses. However it is possible to develop such a process into a core competence with suitable investment in equipment and training.
It follows from the concept of Core Competencies that resources that are standardised or easily available will not enable a business to achieve a competitive advantage over rivals.
