You can have all the right strategies in the world but if you don’t have the right competencies you surely are doomed
Organizational core competencies can be defined as the aggregate unique capabilities that an organization possesses that drive the business in the delivery of distinct customer value in the form of products and/or services. These unique capabilities can be in the form of skills, culture, business approach, customer relationship management and technology among others. An organization can have more than one core competency. The ability to coordinate and stream these capabilities drive the business through creating sustainable competitive advantage. It is not just a strength or an attribute that an organization has, but the ability to effectively and efficiently synthesizing those capabilities to deliver value. These organizational core competencies are not static but can deliberately be changed over time and space as organizations adapt to the dictates of their operating environments. An entity can also deliberately acquire and/or develop organizational core competencies in line with its vision and mission.
Business strategy represents an enterprise’s plan of action to achieve predetermined goals or objectives. It focuses the enterprise on those critical factors that bring success to the organization. Ability to deliver on a strategy is heavily dependent on the organization’s core competencies. According to the Harvard Business Review (1990/05) a good business strategy should be firmly rooted in an organization’s core competencies. The business operating environment presents numerous opportunities that can be exploited by enterprises. Organizations should not find themselves chasing every opportunity that exist in the environment – their strategies should be informed by their unique capabilities. This enables the organization to focus on what it is good at, thereby setting itself up for excellence. Should an organization want to pursue opportunities outside its core competencies, the organization should also invest in and make deliberate efforts to develop such competencies. If business strategy is not informed by the organization’s core competencies, failure is guaranteed. At the end of the day it is important for every business organization to align its strategy to its core competencies.
Having facilitated strategy sessions for many organizations in Zimbabwe and beyond, the key challenge observed is that organizations are not conscious about their core competencies. This automatically means that in many organizations there are no deliberate efforts to develop organizational core competencies.
This dilemma haunts many organizations as they find themselves adopting strategies which they fail to execute simply because they lack the appropriate organizational competencies. In today’s ever complex environment, it is important for organizations to focus on those areas they have the greatest impact. According to the Core Competency theory of strategy, organizations should always play to their strengths in terms of core competencies. The starting point therefore is to define the company’s core competencies. Once that has been done, strategy can thus be developed around these.
Every business organization needs to go through a process of identifying and deliberately developing a set of core competencies on which its business model rides to guarantee long term business growth and success. Investments in core competencies should be made so that they remain unique to the organization thereby securing competitive advantage. Different models can be used to identifying and developing organizational core competencies. However according to C.K. Prahalad and G. Hamel (Harvard Business Review, 1990), for an attribute to be regarded as a core competency, it should satisfy the following:
- It must provide superior value/benefit to the customer
- It should not be easily replicated by competitors
- It should provide potential access to a wide variety of markets
Once the core competencies have been identified, the business is in a better position to make smarter decisions. The adoption of the outsourcing model in organizations is driven by the core competency approach to business. Companies divest from non-core competency areas to focus their resources in those core competency areas. This propels companies to higher levels of uniqueness where they become inimitable. In the developed world the outsourcing model has been used extensively and successfully – the key being the ability to identify the organization’s core competencies.
Identifying and developing organizational core competencies provides a sound basis on which strategy can successfully be developed and executed in an organization. Business strategy should always leverage on the organization’s core competencies. Companies should not focus on anything and everything, they should not pursue every opportunity that presents itself in the environment but should deliberately develop desirable core competencies on which strategy rides. This approach creates unique expertise in organizations and propels businesses to market leadership by offering unique value propositions to customers that are rare to find and that are inimitable. It also allows organizations to expand by competing in different markets – riding on their unique capabilities.
