Skills and technologies that enable an organization to satisfy its customers
better than its competitors.
Examples of core competencies are:
• Boeing – jet technology (e.g. 747).
• Sony – miniaturization (e.g. PlayStation).
• Apple – innovation and design (e.g. iPod).
• Coca-Cola (pictured right) – marketing of its brand.
• BMW – engineering.
The term core competencies was created by two business professors, Gary Hamel and C.K. Prahalad in their book, Competing for the
An alternative name is “distinctive capabilities” used by the Scottish professor,
A resource based strategy fully exploits an organization’s core competencies.
How to create a core
1. Put customers first
Core competencies must provide benefits to present and future customers better than competitors
(for example, James
Dyson’s ,pictured right, engineering skills that invented the bagless vacuum cleaner).
2. Be creative and innovative
Core competencies give customers new solutions to their problems now and in the future, being a “gateway
to tomorrow’s markets” (say Hamel and
3. Corporate culture and employees
Core competencies are created by innovative, customer driven employees.
Employees must have:
- ability (helped by effective teamwork and continuous learning and training).
- inspiration (from challenging aims, motivational leadership and a shared culture that
prioritizes a passion for excellence, innovation and customer satisfaction).
4. Look at your 7 S’s
Core competencies come from what you’re good at, so they will be found in the organization’s 7
- systems (how well things are done).
“Every organization needs one core competency:
- Peter Drucker (American management writer,
This reflects Drucker’s view in his book, The Practice of Management (1954) that an
organization’s most important activities are:
- marketing (customer satisfaction).
Drucker also said that great companies “get their strengths together and make their weaknesses
“Character cannot replace competence”,
- Max De Pree (American boss, pictured
Do something brilliantly (competence) but also do what’s right (character).
“Ability without honour is useless”, said the Roman philosopher, Cicero.
“Opportunism without competence is a path to
- Kenneth Andrew (American management
professor, pictured right)
An organization must not only identify market opportunities but also have the ability to exploit them better
“Ability is nothing without opportunity”, Napoleon said.
Hamel (pictured right) and
Prahalad (pictured below), Competing for the Future (1994)
Core competencies should gain entry to a wide variety of markets, significantly increase value for customers and
be difficult for companies to imitate.
They result from a long period of continuous improvement (usually over 10 years).
(see for more detail Competing for the Future in the
Business Books section)
John Kay (pictured
right), Foundations of Corporate Success (1994)
Business success comes from applying “distinctive capabilities” in a particular market
that competitors don’t have.
These come from innovation and effective long-term relationships with customers, employees and suppliers that
give the organization brand loyalty and an excellent reputation.
(see for more detail Foundations of
Corporate Success in the Business Books section)