What is your business good at? What is your area of expertise? These are the questions being asked every now and then when executives deal with other businesses. Many executives find it rather difficult to identify instantly of the core competencies of their businesses. In 1994, Gary Hamel and CK Prahalad wrote a book titled “Competing for the Future”.
They pointed out that to be successful in each coming decade, business required its unique set of “Core Competencies”. In 2000, Hamel continues to point that business requires a revolution on new innovation. (Hamel’s latest book is “Leading the Revolution”)
Currently, the concept of ‘core competencies’ receives a widespread attention from private organizations, government units, and state enterprises. However, whenever people talk about ‘core competencies’, some of the doubtful issues remain such as:
• What does “core competencies” mean? Is the concept practical in reality?
• Are there any models or format to capture the concept of core competencies? Is the model taken from foreign countries directly applicable to business in Asia, especially in Thailand? Should there be any adjustment?
• Where should the analysis on core competencies start? Is the result of the analysis reliable?
• The most important issue is probably the extent that business should follow an advise from business consulting firm. How do we know that their recommendation to us is suitable?
The writer has been frequently asked these questions and a lot of questions are posted on my web board (< http://thekmthailand.blogspot.com at www.dntnet.com). Therefore, to clarify these doubts and exchange the knowledge on the subject, let’s examine these points together.
• What does “Core Competencies” mean?
Core Competencies of business means the area of expertise or the uniqueness in terms of products or services that is the proprietary knowledge of the business, something which the competitor cannot catch up with, and cannot be easily duplicated.
Generally, the core competencies of business comprises of a set of skills and technology, rather than a single skill and technology. There are several characteristics to assist business to determine if something is considered core competencies or not.
(1) The value and benefit to the customer: This means something in the business that has utility to its customers, that satisfies and justifies and justifies the reason for its existence i.e. the core competencies of DNT Consultants Co.,Ltd. Is that the company is capable of providing expertise to create a new knowledge to its clients, who strongly feel value and actually receive the expected benefits as a result of that core competencies.
(2) The uniqueness : The core competencies of business must be differed and unique from the competitors in a sense that it is either more advance or cannot be easily duplicated. Even the core competencies is the same with others, it must be superior to others i.e. DNT Consultants Co.,Ltd. Has superior capability to create a tool for a test and measurement of “the state of leadership” or “the competency of executive”.
(3) Continuation of development : In addition to the above two characteristics, the core competencies must be able to be developed further or provides a basis of future innovation i.e. DNT Consultants Co.,Ltd. Not only has superior tool to test and measure the state of leadership, the company works on that proprietary knowledge to develop a business measurement model such as the KPIs/BSC.
• How to search for the core competencies?There are several routes to develop, search, and analyze the core competencies of business. Here are some of the major alternatives.
- First alternative: The Core Competencies comes from “Managerial Judgement”, that is, executives gather to discuss the core competencies of its business. Mostly, they will rely on the technique such as “BEIs” or Behavioral Event Interviews or analysis of Key Result Area or “KRAs”. They work with the questionnaire, interview, observation and record important events of highly competent executives, etc.
- Second alternative : This route offers more objectivity in developing,searching, analysing the core competencies. A tool such as the “360 degree measurement system” is utilized. Sometime the result of the first alternative is extended to the measurement of the executive competencies under assumption that the core competencies of business comes from its leader. Therefore, measurement of competencies of the leaders is equivalent to the measurement of business competencies.
- Third alternative : The company realizes that it lacks knowledge in searching for the core competencies, and decides to buy-in that knowledge from a consulting company.
Regardless of the alternative, there are several to bear in mind.
1) Analysis of core competencies must be based on the key functions or scope of the task, not on the person holding that position. Many businesses are misled to analyze the key tasks of the person holding that position, as a result what they get is the core competencies of the position, not for the business.
2) The core competencies of any one position cannot reflect the core competencies of business unless it is linked to the business performance measurement. Core competencies of this sort become artificial and confused because it is not based on the key result areas.
3) Confusion in a set of core competencies such as technical or non-technical knowledge and personal qualifications complicates the analysis of core competencies, making it undistinguished, intangible to measure objectively.
4) Adoption of a tool as suggested by the consulting firms merely follow the through study and judgement because many consulting firm must go through a questionnaires that are translated from foreign countries. Moreover, they are selective to the topics. They cannot explain the “root of the ideas” correctly. Consequently, the tool simply doesn’t work.
If you wish to gain more insight on this topic, perhaps you may want to read my book about “How to measure core competencies of business and people?” (2000) or e-mail to me at DrDanaiT@gmail.com.
Dr.Danai Thieanphut
Managing Director
DNTConsultants Co.,Ltd.
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