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Core competency analytics

What is it?

Core competency analytics is the process of identifying what your core competencies are so that you may exploit them to the full.

A core competency is a management concept introduced by C.K. Prahalad and Gary Hamel, who defined the theory as ‘a harmonious combination of multiple resources and skills that distinguish a firm in the marketplace’. In order to be considered core competencies they must fulfil three criteria:

  1. Provide potential access to a wide variety of markets.
  2. Should make a significant contribution to the perceived customer benefits of the end product.
  3. Difficult to imitate by competitors.

Why does it matter?

Core competency analytics matters because finding and securing a competitive advantage is tough. It is even tougher if you are not 100 per cent sure exactly what unique core abilities your business has.

Often in business we tend to look at the end product or service we produce and consider that is what makes us unique, but core competency analytics looks behind those end products and services into how they are created, breaking the production down so that you can highlight key skills or abilities that could be utilised elsewhere for maximum advantage.

When do I use it?

Every business should know what their core competencies are so that they can optimise them; so this is a process that should be done at least every year.

Plus, if you don’t know what they are and who in your business has these core competencies you may not realise that you are losing them when people move on – until it’s too late.

What business questions is it helping me to answer?

Core competency analytics helps you answer business questions such as:

  • What do we do better than most other businesses in our area?
  • What core competencies have we accumulated over the years?
  • What should be our core competencies?
  • Could those core competencies be better utilised?
  • Could they be successfully used to create new or different types of products?
  • How developed are our core competencies?
  • Where have we got gaps in our core competencies?

How do I use it?

Start by listing all the actions that are required to produce your products or services. In essence this means detailing exactly how a product is made or how a service is developed from the very start of the process to the delivery of that product or service. Taking each step or element in turn, break it down to understand what enables competency in that task or process so you have a map of how something is achieved.

You can then start identifying patterns (using, for example, factor analysis) to determine what are the core competencies in your business.

Practical example

A large car manufacturer may believe that their core competency is in manufacturing cars, but by running core competency analytics they learn that this isn’t the case. Instead, by breaking the manufacturing process down and analysing each area they soon discover that their core competency is actually the design and manufacture of engines.

This insight therefore allows them to explore new market opportunities where brilliant engine design could be a major competitive advantage beyond the creation of cars. As a result, the traditional car manufacturer can move into the creation of lawnmowers, tractors or any other areas where engine design is important.

This makes sense in business. If you have the core ability and skill set that already puts you ahead of your competition then why wouldn’t you then further utilise that same skill set to expand into new markets.

Tips and traps

Identifying core competencies can help to identify and eliminate waste or improve inefficiencies as a by-product of the identification process. It can also help to identify areas of development before they arise to cause significant problems.

For example, if the car manufacturer in the example didn’t appreciate that their core competency was engine design then if their most experienced engineer announced he was retiring or resigning to pursue other opportunities they may not see that as the challenge that it really is.

Further reading and references

For more on core competency analytics see for example:

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