Core competence concept-Ideal for small businesses

One of my strong beliefs is that practically all management concepts can be applied in small as well as large businesses. Usually, it so happens that while introducing new concepts, management gurus think of large businesses only. For instance, CK Prahalad’s book on his concept of Core Competence is complex and not easy to understand. I am not ashamed of admitting that I also had a difficult time understanding the concept and I am not sure that I have understood all that CK Prahalad had to say. Even a journalist working with the leading business daily in India, Economic Times, was not clear as to what Core Competence meant.

Core Competence is an activity or a process that an organization is so adept at that it forms the basis of its competitive advantage. It could also be defined as the capability of an organization that differentiates it from the competition. Core Competence also refers to certain skills that the organization specializes in. It is suggested that an organization should focus on building a portfolio of core competencies rather than a portfolio of businesses. In fact, the portfolio of core competencies will automatically lead to the building of a portfolio of businesses and products. Developing Core Competence is about integrating a number of different technologies as well as organization skills to deliver something of value to the customer.
Contrary to popular belief, the concept of Core Competence can be used by even small companies to grow their business. Let us discuss how a small company like ours used the concept of Core Competence to introduce new products as well as to start new businesses. Please refer to the chart on the next page which explains how we developed our core competencies as well as how they were combined to develop new businesses, products and services.

We are a small advertising, training and a publishing company. We believe that our core competencies are as follows:

Graphic Designing

This Core Competence was slowly and steadily developed after we started our advertising agency in 1996. Later, this Core Competence led us to start a number of new businesses including website designing and development. Now website designing and development has become another one of our Core Competence.

Management Knowledge

This Core Competence includes our ability to: (a) Develop management concepts based on self experience, and (b) Explain management concepts in a simple manner. This Core Competence led us into offering management training services. In addition, we combined our core competencies of graphic designing and management knowledge to write and publish books on a variety of management topics including customer satisfaction, advertising and communication as well as to develop and sell various merchandise items based on our management concepts.

During the recent economic slowdown, we decided to use our core competencies of graphic designing, website development and management knowledge to develop a new business, that is, the largest website in the world for management and motivational posters We developed the concepts for the posters using our Core Competence of management knowledge as well as management concepts developed by us. These concepts were converted into excellent poster designs using our Core Competence of graphic designing. All these posters were put on sale on an e-commerce website developed with our Core Competence in website designing and development. Within 1 year, we have become the largest website in the world for management and motivational posters. Our website development capability also ensured that we are the top ranked website on various search engines. Today we have nearly 700 posters on our website, all conceptualized and designed by us.

We observed that there are various advantages of developing businesses and products based on your core competencies. Some of the advantages we benefited from while developing our website are as follows:

(a) Our development cost as well as the investment in the new business was minimal. In fact, we developed with an out-of-pocket cost of just Rs. 500 for domain name registration. Using our core competencies and in-house graphic designing capacity did not involve any additional cost. For instance, our designing team designed the posters during slack demand for graphic designing.

(b) Substantial entry barriers have been erected as it would be very difficult to find businesses with the combination of core competencies that we used to build this business. In addition, we are offering customization in terms of translation of our posters in any language in the world, conversion to any size and insertion of buying company’s logo which serve as tremendous entry barriers as these cannot be offered without an in-house graphic designing capability.

(c) High rate of return because our investment was minimal as compared to someone who would either start to build the required competencies for developing such a website from scratch or adopt an outsourcing model.

(d) Development of business with a unique niche positioning and a flexible risk-free business model.

We have received tremendous response to our website. We our selling our posters on a regular basis in India and abroad. We have been able to build an online business with a competitive advantage and barriers to entry by using a unique combination of our core competencies and available resources which were specific to our company.

The other businesses and products that we have developed by combining our core competencies are as follows:

(a) By combining our graphic designing capability and management knowledge, we started publishing a management magazine titled Management Talk with a unique positioning, that is, “making management concepts simple to understand and implement.” Actually, this positioning of our magazine also has roots in one of our Core Competence. As mentioned earlier, we not only have the ability but also have the interest in explaining management concepts in a simple and easy to understand manner.

(b) We also combined our Core Competence of management knowledge, content writing and website development to develop another e-commerce website

(c) In addition, we combined our various core competencies to introduce various products like online training, customer dissatisfaction cards and management video/CDs.

It is obvious that the strategy of every company, big and small, should be to identify its core competencies and continuously explore how these core competencies can be used to develop new businesses or products. Developing absolutely new core competencies for establishing new businesses is an expensive proposition. However, our experience suggests that even developing new competencies becomes easy and cost effective when used in combination with existing core competencies. For instance, we were able to develop our Core Competence in website development cost effectively because we already had the Core Competence in graphic designing and content development.

In addition, every business has a set of core competencies which are unique to it. By using a combination of these core competencies to establish new businesses and products, you will not only be able to do so with a competitive advantage but also with a cost advantage. As mentioned earlier, we have been able to establish our e-business of management posters with a tremendous cost advantage as well as barriers to entry. Remember, using existing core competencies, usually does not involve any additional costs but developing new competencies does.

It is evident from above that management gurus should present their concepts in a simple manner using simple and easy to understand language so that small business owners, entrepreneurs as well as large company executives can understand and implement the same. The objective of management gurus, writers and experts should be to ensure that the understanding of old and new management concepts percolates down to everybody who can use it. In any case, that is what I intend to do with my blog, management magazine and books.

If any one of you have knowingly or unknowingly used the concept of Core Competence to develop new businesses and products, I would like to hear from you so that we can share the same with our readers.

Avinash Narula

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