Monday, May 26, 2008

Identifying your Core Competence and Next Practices

"Core Competence" and "Best Practices" are some of those magic mantras that everyone utters, not many understand! All around the corporate battlefields there are heard loud cries of "lets build around our core competence!" ; "Let us institutionalize best practices".. "go out and sell value"; "we should get out of the commodity business trap" so on and so forth.

Not many, however, are even aware of their core competence or how it can fetch the elusive 'value' over their competition. For most enterprises, 'core competence' is restricted to animatedly and energetically pursuing the next opportunity that their armies of sales folks unearth or, many a times, stumble upon by sheer luck!

All leaders are grappling how their organization can become a market leader through institutionalizing best practices that address future needs as against solely today’s requirements.
We are all aware that the industry ecosystem is not static and organizations need to constantly change or reinvent themselves to be competitive and successful.

Noted strategists CK Prahalad and Gary Hamel introduced the term ‘Core Competence’ of an organization in their path-breaking Harvard Business School paper and book ‘Competing for the future’
‘Core Competence’ defines a unique set of capability that is comparatively difficult to imitate, is disproportionate to value or customer benefit and opens gateways to new market opportunities through minor modification.
The duo stressed on organizations defining a ‘strategic intent’ and possessing ‘strategic foresight’.

They further highlight that winning organizations:
- build competencies for tomorrow not just today
- have in place ‘best practices’ that are as relevant next year as they are today
- continuously identify new sources of unique advantage
- are not just followers but are the architect of industry revolution, reinvent the industry itself
- don’t just benchmark themselves to best practices but become the benchmark

How can your organization become such a winning and competitive organization which is future ready?

You Mr. leader need to ask yourself, your leaders and answer many uncomfortable questions like the ones below:

  • Can we identify what are our real core competencies that we use to win business today?
    Do we really know our best practices? Can we identify some of our current best practices and whether these will be sufficient for us to be competitive in the future?
  • We have achieved accolades and industry certifications (for example for IT cos it includes CMM or CMMI Level 5 etc, for Manufacturing cos this could be ISO9001 or TQM certifications) – are these truly leveraged? CMMI Level 5 for example implies optimized and continuously improved processes, metrics with each cycle. Are we doing this?
  • Have we identified new sources of unique competence?
  • Do we play by new set of rules because the environment is changing?
  • Are we constrained by current thinking? i.e. short tem vs. long term thinking.
  • Will the processes and solutions we work on today be relevant next year, the year after next?
  • Do we know what the world and our competition is doing so we can do better? Do we know this across all dimensions of the organization – Business, Delivery, Support?
  • Do we know what we are better at than our competition?

It is customers who ultimately defines ‘better’
Do we understand the dimensions of being better?

An Approach

As an approach you and leaders can form teams to identify what it means to be "better" than your competition and current competencies and best practices that help you to be better.

Identify and isolate the measures that your customers rank you on, which constitute being better than competition.

The teams can identify and list specific attributes, rank the relative importance of these attributes on criteria including impact on customers and why these are important or valuable to clients and others.

Identify which practices and competencies relate to these attributes and the variables that influence these practices and competencies.

for example some of the attributes could include 'Flexibility', 'Technical Solution capability'; "Ability to scale services up and across the clients departments"; "ability to advise on business impact of technical solution:" etc.

Next identify why these attributes are important to your customers. Do a forced and relative ranking by importance to your customer.

Then identify your organizations' competencies or strengths that are associated with these attributes and ones that influence the outcome.

Also identify the organization variables that influence the competencies or practices identified, both that strengthen and weaken the competencies.

Of course, it is assumed that you and the team understand your customers, the macro environment that the customers' companies operate in and their drivers etc. Performing this exercise in absence of such an understanding is theoretical and a time waster!

The team then needs to identify all the high priority attributes and analyze as below.

  1. If best practices and competencies exist within your organization for these attributes
  2. Whether the best practices and competencies identified above will be as relevant in the future as they are today?
  3. Whether the best practices and competencies identified above will be sufficient for you to be competitive and successful in the future
  4. If not, what would be the best practices and competencies that need to be developed?
  5. What will the implications be on organization structure, processes and people skills?

Some pointers to identifying appropriate best practices and competencies for the future could be your ability to craft positioning statements with our customers which could include:

  • “This is where the industry is headed and this is how our services can enable you succeed in the future in your markets”
  • “These are the winning technologies and solutions of the future and this is how we can help you adopt these better, faster”
  • “Here is what we are building and this is why these are relevant to you”
  • “To win in your markets of the future you need to do this and this and this and we are the best positioned to enable you do these right”
  • etc.

Once the above exercise is conducted in earnest, you will be armed with a set of identified core comptencies that are relevant to your customers and that will help you be competitive.

This exercise will also help unearth best practices that are in place today and that you would need in the future.

You can then plan for investment into these competencies and best practices, strengthen these further to protect from erosion and competition etc.

In fact, this exercise can be conducted periodically to assess if you remain competitive, and for modifications to the practices for keeping them relevant to changing business environment.

Copyright 2008

Labels: , , ,