Strategy · Organising to Scaling
What you do better than anyone
You name the one capability your company has that others can't easily copy, and that still works when you're not there.
Does this sound familiar?
- Your website says you deliver quality, service and reliability. So does your competitor's.
- You win work, but you don't really know why the client chose you.
- Clients ask for you, or for that one experienced specialist, and not for the company.
- A new competitor offers the same thing for less, and you don't have a good answer.
Who it's for, and when
For founders who, when asked 'what are you good at?', give a list any competitor would give too. It matters from Organising onwards: you're choosing where to invest, and the company has to be able to do things without you in the room. In Searching and Proving it's too early. You're still finding out why clients pick you.
The model
“Core competencies are the collective learning in the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technologies.”
A core competence is a capability of your company that your products and services grow out of. In 1990 Prahalad and Hamel wrote that Honda didn't get big because of one good product. Honda was better than anyone at engines, and used that in cars, motorbikes, lawnmowers and generators. They used the image of a tree: the products are the leaves, the core competence is the root system.
Their three tests work in a smaller company too, once you translate them. In your company, Honda's markets become your services or your types of client: does the capability work for maintenance and new builds alike, for year-end accounts as well as advice? The client notices it: they mention it as a reason to choose you or to stay. And it's hard to copy, because it's built into how you work. Prahalad and Hamel call it 'collective learning'. In Organising that's the real test: does it still work when you or your best specialist isn't there? If not, it's still one person's talent, and now you know what needs handing over.
On the strategy canvas you write one down, in one or two sentences. The canvas adds a fourth test: the competence helps you towards your BHAG. Where you play is in the lesson Your sandbox, and how you win there in the lesson Success strategies. This lesson is about what you can do that others can't easily copy.
C.K. Prahalad and Gary Hamel, The Core Competence of the Corporation, Harvard Business Review (1990). Developed further in their book Competing for the Future (1994).
Works for more than one service or client
Could you use this capability to deliver something else, or to help a different type of client? Then it's a root. If it only works for one product, it's a feature of that product.
The client notices it
The client doesn't need to know the term, but they feel the difference and mention it when you ask why they stay. If they don't notice it, it doesn't belong in this box, however proud of it you are.
Hard to copy, even without you
Could a competitor catch up within a year with money, by buying a machine or hiring someone? Then it isn't a core competence. And if it lives in one person's head, it walks out of the door when that person leaves.
It helps you towards your BHAG
The canvas test. If you get better at this one thing, do you get closer to your BHAG? If they point in different directions, either the competence is wrong or the BHAG is.
Pitfalls
A list of virtues
Quality, service, flexibility, personal contact. Everyone says that, so it doesn't set you apart. A list of five is usually a list of things you do reasonably well.
Outsourcing what makes you strong
Prahalad and Hamel saw companies outsource work to save costs, and in doing so give away the capability that won them the work. Check whether something is a root before you let it go.
Writing down what you'd like to be
You can set out to build a core competence, but say so. What you write down now should be something your clients recognise. Otherwise your team is steering by something that doesn't exist yet.
Watch and read
The model itself in just over two minutes, from the magazine where Prahalad and Hamel published it in 1990: what a core competence is and how to find yours.
Watch on YouTubeWhy Dyson started making his own high-speed motors, and how that one technology led to vacuum cleaners, hair dryers and more. Prahalad and Hamel's tree in a single company.
Watch on YouTubeTo go further
One of the two people behind the idea looks back: where it came from, how it was misread as a reason to outsource everything, and what it means now.
Watch on YouTubeRead
Competing for the Future
Gary Hamel en C.K. Prahalad · 1994 · ISBN 9780875847160
The book that builds on the 1990 article: core competencies as the roots that tomorrow's products grow from, and how you choose and build them. A hefty business book; this ISBN is the 1996 reprint with a new preface.
View the bookApply it
- 1
Ask what clients would miss
Ask two or three of your best clients: what would you miss if you went somewhere else tomorrow? Write down their words. If you're already calling them about your core customer, ask in the same conversation.
- 2
Find the root under your services
Put your three most important services or products side by side. Which capability runs through all three? That's your candidate.
- 3
Run it through the tests
Use the one-page test in the examples. If it fails one test, keep looking. If it only works when you or one specialist is there, write down what needs handing over.
- 4
Put it in one sentence and run it past your team
Have your leadership team read the sentence. Do they recognise it without explanation, and would a competitor need years to copy it? Then it goes on the canvas.
Examples
The one-page test
Candidate: 'We ...' 1. Works for: [service or client type], [service or client type], [service or client type] 2. Clients mention it: '...' (who, when) 3. A competitor can't catch up with a machine, a system or one hire, because ... 4. Also works without [you / your best specialist]: yes or no. If no, to hand over: ... 5. Brings us closer to the BHAG, because ...
An installation company
At first the canvas said: craftsmanship and service. It turned out clients stayed because a breakdown was nearly always fixed in one visit. Underneath was something they'd built over years: engineers who know every brand's systems, and a warehouse that knows what needs to be in the van. It works for maintenance, new builds and service work for other installers. The canvas now says: 'We fix a breakdown on any brand in one visit.'
A software company
They thought their product was what set them apart. It turned out to be something else: they can move the data out of a client's old system, correctly, in a few days, where others take months. At first only the founder could do it. They wrote his approach down and had two developers work alongside him until they could do it without him. The canvas now says: 'We move the data from any old system across correctly, in days.'
Do this in your own business
Everything up to here is free. What you fill in for your own business, you keep in Boldcaster.
- You write the Core competence section of your strategy, and it stays on your strategy page.
- You assign the lesson to your team and see who has done it.
- The quiz counts towards your progress, and you see which lesson comes next.
Four weeks free. You'll land straight in this lesson.
Quiz
6 situations. You need 5 of 6 right. You can try again at any time.
1.Your leadership team comes up with: 'We deliver quality, work closely with our clients and are flexible.' What's the problem?
2.What sets you apart is a new cutting machine your competitor doesn't have. Is that a core competence?
3.Clients come back because your lead engineer finds every fault. He retires in two years. What does the model say?
4.To save costs you want to outsource the design work to an agency. Clients mainly choose you for the designs. What do you do?
5.You're strong at bespoke work for every client. Your BHAG is a standard product running across Europe. What does the canvas test say?
6.A printing company is very good at quickly handling small runs with variable data. How does it know this is a root and not a feature of one product?
Nothing is saved here. In the app, the quiz counts towards your progress.
Read next
- Your core customer · You test who your company is for in conversations with customers, and describe them as one person once the market confirms it.
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