Pros and Cons

As the classic article, “The core competence of the corporation” (HBR, May-June 1990) describes, core competence (CC) is the root system that provides nourishment, sustenance, and stability to the entire company’s core product lines, business units, and end products. Note that CC is not about excelling in any single activity in the value chain. Rather, CC involves the bundling of knowledge and skills that reside in various parts of a company, to produce a competitively valuable advantage. CC is knowledge-based, residing in people, and not in a company’s assets on the balance sheet. CC requires collective learning in an organization: on how to organize work, integrate multiple streams of technology, and coordinate diverse production skills.

Thought experiment: For each of the following examples of CC, think of which diverse groups of employees within a company (e.g., R&D, marketing, production, engineering, MIS, operations, finance, etc.) need to work together closely:

1. capability to fill customer orders accurately and swiftly

2. knowhow in creating and operating systems for cost-efficient supply chain management

3. capability to speed new or next-generation products to market

4. expertise in integrating multiple technologies to create families of new products

5. skills in manufacturing a high-quality product at a low cost

6. superior after-sale service capabilities

Some real-life examples of CC: Honda’s core competence in engines and power trains gives it a competitive advantage in the car, motorcycle, lawn mower, and generator businesses. And 3M Corporation has a legendary reputation in product innovation – its CC in introducing new products goes back several