Isyourcorecompetenceamirage?Managersnowconsiderjustabouteverythingapotentialcompetence.Areyoumeasurablybetter,canyousustainthedifference,anddoesitmatter?Buildingacorecompetence:threeoptions.KEVINP.COYNE,STEPHENJ.D.HALL,ANDPATRICIAGORMANCLIFFORD1997Number1Corecompetence—theideathatacompanycansucceedwithoutastructuralcompetitiveadvantagebybecomingthebestatafewkeyskillsorinafewknowledgeareas—hasenjoyedenormouspopularityoverthepastsixyears.Thearticlethatintroducedtheconcept1hasbeenoneofthemostrequestedreprintsintheHarvardBusinessReview'shistory.ExecutivemanagementprogramsandMBAcurricularoutinelydevotehourstothesubject,andexecutivesoftenrefertotheirownandcompetitors'corecompetencesaskeydriversofstrategy.Butdespitealltheattentionthisconcepthasreceived,itstangibleimpactoncorporateperformancehasbeenmixedatbest,asthesestatementsattest:Corecompetencehastoooftenbecomea'feelgood'exercisethatnoonefails.2Truecorecompetencesarehardtodefinepreciselyandareoftendiscoveredretrospectively.Thatis,asyouexperiment,youdefineyourcompetencesbysimplydescribingyoursuccessesandfailures.3Wetalkedto[corecompetenceexperts]andaskedthemtohelpusidentifyourcorecompetences.Butafterhavingthemworkwithourseniormanagement,leadingthemthroughsomegroupexercises,wereallyhadamessonourhands.Wecouldnotdefinewhatwascoreasopposedtononcore,andwhatwasacompetenceasopposedtosomeprocessorofferingwejustdidwell.4MostmanagerswetalkedtowereuncertainastoexactlywhatqualifiesasacorecompetenceOurownobservationsbearouttheseviews.Fewmanagerswehavetalkedtocouldclaimtohaveutilizedacorecompetencetoachievesuccessinthemarketplace,andevenfewertohavebuiltacorecompetencefromscratch.Indeed,mostwereuncertainastoexactlywhatqualifiesasacorecompetence.Weareleftwithaconundrum.Corecompetenceisclearlyanimportantconcept,andsomecompaniesseemtobeabletomakeitwork.Butformost,itislikeamirage:somethingthatfromadistanceappearstoofferhopeinahostileenvironment,butthatturnstosandwhenapproached.Whydocompetencesseemsoelusive?Onereasonmaybethatthereisnoclearbasisforidentifyingthem,noranyestablishedwayofgaugingprogresstowardthem.Toaddresstheneedforamorerigorousapproach,wereviewedtheliterature,assessedindividuals'experience,andconductedcasestudiesofcompaniesthathadattempted(successfullyorunsuccessfully)todevelopacorecompetence.Thisresearchproducedfourimportantfindings:corecompetenceisanumbrellaphrasecoveringtwodistinctbasesofadvantage;certaintestscanhelppredictwhetheracompetence-ledstrategywillbesuccessful;therearethreedistinctpathstodevelopingacompetence,eachwithitsownbenefitsanddrawbacks;andsustainingacorecompetencerequiresjustasmuchrigorasdevelopingoneinthefirstplace.Whatarecorecompetences?WhilemostoftheexamplesinHamelandPrahalad'sarticleconcernedknowledgeofoneormoretechnologies,executiveshaveextendedtheideaofcorecompetencetocovermanytypesofskillsandfunctions,includingprocessengineering,production,newproductideageneration,andevencorporateidentity.Theytreateverythingasapotentialcompetence.Oneexecutiveasserted,ThewayIdeterminecorecompetencesisthattheyarethosefewthingsthatyoudotogetherwiththecustomerthatcreatevalue.Incontrast,webelieveaprecisedefinitionisessential.Tomountawinningcompetence-basedstrategy,itisnotenoughtorelyonbroadgeneralizationslikemarketing,productdevelopment,orservice.Oneconsumergoodscompanywithareputationformarketingexcellenceassumedthatitwassuperiorinallaspectsofmarketing.Yetitisnotparticularlyskilledatpricing,isonlyaverageatchannelmanagement,andhasmadesomecostlyerrorsinastringofnewproductfailures.Itstruecompetenceismuchnarrower:demandstimulationthroughimage-basedadvertising.Companiesmustdefinetheircorecompetenceswithequalprecisioniftheyaretousetheconcepttoitsfulladvantage.Thedefinitionmustalsoincorporatetheapplicationsandlimitsofthecompetence.Alargeregionalbankbelievedthatoneofitscorecompetenceswasitsabilitytoprocessfinancialtransactionswithtremendousaccuracy.Itindeedexcelledatcashmanagement,checkprocessing,andseveralsimilarlines.Butitexitedthemortgageservicingbusinessafterfailingtomasterthetransactionprocessingtasksinvolved.Weproposeasimpledefinition:Acorecompetenceisacombinationofcomplementaryskillsandknowledgebasesembeddedinagrouporteamthatresultsintheabilitytoexecuteoneormorecriticalprocessestoaworld-classstandard.Suchadefinitionexcludesmanyskillsorpropertiesoftencitedbyorganizationsascorecompetences.Patents,brands,products,andtechnologiesdonotqualify;neitherdobroadmanagementcapabilitiessuchasstrategicplanning,flexibility,andteamwork;nordohigh-levelcorporatethemeslikequality,productivity,andcustomersatisfaction.Corecompetencessodefinedcanbegroupedintotwocategories:Insight/foresightcompetences.Theseenableacompanytodiscoverorlearnfactsorpatternsthatcreatefirst-moveradvantages.Suchinsightsmightderivefrom:Technicalorscientificknowledgethatproducesastringofinventions,aswithCanon'sopticsknowledgeandminiaturizationabilityProprietarydata,suchasthebehavioralandcredit-scoringknowledgeusedbyCitibanktobuildtheUnitedStates'leadingcredit-cardbusinessinthe1980sInformationderivedfromhavingt