Core Competence Analysis – SKCI Business Strategy Tool

Background

Core Competence Analysis is an essential part of strategy development as it sheds light on the skills and strategic assets an organisation has or might need to gain for successful growth.

There are numerous tools and systems available to assess core competence, but often the simplest strategy tools are the most effective. 

That is why the SKCI Team has used its years of experience to create a matrix that can be applied to all organisations and provides a clear set of strategies. 

When To Use Core Competence Analysis

The Core Competence Analysis tool can be a useful way of establishing to what extent an organisation has the capability to grow, or whether skills will need to be brought in from outside (with the likely increase in risk and potential for delays). 

Therefore, it is best used early in your planning process and this is often done when answering the first of the Five Key Questions: ‘Where are we now?’. 

Of course, competences can change and develop with time so it’s a good idea to keep reassessing the alignment between Competences and Strategy, as they are likely to change over time.

How To Use Core Competence Analysis

The Core Competence matrix requires an honest assessment of your organisation. 

Think about the skills and strategic assets that your organisation can offer. Now fill in the table, starting with your existing competences and how you use them in your current markets. From there, list the potential benefits of moving into new markets or gaining new competences. 

The four strategies that come from this analysis are:

• Premier Plus Ten:
  Building on your existing skills to push into a new market. This is a medium risk option as your organisation will be building on the knowledge it already has.
• Mega-Opportunities:
  A tempting strategy as it has the potential for huge growth. However, it is a very high-risk option as you will be recruiting/learning new skills as well as getting to grips with a new market.
• ‘Fill in the Gaps’ :
  A strategy revolved around the knowledge and skills you already have, in your current market. This is a low risk option but offers limited growth, especially in the long-term. 
• White Spaces:
  Taking your existing competences and using them in a new way. Again, this is a medium risk option as you will not have to train employees or recruit further, yet it still offers good potential for growth. 

Throughout this process, it is best to keep in mind the qualities and values that differentiate your organisation and make you unique. These are the elements you want to use to your advantage as they help sustain your culture and are difficult to imitate. 

Keeping in mind the potential for growth, ask yourself the following questions:

• What competencies do we have that make us distinct?
• Do we have the capability to fulfil our goals?
• Do we need to bring in skills from outside?
• Is the opportunity worth the cost/risks involved in learning or recruiting?
• Will an expert benefit the organisation? Or will their knowledge get lost in existing bias?
• How do our competences align with the emerging challenges of climate change, sustainability and ESG?

Worked Example

Let’s look at the example of NewTechNow, an imaginary B2B software and hardware company that we have seen in previous examples.

Now that the four options are clearly laid out, we can see, NewTechNow needs to prioritize strategy. 

‘Fill in the Gaps’ is the lowest risk option, but it doesn’t provide the scale of growth that NewTechNow wants to invest in. 

Typically, companies will then look at White Spaces and Premier Plus Ten as they offer the potential for growth without high risk. In this example, NewTechNow might want to prioritise White Spaces by focusing sales activities outside Europe. In terms of competences this may mean current employees learning about the new environment, or perhaps it would be worth consulting an expert in the market.

Given the company’s strong IP, Premier Plus Ten would seem to be a clear option. But the higher revenue potential from White Spaces will encourage the company to focus on this in the short term. The challenge will be to maintain the underlying long-term commitment to Product Leadership while management attention is distracted by moving into new markets. 

This short-term shift in focus should ultimately be beneficial provided the organisation does not lose sight of its USP as a product leader.  (See Value Discipline Model)

The final option of Mega-Opportunities is often beguiling as it represents an enormous revenue potential, however it is also by far the riskiest. While recruiting experts seems like an easy task, if they are in a minority among current employees, their skills may be lost or wasted. This option also risks delays and is in no way a fast pass to successful strategy.

As sustainability becomes more important, companies are increasingly looking at how to embed ESG (Environmental, Social & Governance) in their organisations. The Core Competence Analysis can be used to establish the best way to do this by identifying where the gaps are in competences and how the challenges of ESG can be addressed alongside the existing corporate culture. 

How Does This Fit Into The 5KQ Strategy Framework?

SKCI’s unique 5 Key Question (5KQ) strategy framework gives our clients an effective way of managing strategy development. Core Competence Analysis can answer several different questions but is often used for question one, ‘Where are we now?’ and question two ‘Where do we want to go?’.

By analysing your core competences, you know what kind of changes need to be made. It is an essential building block for the rest of your strategy development, as without knowing your strengths and weaknesses, you will not be able to effectively improve your organisation. 

Additional Resources

Additional Strategy resources, including blank worksheets in PowerPoint and Word format, are available from the SKCI website: www.skcinv.com/business-strategy-resources