Core competencies are the most important scarce resource a business can create. Core competencies stem from the business's accumulated experience, and its organisation wide systems and processes. Where these drive declining cost economies that result in the business having lower average unit costs than competitors, then it has a competitive advantage.
There are several reasons for being interested in the subject of core competencies, the main ones being to:
- Design ways to create new core competencies, and thereby to increase the value of the business.
- Leverage existing core competencies into new business opportunities. This option is important to businesses that have created resources where the best way to monetise them is through the continuity of the business.
- Maintain and increase the value of existing core competencies. This is a preoccupation of businesses faced with capital budgeting constraints and getting the right balance between the different demands for capital.
- Guide business transformation in response to changes in market conditions.
- Direct turnaround managers of businesses under financial stress, to identify the business's core competencies to safeguard them so they are not destroyed in the drive to re-establish profitability.
Core Competencies: Real options as corporate strategy provides practical approaches, and guild to identifying and evaluating a business's core competencies and how to improve them. It also describes the different ways that core competencies can be leveraged into new business opportunities.
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