The prime function of a company might be profit-making, but the true essence lies in achieving its core purpose. Every business either solves a problem in the market or meets an unmet need of the consumers. Only then can it remain relevant in the market for the long term and achieve targeted success. It implies that every business must sketch its purpose carefully. It must know the reason for its presence in the market and the difference it makes.

Eyeing a purpose and achieving specialty in the market requires a specific set of skills. Therefore, businesses should build their operational framework on some core competencies. These core competencies are parallel to the overall purpose of the company.

They are not necessarily tangible assets but a specific skill set that you have mastered. They differentiate a business from others and provide it a competitive edge over others. These competencies are the area where your company excels, allowing it to capture the most market share.

No business can succeed without a strong strategy. Core competencies are the cornerstone of the strategic strength of any business. They dictate how the strategic outlook of a company progresses. Therefore, having a solid understanding of your business’s core competencies enables you to evolve your business with time. If you haven’t worked on them yet, this article highlights three ways to identify and develop your business’s core competencies. These steps can help your business to achieve its true potential.

1. Study and respond to the evolving business environment

Your core competencies are of no use if they are not making you competitive. Therefore, you must respond to the changing business needs with time. For instance, today, businesses cannot succeed without big data and data analytics. So, your employees must develop this core competency. Either train your workforce through online MS business analytics or hire new talent to incorporate it into your business.

You must carefully study and analyze the markets in which you are targeting to operate. Only then will you be able to identify the right core competencies and develop them accordingly. If we see the current situation under the COVID-19 pandemic, the business environment has radically changed. Markets have moved towards digitization. Now, if your business doesn’t possess the skillset to withstand competition in this digital world, then you must develop it. For that, you must identify the existing competencies and upscale them as per the modern requirements.

For instance, you might realize that retail marketing and retail sales are among your business’s core competencies. It means that you have been successfully operating through these channels for quite some time. However, if you study the current business environment, you will realize that online marketing is rapidly becoming the new norm. Now you must develop these competencies as well to prepare your business for the new competition of e-commerce.

2. Benchmark your competencies against the three criteria

C.K. Prahalad and Gary Hamel were the pioneers of the term ‘core competence’ for the first time in 1990 in their HBR article, “The Core Competence of the Corporation.”

They also proposed three criteria that make any competence a ‘core competence.’ The criteria define core competencies as business activities and skills that are:

  • Rare/Unique
  • Difficult for your competitors to imitate
  • Produces more value for customers

It sets an excellent ground for you to identify your existing core competency. You have to look carefully at your current business activities and contrast them to these three criteria. For example, the core competence for Maersk is sea freight, Amazon is parcel management, and Fly Emirates is their luxury-filled flights. They all tally against the criteria.

All these competence are rare to find among other business players of the same industry. They are certainly challenging for their competitors to imitate since these companies have invested years in developing them. Others can never fill that experience gap. Lastly, these competencies certainly drive the most value for their customers.

3. Never hesitate to outsource

The best way to focus more and develop your core competencies is to outsource other business functions where you aren’t efficient. Instead of investing efforts in building such competencies, it is more prolific for your business to divert those efforts to the things you do well. Globally, we see a vast IT outsourcing market since this competency is very difficult to develop in-house. According to a report by Globe newswire, global IT outsourcing reached a whopping $318.5 billion in 2020.

It is an interesting fact that Even huge companies outsource so they can focus on their core competencies. Google has outsourced email support for AdWords. Alibaba has outsourced web development. Even the trillion-dollar company, Apple, has outsourced its supply chain and manufacturing facilities. So you must also not shy away from outsourcing and then focusing on your core competencies only.


Identifying core competencies is just like peeling an onion. There are several layers of business functions and activities. You must carefully peel all to reach the core. Whereas all these layers are essential for your structural and functional strength, the center holds the key to success. Therefore, you must keep the three criteria of core competencies in your mind and analyze your business. You should then focus significantly on your core competencies and outsource others that are limiting your organizational resources.

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