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What Are Core Competencies for Business?

Max Freedman
Max Freedman

What strategic advantages does your business have over the competition? Find out what core competencies are and how to identify them.

  • Business core competencies are your company's unique abilities, products and services that give it a competitive advantage in your industry and market.
  • Personal core competencies are akin to the skills you search for on résumés when hiring new employees for your company.
  • There are viable strategies for identifying your core competencies and acting on them, but you should be careful not to misidentify your core competencies.
  • This article is for business owners who are looking to learn what core competencies are and how to define their company's core competencies. 

No two businesses are alike, but some are less alike than others. The more ways your company stands out from its competitors, the more likely your business is to attract customers. These distinguishing qualities are related to core competencies, and when you properly identify and act upon these features, your business can thrive.

What are core competencies?

Core competencies are the defining products, services, skills and capabilities that give a business advantages over its competitors. Put another way, business core competencies are competitive advantages that no competitor can reasonably offer or replicate.

Identifying your company's core competencies – including its core products and most compelling competitive advantages – is an important business strategy for proving your value to both new and longtime customers. When you know your business's core competencies, you can better forge a strong reputation for your business, market it and grow it by obtaining new customers.

Key takeaway: Core competencies are the competitive advantages (products, skills, services, capabilities and more) that distinguish you from others in your field.

Examples of core competencies in business

When you first read the definition of core competencies above, you might have wondered which of your products or services you could include among your core competencies. If you weren't immediately able to identify any, that's OK – core competencies can also be skills and abilities. We'll get into some real-life examples of business core competencies that aren't products and services in just a bit, but first, here's a list of common core competencies:

  • Consistently high quality
  • Incomparable value
  • Ceaseless innovation
  • Clever, successful marketing
  • Great customer service
  • Formidable size and buying power

To explain further, let's look at an example of a leader in each of these core competencies.

  • Consistently high quality: Google remains the world's leading search engine and one of the most-used email, calendar and cloud storage platforms because the quality of its software remains consistently high, no matter the tool being used. Whether you're using Google Photos to access your beloved memories, Docs to create and edit text or Maps to get around, you're likely turning to Google for its ease of use, modern look and feel, and extensive organization options.
  • Incomparable value: Many companies use Dropbox for quick and simple file sharing not only because it makes these tasks easier but because its price is widely seen as incredibly reasonable for its services. For a massive amount of cloud storage, offline file access, e-sign tools and watermarking features, business owners pay less than $20 per month.
  • Ceaseless innovation: QuickBooks has dominated the accounting software industry for decades because it constantly adds new tools and features that other platforms just don't have. The brand's ceaseless innovation is the crux of its competency model and a major reason it has long been seen as the first accounting software choice for businesses of all sizes.
  • Clever, successful marketing: Chances are good that no matter where you live, you have an abundance of department stores to choose from when you need all manner of items. Despite the competition, Target has continued to expand in large part because its brand is undeniable. Marketing images of employees in red shirts, its branded mascot Bullseye the white bull terrier, its familiar fonts and its consistent red-and-white motif have caught the eyes of customers – and sellers – for decades.
  • Great customer service: Amazon is arguably the most omnipresent brand in the world, and its success comes in large part from its unparalleled ability to provide excellent customer service. Given that Amazon's online marketplace lacks one defining core product and is instead a sea of options that fulfill myriad wants and needs, the company's strategic planning has long involved an unflagging focus on customer satisfaction.
  • Formidable size and buying power: Part of why McDonald's has been able to expand its dominance not just in the U.S. market but also internationally is its size and buying power. The company is so large, and has such massive buying power, that it can easily afford to open new franchise locations wherever it pleases. It also has enough buying power and a large enough supply chain to purchase food at such low prices that it can sell meals at highly competitive prices.

While these examples name massive companies, even small businesses can identify core competencies. We'll get into that in a bit, but first, it might help to understand your own personal core competencies.

Key takeaway: There are six main core competencies, and not all of them are products or services. Most household-name brands have grown to their ubiquitous stature through refining at least one of these core competencies.

Examples of personal core competencies

You might not realize it yet, but as a business owner, every time you search for new employees, you assess each prospective applicant's personal core competencies. Every skill someone lists on their résumé is a personal core competency, and chances are good that when you identify a job applicant with personal core competencies matching your organizational goals, you'll move them to the top of the list.

Here are some examples of common personal core competencies:

  • Strategic planning
  • Excellent organization skills
  • Leadership and personnel management
  • Project management
  • Attention to detail

Personal core competencies can also involve highly industry-specific skills. For instance, if you work in information technology (IT), you may excel at certain computer languages or have unique experience working with certain types of customers. That last example ties into a key point when it comes to identifying core competencies: Looking at the people you work with may help you identify your competitive advantages.

Key takeaway: Personal core competencies can be thought of as the skills and unique qualities you would seek from people hoping to work at your company.

How to identify your business core competencies

Let's turn back to the aforementioned examples of business core competencies. You'll recall that all of these examples involved large businesses. If you own a small business, don't take this trend as an obstacle to identifying your business core competencies. Instead, follow these steps to figure out your business core competencies:

1. Look at your customers and clients.

Does your business cater to a specific group of customers or type of business within your industry? For example, some people with IT degrees go on to work with students with special needs whose electronic educational materials must be modified to lessen the learning challenges they may face. A core competency of a company with a strong reputation for providing these services might be a special focus on working with clients with disabilities. [Read related article: How to Find Your Business Niche]

2. Turn to your company's mission statement.

Did you launch your company to address a gap that none of your competitors have filled? Look at your mission statement to remember why and for whom you launched your business – one of your core competencies is providing that product or service to that client base.

3. Discuss your core competencies with your team.

Ask your employees what they think your company does especially well, both compared with its competitors and in general. Then, take their answers and compare them with yours. The overlap can point you to your core competencies. For example, if you run a restaurant and want to figure out how to survive as the industry struggles, meet with your team to identify your most sought-after meals and cuisines, and then jot those down as your potential core competencies.

4. Make sure your core competencies actually are core competencies.

Here's an important point to keep in mind: Just because you identify something your company does especially well doesn't necessarily make it a core competency. Let's use the restaurant example again: What if other restaurants in your area are also beloved for serving the same meals as your most popular items? In that case, you might not be able to qualify these meals as core competencies because, clearly, your competitors can replicate and offer them.

The problem with labeling something that's ultimately not a core competency as one is that you might shift your business strategy toward focusing on a less profitable product or service.

5. Outsource as needed.

No company can fulfill all of its necessary tasks in-house. If you find yourself struggling to prioritize the products and services that best distinguish your company, consider outsourcing other business needs so that you can focus on making your core competencies the best they can be. For example, if your business's core competency is selling the highest-quality handcrafted furniture in your area, outsourcing your marketing efforts can give you the time you need to properly design and make the furniture.

6. Put your core competencies to the test.

Once you've determined your core competencies, shift your business strategy to focus on them. If you notice more customers coming to your business – especially if they've left your competitors and turned to you – then chances are, you've likely identified your core competencies. If not, it's back to the drawing board, and taking the time to figure out what distinguishes your business from others is never a bad thing.

Key takeaway: To identify your business core competencies, look at your customer base and mission statement, consult with your team and then shift your business strategy to focus on your core competencies.

Image Credit: Antonio Guillem / Shutterstock
Max Freedman
Max Freedman,
Business News Daily Writer
Max Freedman is a freelance writer who covers best business practices for business.com and culture for publications including The A.V. Club, MTV, Paste, FLOOD, and Bandcamp. He lives in Philly and doesn't miss his native New York.