To CEOs: What Are Your Core Competencies?

In this post, the author describes core competencies as the areas that drive the most enterprise value and therefore deserve a company's own resources and focus. For growth decisions, he argues that brand and product, which he sees as the main drivers of customer engagement and monetization, should stay in-house. In his view, other areas can draw on outside partners and freelancers.

C.K. Prahalad and Gary Hamel introduced the concept in "The Core Competence of the Corporation," published in Harvard Business Review in 1990. They defined core competence as the collective learning in the organization, especially how to coordinate diverse production skills and integrate streams of technology. Their framing focused on deep capabilities that support many products and markets.

Prahalad and Hamel proposed three tests in their 1990 Harvard Business Review article. A core competence provides potential access to a wide variety of markets, makes a contribution to the customer benefits of the end product, and is difficult for competitors to imitate. A capability that fails these tests can still be useful, though it would not qualify as a core competence under their definition.

Prahalad and Hamel suggested two questions for judging what a company stands to lose: how long could it preserve its competitiveness if it did not control the competence, and what opportunities would be foreclosed if it lost the competence. Asking both about a specific function, such as growth marketing or analytics, helps separate what to own from what a partner can supply.

The author's position is that brand and product should not be outsourced, because he considers them the pillars of sustainable success. He treats growth as an area where outside partners can add value, and he acknowledges a bias on this point. Leaders can check this view for their own business against Prahalad and Hamel's three tests for a core competence.