(1) Core: Center
The core of our problem is motivation. We need people to work harder.
(2) Competency: Skill, something you can do.
I have many competencies that qualify me to do this job well.
(3) Core competency: Main skill. The foundation of your business.
Our core competency is understanding Asian trends. It’s why our ads work well. I really don’t think we should expand into Europe.
1. What is Honda’s core competency?
a. Making cars
b. Making motorcycles
c. Making motors
2. Why is it a good idea for Google to own YouTube?
a. They get lots of information from all the videos
b. They can sell ads before videos play
c. It’s not a good idea
3. Why shouldn’t you expand your business beyond your core competency?
a. You have no foundation to build on
b. It’s too hard
c. It’s difficult to organize the information
By Jeremy Schaar
Core means center.
Competency means skill.
Core competency is your central skill. It’s the thing you’re good at that makes everything else possible. Today you’ll learn what core competencies are and why they’re important. In specific you’ll learn about Honda, Canon, and Google. I hope this lesson will help you understand strategy discussions better and think well about your business decisions.
So, what do you think Honda’s core competency is? Some might say “making cars.” Someone else might say “motorcycles.” Another person might say “making vehicles.” None of those are right. Those are products, not competencies. The actual answer is that Honda’s core competency is making motors. All of their products–motorcycles, cars, boats, lawnmowers, planes–have motors inside them. Honda makes great motors and then builds products around them.
Honda began as a supplier to Toyota. By the late 1940s, they made their own motorcycles. Expanding on their ability to make great motors, they began making cars in the 1960s. Nowadays, they make more motors than any other company in the world. They make motors for cars and motorcycles, but also for lawn mowers, snow throwers, boats, and planes.
The company Canon is another good example of a core competency. What does Canon make? Did you think of cameras or copy machines? Actually, Canon makes both. Why? Because their core competency is the lenses that cameras and copy machines use.
A core competency doesn’t need to be a physical thing. Google’s core competency is organizing information. Lots of people get confused and say that Google’s core competency is selling ads online, but that’s not right. That’s Google’s most profitable product. But it’s built on organizing information online. So when Google does something like buy YouTube or develop a driverless car, they’re trying to get more information to organize. They then develop products built on top of the organized information. Online advertisements work because Google organizes the web and your email so well.
So, what does this mean for you and your company? What are the strategic implications? Well, when you’re trying to decide where to focus your time and money, you should choose to do so in things related to your core competency. Your core competency is a foundation. You can build success on top of it. If you’re doing something unrelated to your core competency, then you’re basically starting a new business. That can be OK, but maybe you should treat it like a new business and not an expansion of your current business.
Want to learn more about Honda? Here’s an interesting article you might enjoy.
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