Consistent incubation of new capabilities keeps a firm ahead of the competition

An employee at the workplace.

Core competencies based on intangible resources are the most effective because they are less visible as they relate to employees’ knowledge and skills.

Photo credit: Shutterstock

What you need to know:

  • Firms learn and continuously reshape their capabilities, thereby developing the core competencies that are used to establish a competitive advantage in the marketplace.
  • Effective leadership involves exploiting the core competencies through sharing resources across units in the organisation. 
  • Strategic leaders need to allocate resources towards building new capabilities, which capabilities are developed into core competencies. 

With the electioneering period behind us, we are now back to work and need to position ourselves to take on the opportunities that come our way while mitigating any arising risks.

Firms will need to focus on exploiting and maintaining core competencies to bring out their A-game.

We were brainstorming on the subject of core competencies and what organisations would need to do to post a positive and sustainable recovery from not only the Covid-19 pandemic but the economic slowdown traditionally associated with electioneering in Kenya. 

Core competencies are capabilities that firms develop over time, as they learn from the results of the competitive actions and responses taken in the process of competing with rivals, and hence serve as a source of competitive advantage. 

Competitive advantage 

Firms learn and continuously reshape their capabilities, thereby developing the core competencies that are used to establish a competitive advantage in the marketplace.

Effective leadership involves exploiting the core competencies through sharing resources across units in the organisation. 

It goes without saying that core competencies based on intangible resources are the most effective because they are less visible as they relate to employees’ knowledge and skills.

Core competencies depend on the lens through which you look at them. 

They could refer to the organisational capabilities that give the organisation a competitive advantage, if you are using the “management” lens, but could also be the human capabilities that are related to superior job performance if you were using the “HR” lens. 

The common denominator is that whether you are looking at the individual level or the organisational level, it leads to giving the organisation a competitive advantage against its rivals in the marketplace.

It is not the possession of core competencies that is important, but the ability to leverage them for the benefit of the firm.

Resources can influence performance only to the extent that the firm can adequately leverage them, and what a firm does with its resources is more important to performance than its possession of those resources.

At the individual level, this is akin to possessing a skill that is not put to use. 

Possessing the skill is important but you only create value when you put it to use.

Core competencies are built up over time as the organisation learns from the outcome of the competitive actions while competing with rivals, which enables them to continuously reshape its capabilities. 

Mere possession not enough 

Firms must, therefore, accumulate, combine and exploit the resources, as mere possession is not enough.

Once a firm understands the core competencies it has built, it will select and implement strategies that emphasise these competencies. 

Most organisations would leverage partnership arrangements to deliver products and services whose resource needs are beyond what they (the firms) have built in-house, with each partner leveraging on its own core competencies. 

Such partnership arrangements are very common today in the commercial space and notably in the banking sector. 

To illustrate this point, take the example of the Mshwari product. This is a collaborative arrangement between Safaricom through M-Pesa and the NCBA Bank. 

The product leverages the mobile money infrastructure, a core competency of Safaricom, to offer higher value financial services to scale, a core competency of NCBA. 

Mobile money infrastructure 

It would have been inefficient and possibly ineffective for either Safaricom to build the competency in delivering higher value financial services to scale or NCBA to build a mobile money infrastructure.

Leveraging on their respective core competencies, the two are able to deliver a service to the market that is both efficient and effective, hence achieving their respective strategic objectives. 

As I have argued here before, core competencies based on intangible resources are most effective given that they are less visible as they relate to employees’ knowledge and skills. 

Strategic leaders need to allocate resources towards building new capabilities, which capabilities are developed into core competencies. 

It is the consistent development of new capabilities that keep the organisation ahead of the competition and hence maintain a sustainable good performance.

Dr Olaka is the CEO of Kenya Bankers Association.