Nearshore Americas

How to Determine When a Function is a Core Competency

Many businesses, as well as the service providers that support them, speak of the importance of core competencies. 

But what is a core competency? And how can an enterprise separate a core competency from day-to-day business functions, many of which remain relevant and important?

“A core competency is a deep proficiency or set of skills that enables an organization to deliver unique value to customers,” says Victor Pereda, CEO at  NEARSOL, a US-headquartered BPO services company. “It embodies an organization’s collective learning, particularly of how to coordinate diverse production skills and how to integrate multiple technologies.”

NEARSOL itself has extensive experience in process management for captive and contact centers, with impressive operational and technological resources. Informed by this context, Pereda argues that a company’s unique human and technological abilities must be fully understood before it’s possible to nurture and cultivate the right core competencies. To do this, companies should isolate their key abilities, and hone them into organization-wide strengths.

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Once that’s done, an organization’s unique selling points should then be easy to identify: these are the products or services that are difficult for competitors to copy or procure, and that customers truly value. When these unique characteristics come into play, an organization can find itself in an enviable position, where it doesn’t have to compete on price alone. 

However, in order to capitalize on this advantage, and to win business from the competition, it’s critical that a company not become complacent. Core competencies should be flexible, and develop with time – they shouldn’t remain rigid and fixed. The organization can then maximize its resource utilization, and direct these resources to any new opportunities.

Core Competencies Outside the Enterprise

One complicating factor when addressing core competencies is mission creep, wherein more and more aspects of a business are considered “core”. There is a simple explanation for this: managers are told, and tell others, that every person and function within a business is important. To then say that some functions are core to a business, and others are not, can appear contradictory.

There is also the divide between those products and business processes that are closely identified with human activity, and those that are heavily dependent on technology. In recent years, technology has had a higher profile – a big shift from the 1990s, when core competencies referred mostly to the performance of managers.

Core competencies are often outer-directed, and represent the ability to seek and locate opportunities beyond the enterprise

As well, there is an understanding that core competencies are often outer-directed, and represent the ability to seek and locate opportunities beyond the enterprise.

“Organizations must nurture their core competencies to pursue alliances, acquisitions, and licensing arrangements,” says Pereda. “These pursuits will further build the organization’s strengths.”

This is a critical observation. Traditionally, an organization might utilize a third party to provide products and services that are outside of its core competencies. In this way, it could stick to what it did best. This model still holds, but has changed, in that external providers are increasingly skilled at delivering higher-value and more complex business services.

When this is the case, it becomes even more important for an organization to truly understand its core business, and to assess what processes are best handled by service providers. A proper business model should help define how this work can be divided. 

If the model isn’t built around core competencies, there is a risk that smaller, less critical issues can dominate. If this happens, a company can get into some serious trouble. Poor prioritization can lead to inefficiencies that draw attention and resources away from those areas that are critical to business success. 

“Organizations must nurture their core competencies to pursue alliances, acquisitions, and licensing arrangements” — Victor Pereda

However, a proper understanding of business priorities can free an enterprise to do what it does best, without wasting time and resources trying to become expert in areas where third parties are more capable. With this focus, an organization can also integrate its core competencies into every aspect of its operations, including branding. 

Competency then becomes identity, and contributes to the long-term success of the firm. Critical areas such as quality control and innovation maintain their priority, as do high levels of customer service, which can be delivered with the assistance of a third party.

At the end of the day, an organization must not only identify and promote its core competencies. It must also ensure that every business interaction – whether directly to the consumer, or in a B2B engagement – reflects the values and expertise that make a company unique, and set it apart from the competition.   

If process and employee management is not one of your core competencies, NEARSOL can manage those aspects of your business for you, so you can focus on the areas of your business that are your core competencies. Visit www.nearsol.us for more information on how to partner with NEARSOL.

Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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