Core Competency

The concept of core competency of corporations was introduced by C.K. Prahalad and Gary Hamel in a Harvard Business Review article in 1990. They wrote that a core competency is "an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity." Put simply, core competency is a deep proficiency that enables a company to deliver unique value to customers. It embodies the corporation's collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies.

Core competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. It is hard for competitors to copy a company's core competencies. Understanding its core competencies allows a company to invest in its strengths and eliminate its weaknesses so that it can differentiate its value proposition to its customers on one hand and set strategies to unify the company, on the other.

One of the key tenets of crafting corporate strategy while taking the core competencies into account is to work on building new core competencies when existing cores are working well. In tactical terms, this means that a company should never get complacent with its success, should constantly monitor the marketplace, and should frequently disrupt itself, before the competition does.