So, when we talk about competitive advantage,
you may have heard the phrase, core competency.
And this is a phrase that's important to be familiar with if
you're going to work in business.
What does a core competency itself look like?
Well, what I want you to do for
a couple of minutes is to think about businesses with which you're familiar.
And try to think about what's unique about them.
What they do better than their competitors.
What they do internally to add value to customers.
How it is that they're able to charge a price that
allows them to earn profits in the marketplace.
When we're talking about core competencies,
we're talking about activities that companies engage in and do better,
more efficiently, less expensively, and that add value for customers.
So it's very important for me that as we get started,
you understand that a core competency is an action, or an activity.
An activity in which the company engages.
It's not something static that they possess or own.
It's an activity and ability that they have.
So, let's talk about that for a few minutes.
How does this core competency view
differ from the Porter's five forces view that we looked at previously?
Well first of all, if you recall,
Porter's five forces is an external view of the world.
It says that companies are successful based on their external
industry environment.
[COUGH] This is an internal view of companies.
If the external view says you need to be in the right neighborhood
to be successful, [COUGH] this model says you need to have some heart.
You need to have something internal in order to be successful.
It doesn't even matter what industry you're in, this model says,
you can be successful despite negative forces,
in terms of the Porter model of the five forces.
And so this is an internal approach.
This is an approach trying to help companies develop,
internally, core abilities to compete.
Core abilities to add value to customers.
And this model actually became quite popular in
the 1980s when a group of consultants and academics and
others reacted in some ways to Michael Porter's five forces approach.
And said, hey, there are successful companies even in unprofitable industries.
How do we explain that?
And what they did is they actually took one of Porter's depictions,
which is called the value chain and
used it to demonstrate how internal competitive advantage can be created.
So if you're starting your own business, pay close attention because what you want
to do according to this approach, is to try to find some uniqueness.
In fact, I would argue you pay attention to this even just in your own careers and
your own lives.
Because you need to find some core or unique ability that you have or
able to do better, more efficiently,
less expensively than your competitors and that add value.
[COUGH] What we'll do in the next part, is we'll look at this value chain and
try to understand a little bit more what we're talking about
in terms of core competencies.
Doug E Thomas, Ph.D.Professor
