So, we've been talking all about core competencies and trying to understand the activities and sources of competitive advantage. One reason it's very important to identify the source of your competitive advantage, your core competency, is because the market and the world is constantly changing. For example, if you are Nike and you identify yourself as a marketing or sales company, you probably can be successful in doing more than just selling shoes. If for some reason shoes are no longer needed, or no longer popular in the world, Nike has a unique skill in its ability to promote, market, and sell branding, etc. Think for a couple of minutes about UPS, a global delivery company. You might think of Federal Express, or DHL, or another local company in your country. What are the core competencies of those businesses? Probably all of them have some unique ability compared to the rest of us, related to logistics. They're very good at getting something from one place to the other, they're very good at keeping track of where things are in a process. And they're very good at doing that quickly, efficiently, where they can make money. Less expensive than most of us could do it, right? In fact, I'll tell you a little anecdote, I never want to be the professor that tells you that you will fail in business. The founder Fred Smith of Federal Express, Fed Ex, took a business class about 40 years ago and presented the idea for Fed Ex to a professor, and did not receive a good grade. So I don't want to be that professor, right? They figured out a way to make money and to create a business that added value and identified demand, that the professor certainly didn't think existed. But if you think about it, all those companies ultimately are logistics companies. Let me explain. If UPS, I'll use that example, identifies itself as a logistic company, and perhaps it outsources marketing and sales to some third party, somebody who can do it better than they can do, and they focus in their efforts on logistics. What happens if package delivery becomes less important? What if 3D printing takes off and we make things in our own home, and it's no longer important for many of the packages that are delivered today to be delivered in that way? What will UPS do? Will it simply die? Think of industries in the past that existed, such as the telegraph industry that no longer exists, or the wagoning industry, for travel, which was replaced by the motor vehicle industry. What happens to UPS in that instance? It's much better for them to define themselves as a logistics company and engage in logistics activities, rather than a delivery company, because logistics is much broader. They can sell that service to a variety of providers. Let me give you one example. In the United States and other parts of world, the motor company Ford hired UPS to keep track of its vehicles from the point of manufacture to when it was delivered to a dealership or place where it was going to be sold. Ford Motor Company didn't try to do that activity itself. It bought it from someone else, and UPS is diversifying and going beyond just delivering packages that it takes possession of and delivers themselves. That's just one example. Let me give you another. I used to work for American Express, which is a service company that's all over the world. American Express probably has a core competency in service. In fact, I think they would define themselves along those lines. They have figured out a very effective way to be nicer in providing service and better at other companies than they can do themselves. When I worked for American Express in Mexico, it was clear that customer service was one of the core competencies and at that time there were contracts that American Express acquired from third parties to provide customer service for. One example was Domino's Pizza. If you wanted to order Dominos pizza in Mexico, you call the 1-800 number, and you are routed to an American Express customer service center where your order was taken and routed to the local store. Ticketmaster, the ticket-selling entity In Canada, American Express did the same thing there. So companies that weren't the best in the world at being nice or providing service, doing it efficiently, doing it well, doing it quickly, recognized that they couldn't come up with the resources to do that as well as a company like American Express could. If travel agencies go away or credit cards go away in the format we understand, American Express has a core competency of service. And, we call that, what UPS has done, and American Express, in-sourcing. Taking a core competency and finding additional uses for it in the marketplace. So this is a little bit of the power of the core competency approach. It's a way of identifying sources of success, and then leveraging them to your advantage. Again, think of how you might do this in your own life, in your own career, with the skills that you're developing in your own education. Think about the company you work, the company you want to start, and how you might have a core competency. It might not be in the whole world. It might be in a very small part of your community. But each company should be focused, internally according to this model, at trying to do what they can do best or better than competitors, even if the industry itself is a difficult one to make money in. That's what the proponents of this model would argue we should be doing as business people. The final thought I want to leave with you is not meant to discredit this model but simply say, as powerful as you might find this model to be in explaining or helping you to understand success. There's still one key missing point in my view. As powerful as it is to say identify your core competencies, what this model doesn't do is tell you how to create a core competency. I can't tell you how to do it. I can't say go be the best in the world at starting courier or delivery service on bicycles. Or the best social media network in your part of the world. I can't do that, and I don't think that anybody can. We're using this model alone. It simply says that successful companies seem to have developed core competencies. It doesn't tell you how to do the process. That's the hard part in business. So, keep that in mind. This is not the end all answer. You still have to go do the hard work in starting or maintaining success in your business.
