Core competency is a well-known business concept (C.K. Prahalad and Gary Hamel. “The Core Competence of the Corporation” Harvard Business Review, May 1990). However, sometimes the core competency concept is misunderstood, if we assume that any important/strategic activity is a core competency. From that approach almost any activity is important/strategic for the company and should not be outsourced. For instance warehouse and distribution are important/strategic activities because the delivery of products to customers depends on those activities; legal activities used to manage important matters as well; and so on.
To be sure that we have a core competency, we should ask ourselves three questions regarding that competency or activity:
- Do we have enough resources?
- Do we have enough expertise?
- Does this activity fit with our company strategy?
What is a core competency?
If any of these questions has a negative answer, we must consider outsourcing that activity. Any activity that is not a core competency should be analyzed the convenience to outsource.
Some activities of the supply chain are core competencies and source of Competitive Advantage (CA) for global leading firms: Walmart, Ikea, Dell, Amazon, Toyota, Inditex/Zara, FedEx, etc.
From the turnaround point of view, knowing our core competencies is even a more important matter because the firm is probably underperforming in some of the non-core activities which are adding complexity. So, those activities are able to be improved quickly by outsourcing, and we would be able to focus on fixing the threatened and real core competencies.