The Core Competency Conundrum
By James A. Alexander, EdD.
Don’t be surprised or angered or embarrassed if customers don’t see
your PSO as possessing some unique capability of high value today.
Core is Good
For years strategists have urged executives to ‘keep to your core,’ ‘stick to
your knitting,’ define what you can do really well and try to outsource
everything else. This is solid advice that has helped many an organization redirect
its resources and fine-tune its focus to extract both efficiency and
effectiveness internally. This is all well and good, but it is not enough. The
downside is that often your core competency is the same as your top
competitors’ core competency. So unless your core competency is seen as
markedly better externally (in your customers’ eyes, not yours) you have no
marketplace differentiation, zip advantage, nada uniqueness. In other words,
your organization is a commodity.
Distinct Is Better
The key to marketplace uniqueness is not core competencies but distinct
competencies–capabilities or attributes that make your company clearly
superior to your competitors in things that customers care about (hence,
they will pay for them). Distinct competencies are what strategy is all about.
Ideally, distinct competencies are difficult and/or time consuming to imitate
(e.g., patents, industry benchmarks/best practices data, powerful brands).
Therefore, they build barriers to entry, dissuading potential newcomers from
targeting your market and preventing existing competitors from copying your
approach, as the potential value is outweighed by the high cost of time and
effort. True distinct competences yield more, better, and easier sales and the
profitable growth that results. From a big-picture perspective, business focus
should strongly favor the development, growth, expansion, and protection of
your distinct competency, as it is the secret sauce, the get-out-of-jail-free
card, the force field that protects organization sustainability.
Professional Services as Differentiator
In many product companies, just having a viable professional services
capability can provide this distinction. Strong professional services improve
win rates by embedding more credible horsepower in the pre-sales team.
Solid professional services build customer loyalty as strong services increase
product performance. In-depth professional services also allow a business to
have a true solutions capability (all solutions are services-led), gaining a
larger share of customers’ wallets while building executive-level bonds that
resist competitive inroads.
My research supports that this philosophy is catching on, as professional
services revenue is growing at two and one-half times that of products and
traditional product-support services. If your organization does not have
robust professional services capabilities you are not only missing out on
profitable growth, you are also making yourself vulnerable to competitive
Distinguishing Your PSO
If you and your top competitors already have professional services
organizations, how do you drive distinction? Depending upon your
comparative market position, several opportunities exist for differentiation.
Perhaps your depth and breadth of services offerings may be a potential area
of strength that your competitors cannot match. Maybe density and scale
provide you the best opportunity. There are lots of possibilities. For many
PSOs, however, the best chance for distinction is in creating a superior
reputation for relentless reliability–doing it right the first time, every time. In
an industry where customers often describe solutions implementation as ‘hit
or miss,’ ‘always a gamble,’ ‘geez, I hope they get it right,’ a professional
services brand of utter dependability offers incredible promise.
So what do you do?:
1. Conduct in-depth market research to learn how your PSO is perceived in
the marketplace compared to your competition, and learn of the one
important area of current or potential differentiation. Don’t be surprised or
angered or embarrassed if customers don’t see your PSO as possessing some
unique capability of high value today. That is the rule not the exception in
our industry, and thus presents a big opportunity.
2. Build a ‘plan for distinction’ outlining what is needed (e.g., new skills and
knowledge required, alliances created, systems developed, etc.) and the
steps to bring about competitive advantage. Most organizations should think
in a one-year to three-year time frame. Of course resources need to be
reallocated from other less valuable projects to support this strategic
3. Monitor metrics, manage momentum, and master the motivation as your
people see the benefits of true competitive advantage.
Remember that distinct competency is only defined from the customer’s
perspective–something with substantial value that no one else can provide.
It is a difficult status to achieve, but I can think of no other objective more
Jim Alexander is founder of Alexander Consulting, LLP, a management
consultancy that helps product companies create and implement professional
services strategies. Alexander is also the U.S. Department of Commerce’s ebusiness
subject-matter expert for the Inter-American E-Business Fellowship
Program and the services pundit for the IBM Global Services 2003 Headlights
Program. A services industry thought leader, he has published scores of
articles, white papers, research studies, and books, his latest being SBusiness:
Reinventing the Services Organization (co-authored with Mark
Hordes). Jim may be reached at 239-283-7400 or
Copyright Alexander Consulting, LLP.