Most CEOs understand that one of their most important roles is to be the Chief Strategist for the company. At the same time, many CEOs struggle with the Strategic Thinking Process and have difficulty in even knowing where to start.
A good starting point is the identification of a company’s Core Competencies. These are the unique capabilities that a company has developed over the years that provide high value to customers and create competitive advantage in the marketplace. Core Competencies tend to be processes that operate independently of specific individuals and thus can stand the test of time.
In defining Core Competencies, it is helpful to first define why customers purchase products or services from a company. Then, by working “backwards”, the CEO can zero in on the internal processes that are driving value to customers.
A good visual to use to guide the analysis is to think of the company as a sphere. Customers are located outside of the sphere and are looking for value on the surface of the sphere, which can be described as the “customer interface.” The internal volume of the sphere is the company itself, containing people, assets and the processes called Core Competencies. The trick is to separate the perceived value on the part of customers from the underlying processes that are driving the value.
A good example is Wal-Mart. It is generally accepted that the primary perceived customer value is low price. This value has driven the rapid growth of the company for decades. Few customers, however, understand the real reason the company can offer such low prices. Most management experts point to the world-class Logistics System of Wal-Mart as the real Core Competency of the company.
With over a million distinct items for sale at each store, sourced from virtually every country in the world and then distributed to tens of thousands of stores around the globe, it would be easy for such an enormous system to get bogged down by its own weight. Wal-Mart, however, has turned this potential liability into its greatest strength. The Logistics Core Competency drives the customer value of low price at the customer interface.
Once the CEO identifies the company’s Core Competency, the crucial question becomes: “How do we strengthen our Core Competency to the point that it cannot be imitated by competitors and is without substitute in the marketplace?” Specific tactics can then be deployed by the management team to “build the moat around the castle” protecting the competitive advantage created by the Core Competency.
Tom Jackson is president and owner of Executive Forums of Charlotte, one of 50 nationwide offices of Renaissance Executive Forums, Inc. based in La Jolla, California. Tom leads over 50 business executives in four independent peer-to-peer advisory boards. Contact him at 704-367-0011 or TJackson@ExecutiveForums.com.