Originally posted on Compass Consulting & Solutions – Paul Nottingham
Core competence is something that most successful companies stick to in order to remain profitable. 
It allows the business owner/operator to maintain profit margins and to provide that unique value proposition that differentiates them from their competition. Many fledgling business owners struggle with determining their own unique value proposition early on, and this may lead to straying from their core competency on a search for the magic bullet to help them be successful.
Core competency is a relatively new term in business and has only been around since 1984 when an article in the Harvard Business review introduced the term and its relevance to business success. As such, many folks have not heard much about it, and how important it is to your business growth and survival.
Walmart for example is a great example of managing their business to their core competency (their major strengths) and as such they beat their competition handily day in and day out. What is their Strength? Primarily, Supply Chain management. Here is an excerpt from a report in Apptricity that describes a Wall Street journal article about how Wal-Mart and Kmart both started at the same time in 1962 and up until approx. 1987 Kmart was the 800-pound Gorilla of the Value superstores.
There’s no better story for explaining the real value of mastering supply chain management than the story of Kmart vs. Wal-Mart. Born the same year, 1962, and aimed at serving the same cost-conscious classes, Kmart appeared for the first 25 years to be the clear winner. It had twice as many stores as Wal-Mart in 1987, and $25.6 billion in revenues to Wal-Mart’s $15.9 billion
A Wall Street Journal report confirmed what many consumers in places with Kmart stores long sensed: even after a trip through Chapter 11 and a decade of shrinkage after emerging from it, Kmart never quite figured out how mastering the management of its supply chain could transform it, Cinderella-like, from a retailing urchin into the belle of the ball in consumers’ eyes.
While Wal-Mart very early on focused on controlling costs by mastering its supply chain in innovative ways that included sophisticated, pioneering use of product, consumer behavior, and sales performance tracking technology, Kmart was late to recognize that such technology could be useful, and never really bought totally into the concept.
The retail giant Walmart figured out a core competency that allowed them to do what their competitors in this instance Kmart did but in a much better way and grew their business and took market share to the point of eliminating Kmart as a serious competitor.
I have mentioned in articles before I was in the Food Distribution sales industry for over 25 years. In that time, I learned a thing or two about playing to your strengths in the Restaurant industry. I had a very successful small local chain of Pizzerias that was looking to add a desert menu and wanted something totally different from their competition to really set themselves apart. 
Now, I know what you are thinking…Good on them for looking at ways to set themselves apart and create a niche market right?? Wrong!! I was a broker at the time and represented several dessert lines offering medium to high quality dessert items that were premade as well as quick prep ingredients that allowed for simple add water and bake options. This chain would have offered me a great opportunity to increase my line counts in the distribution warehouses and move some extra product that we desperately needed. After meeting with the local food service distributor and the customer I found out more about their operations and deduced that a very simple solution was their best option: Make dessert pizzas with cinnamon and sugar and some light icing to stay within their core competency and to eliminate waste and excess inventories. This consultative analysis didn’t help grow my lines in the Distributor warehouse but at the end of the day, it proved to be the right approach to the situation. People don’t go to pizza joints for dessert, they go for pizza. By coaching them to use products they already had in house, and every employee knew how to use, there was no learning curve, no real additional ingredient costs and eventually they settled on a simple cinnamon twist concept with light icing that is a huge hit and cost very little to produce. Sticking within their core competency allowed them to provide a new idea, with minimal risk and provided a value add to increase profits…Win/Win.
Examining your core competency is crucial to determining what separates you from your competition and how you can gain the edge in displacing business from your competitors and make it your own. By always evaluating day to day operations, and future growth against what you and your company do best, you will minimize risk and should see better returns on investment.