What is the difference between core competency and distinctive competency? And how can firms gain a distinctive competency?
1. To start with, let's clarify the idea of "competency" in a business context. A competency in a business context is an internal activity that a company performs better than other internal activities it performs.
I'll use Hush Puppy Shoes and Earth Shoes to illustrate points as we go on, and this point--the meaning of business competency--is illustrated by saying that a competency Hush Puppy Shoes has is the competency of providing leather upper-shoe construction at competitive prices within the mid-value market.
2. With "competency" being an internal activity a company performs better than other activities, a "core competency" is a competency (a company's well-performed activity) that is central and integral to:
- fulfilling a company's strategy,
- enhancing a company's competitiveness,
- increasing a company's profitability.
So, if Hush Puppy Shoes has a business strategy of providing quality leather shoes with the most competitive resources and at the most competitive price, then it can be said that a core competency of Hush Puppy Shoes is the core competency of making shoes constructed of leather and suede uppers.
3. With "core competency" being a competency (activity done better than other activities) that is integral to the fulfillment of a company's objectives in strategy, competitiveness and profitability, a "distinctive competency" is a core competency that provides "competitive value" and that the company performs better than its rivals.
Here, our understanding of the three competencies--competency, core competency and distinctive competency--bogs down until we know for sure what "competitive value" is.
4. "Competitive value" creates "competitive advantage." Competitive value derives from an internal activity that a company performs better than its rivals so that the company gives the customer a higher value product or a lower price while enhancing company competitiveness and increasing company profitability.
For example, if a rival of Hush Puppy could provide a shoe crafted with equal or greater excellence made of leather uppers and leather insole, whereas Hush Puppy provides micro-fiber "textile" insoles, the other company would be able to claim competitive advantage because of the increased market competitiveness and competitive value deriving from providing a shoe of equal or greater excellence with competitive pricing yet with greater value for the customer. In other words, also providing a leather insole would generate competitive value because those seeking leather insoles and leather uppers will always buy from Hush Puppy Shoes' competitor thus giving this competitor competitive advantage.
Competitive value can be delivered as a cost advantage, where similar goods are delivered at a lower cost to the customer, or as a differentiation advantage, where similar goods are delivered with a quality advantage (e.g., leather insoles).
5. To return to "distinctive competence": A distinctive competence in an activity that is a core competency--related to strategy, competitiveness, profitability--that is competitively valuable and that the company performs better than its rivals.
To illustrate, Hush Puppy Shoes has a rival in Earth Shoes. Both provide shoes of excellent craftsmanship. Both offer competitive pricing in the mid-value market. Both provide shoes constructed with leather uppers. Hush Puppy Shoes provides micro-fiber "textile" ( synthetic materials made with unregulated nanotechnology) insoles. Earth Shoes provides leather insoles. Earth Shoes has competitive advantage over Hush Puppy Shoes because leather insoles provide competitive value. Therefore, Earth Shoes has a distinctive competency--a core competency that is competitively valuable that the company performs better than rivals--in providing leather insole along with leather upper construction.
The best way for any business to generate profits is by identifying its competencies, or its strengths, at drawing a clientele, keeping it, and making it come back. The competencies may be found in the marketing, the strategic planning, the quality of the product, or the popularity of it. Either way, it is important that these competencies are recognized and used to the max to ensure gains.
Core competencies are the strengths that have been identified in the company that go hand in hand with its business model. Again, this may include the quality of the manufacturing, the low return rate, customer satisfaction surveys, etc. Whatever helps the company progress from its "core", that is, its mission, vision and goal, is eponymously referred to as a "core competency".
The distinctive competencies are basically core competencies that are unique and that make that company rank higher at the competency than their competition. It has to really set the company apart. In this Internet-based society, a distinctive competency would be social media influence, presence, and recognition. Think about how much more distinctive is Dr. Pepper, the root beer soda, in terms of marketing compared to, for example, Piggly Wiggly's version of root beer soda, Mr. Pig. This example shows just one dimension of distinction.
Unfortunately, those companies who are richer and have better media control, quality control, and exposure to the public will fare more distinctive at least in sales and marketing than the smaller, struggling company regardless of the quality of the product. An example is the ongoing struggle between independent microbreweries and the Anheuser-Busch company (owners of Budweiser and a million other American brands), who cannot progress as effectively as the big Budweiser company.
Fortunately, the quality of a product often speaks for itself. The point is to ensure that the word to mouth and other alternative promotions allow the small businesses to flourish.