01 Mar 2016 19:06 IST

The paradox that is core competency

You need to do new things to excel in what you have been doing

“That’s not our core competency,” said the boss. Brajesh felt silent.

Three months earlier, he had joined Modern Machinery Ltd, a company making machines for the manufacturing sector. During its existence of over four decades, this family-owned company had established itself as a well-known player in India’s domestic market by building machines at much lower cost than the imported equivalents. Its customers didn’t need the high-end features and very high speeds offered by the imported machines.

Brajesh was recruited by MML’s owner and boss in keeping with the trend of getting talented young people on board. A mechanical engineer, Brajesh had obtained a Masters in robotics. He had a couple of years of experience in other machinery companies before his post-graduation.

This new hire observed that MML was falling behind the market needs for high-speed-yet-flexible-machines which also have a low set-up time. MML could also not cope with service support for its growing base. Developing a new line of machines to take on foreign competition was going to take time.

Install IoT devices

Brajesh felt the company could retrofit installed machines with IoT devices and networks (sensors embedded in machinery and connected to a network) to improve performance and provide timely and predictive maintenance. He was convinced that for many customers, this would be a good alternative to junking existing machines and investing in expensive imported ones.

It was a win-win situation. MML would gain revenue and better insights for developing new machines. Brajesh had worked out a plan for trying out his IoT retrofit ideas, and had even prepared a rough estimate of revenues and costs for retrofitting a good part of the installed base of MML.

But MML’s owner had a point when he said retrofitting machines with IoT devices and networks wasn’t the company’s core competency. It had neither the knowledge of IoT devices, nor the processes to serve customers via the Internet. Its customers too were more comfortable with traditional methods like phone calls, emails and personal visits for fixing things.

MML’s owner was an engineer who took pride in having developed early models of several machines himself. He would often jump in with ideas when his development or service engineers grappled with problems.

What is core competency?

Core competency is competency related to the business core. One can say buying and selling is core to every business, yet many companies like MML can’t claim the same.

MML might say developing and manufacturing machines are its core activities. Expertise or domain knowledge related to the mechanics of those machines would have to be its core — it is something that gives the firm a competitive advantage. MML survived and grew because of its core competency. But, can it continue to do so when times are changing?

Competitive advantage not enough

It is clear that its existing core competency is not going to be enough for MML. Forget IoT-based services — how will it continue to upgrade its core competency without having any real inputs from the field? How will it write specifications of new machines that customers would want? Will it base them on its competition?

It may be able to buy technology, but it will be relying on someone else’s insights. Shouldn’t MML consider insights into customers’ needs and how machines need to work as a necessary upgrade, to build on its traditional core competency?

Core competency is powerful concept. When a company manufacturing automotive components gets into the hospitality business, it is quite easy to see that is it going away from its core competency. It will have to build a new core.

The way it is practised, core competency is a set of activities in which you are comfortable. But being comfortable can’t be a goal in itself! Not having core competency shouldn’t be an excuse to not do something that makes sense.

If core competency is supposed to confer a competitive advantage, it can’t be static. Brajesh’s ideas can therefore help enhance MML’s core competency.

It’s a paradox: You have to carry out apparently non-core activities to enhance your organisation’s core competency. It takes a capable leader to master this paradox.