The curse of core compentency. When a competitor causes disruption, companies often limit decision-makers' vision and which blinds them to other opportunities

Disruption: The curse of Competency Dependency

Many companies, as good as they may be, engage in self-destructive behaviors. Some companies that seem to be doing well and are on top of their industry can, in a very short time, spiral downward into a disastrous cycle. These companies may possess top leaders and managers, have a proven track record of success, an excellent competitive position, and equally outstanding products and/or services. Why, then, do companies such as these go wrong? This question is one that has plagued academia for ages.

Most companies depend and focus on a core competency for success. But sometimes, a core competency can become obsolete or noncompetitive. Somebody else can be doing a better job, creating disruption, and if a company is unable to figure out what to do, it has become competency-dependent. This becomes a self-destructive habit when it limits decision-makers’ vision and blinds them to other opportunities.

1The Self-Destructive Habits of Good Companies … And How to Break Them AUTHOR: Jagdish N. Sheth PUBLISHER: Wharton School Publishing 2010

Things that lead to the habit of competency dependence:

  • R&D dependence – those who live by R&D die by it. What happens if and when a competitor’s R&D effort produces a product that knocks the competition out of the marketplace?
  • Design dependence – consumer choice is driven not by which product is better made or more advanced, but rather by which has the combination of form and function we call “good design.”
  • Sales dependence – every company depends on sales; some companies develop a sales approach or technique that becomes their core competency.
  • Service dependence – service industries are disappearing and it’s hard to find “non-self” service anymore.

The warning signs of competency dependence:

  • Efforts to transform the company have been futile. Reengineering, reorganization, retooling have been tried and still no good results.
  • The thrill is gone and the company is in a funk.
  • Stakeholders are leaving; investor, supplier and customer loyalty has vanished.

How to break the competency dependence habit:

  • Find new applications where the same competency results in new value.
  • Determine new markets where the same competency remains an asset.
  • Move upstream, downstream – expand the range of your competencies by moving up or down the value chain.
  • Refocus company resources into areas and arenas with more growth and profit potential.

How to prevent the competency dependence habit:

  • Constantly migrate from current-gen technology to next-gen technology.
  • Expand core technology into other products and markets.
  • Diversify competency into different markets or market segments.
  • Grow through acquisition and integration.
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