A recent HBR blog piece — Do Customers Even Care about Your Core Competence? — sets the stage for bringing customer experience to the fore in designing talent management initiatives. The focus of the blog piece is that companies all too often think internally when identifying core competence rather than focusing on how core competence is perceived by customers. A great example is Apple. Looked at internally, core competence appears to be related to technology and the ability to lead the market in advancing new technologies in the digital market. To the customer, Apple’s core competence is the ability to create committed user engagement. It is this customer experience which continues to grow Apple’s market position and maintain its product price levels.
Another example is Netflix. For for a decade this company excelled at just-in-time mail delivery of DVDs. From the customer perspective, the core competence was convenience of film viewing experience — a competence which could seamlessly be applied to electronic rather than physical delivery of movies.
Interestingly, where the core competence viewed from the customer perspective loses its value, the company suffers big declines in results and may even go out of business. A great example of this is Kodak. For years, its customers got what they expected: affordable, simple-to-use cameras and convenient channels for developing film. When the photography industry went digital, Kodak couldn’t compete with cell phone cameras which are available without extra charge, produce images that don’t need to be printed and transmit the images instantly by text or email. At the same time, Kodak, with its core competence grounded in simple cameras, couldn’t challenge Nikon and others in the high end digital camera market.
This understanding of core competence has important implications for talent management. Both developing leaders and growing talent have at their center lists of competencies which define both leadership behaviors and capabilities for specific roles. Where these competencies do not support the company’s core competence as perceived by the customer, the talent management initiatives that are grounded in these competencies will not align with the real needs of the business. If Kodak had understood this, at the start of the digital revolution, it would have transformed its business around its customers’ expectations of simplicity and convenience. And, long before that, it would have targeted leadership behaviors and role capabilities enabling its leaders and broader talent to think in this direction.
This is no small point. All of talent management — recruiting, deployment, performance, succession, development and rewards — is linked to the competencies adopted by the business. The message is clear. Don’t just work with experts and their competency libraries to select your competencies. Start by understanding your business from the outside in. You need to ask what your customers expect and how can you use competencies to deliver it?