Do you go to your exterminator to fix a cavity? Is your landscaper doing your taxes? Hopefully not.
While these are extreme cases, they do represent some of the discussions surrounding core competencies and corporate focus that have gone on for years and continue today. Core competencies are what make your company unique and give you a competitive advantage. They are those actions that define the uniqueness of your company and deliver the greatest value to your customers.
Understanding core competencies is such a critical business issue that educational facilities such as New York University are offering a Graduate Certificate in Core Business Competencies.
Determining Your Core Competence
In 1990, the Harvard Business Review published an article by C.K. Prahalad and Gary Hamel that continues to be one of the most commonly quoted articles on this topic. The authors provide three "tests" to determine if something is a core competency:
It provides potential access to a wide variety of markets
It should make a significant contribution to the perceived customer benefits of the end product
- It should be difficult for competitors to imitate
The article remains a classic as its premise remains sound. Similar lists of "qualifications" for competencies have been published since then and remain relatively consistent.
But some things do change, and in particular, technology.
Recently, Fast Company published an article Death to Core Competencies. Using its top innovators as examples, the article discusses how these firms moved beyond just manufacturing the product and into other areas. For example, Nike moved from sportswear manufacturing into apps, wearable devices and web services. Using business agility and new technology, Nike was able to move into new, adjacent and related markets and product areas.
However, this expansion doesn't mean you need to change your internal activities and go it alone. "Just as Google needed Android to attack mobile and Apple needed Siri to pursue search, thriving businesses need to constantly evolve, either through partnerships, new talent, acquisition - or all three."
"Nike wasn't necessarily equipped for its deep dive into digital. It's why the company worked with Apple for some of its earliest Nike+ products, and why it turned to outside partners for help with the FuelBand's industrial design and user experience." In addition they did acknowledge that you need to manage how far you stray from your core.
All of these examples focused on providing access to a variety of markets, making a contribution to customer benefits, and making it difficult for competitors to imitate. How can P&C insurance apply these examples to their core, allowing them to innovate?
What is your Core?
Ask yourself is our company's business developing apps or portals? Is our company focused on the development and maintenance of leading-market software? Is what we’re doing innovative and focused on our core business of risk management? Are our efforts leading to great customer experience and improved profitability? Are we introducing new products to meet our customer’s changing behaviors and expectations?
Insurance companies do need a wide range of capabilities to meet all their operational and strategic needs. However, the most strategic and logical roadmap may focus on partnering to get the job done. It is a matter of utilizing your capital and resources most effectively to lead to the desired outcome.
At a recent Innovation Group roundtable of insurers, analysts, and others took on the issue of core competencies and the role of strategic partnerships. According to one participant, some insurers do have an aversion to going to "outsiders" for assistance whether or not they are limiting their agility and stunting the pace of change. Utilizing a partner requires a cultural change. Also important is the fact that early adopters of a partnership methodology are already achieving benefits from partnerships and make it an integral part of their corporate growth strategies.
Another contributor at the event pointed out that value is more than a dollars and cents issue. Value extends to the ways partners can support corporate visions and goals by providing the tools, technologies and resources to get the job done faster and more efficiently.
This concept was corroborated by Kimberly Harris-Ferrante, Vice President, Distinguished Analyst for Gartner in a video about the Future of Insurance on the Innovation Group website who said: "We're looking for ways to allow the IT department to do more projects, focus their resources on things that are more strategic. Part of the answer there is looking at alternative models where we can shift things that are either the commodity or difficult to do to third parties, but it's also finding technologies that are easier to implement that will allow business analysts to do configuration without a lot of hard code that has to be generated and long and time consuming projects."
So if you partner on non-core activities, what do you gain? First, you can better establish a vision and focus for your organization so that you can innovate, differentiate and grow your business.
You also get resources and project management that don't drain your current resources. Creating and managing a major project is both time consuming and expensive. By having a partner handle this non-core activity, you get to devote time and resources to your primary activities and let someone else handles development, testing, and deployment followed by maintenance.
Finally and perhaps most importantly, you gain innovation. By working with partners who are true experts, they keep a finger on the pulse of change and trends. It's what they do for a living after all. Combining your vision with their expertise results in a dramatic boon to your company and makes you future-ready.
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