Understanding Distinctive Competence

July 15, 2000 · by Elisabeth Houston

Do you know your firm’s Distinctive Competence? “What unique thing is it that we do really well? What quality or attribute sets us aside from our competitors?”

Do you know your firm’s Distinctive Competence? “What unique thing is it that we do really well? What quality or attribute sets us aside from our competitors?” Clients often ask us to help them identify this critical characteristic, particularly as they seek to identify the ways in which they plan to grow further. “Who are we?,” they ask. “And, if we plan to merge or grow, who are our best partners in completing or expanding our distinctiveness?”

Many factors create distinctive competence. It may be a function of market niche. Perhaps it is the highly specialized architectural product or design service the firm delivers. Or its quality of customer intimacy and superior service. Even low cost.

Ultimately, it leads to competitive advantage. Identifying competitive advantage can set in process the leveraging of resources and energies and the determination of “best-fit” situations in exploring business growth options. For example, Kodak’s distinctive competence is imaging. Kodak’s understanding of this fact has allowed it to grow into businesses as seemingly unrelated as pharmaceuticals (due to similar processing methods). By exploiting expertise (imaging), rather than viewing itself as in the film business, Kodak moved ahead of other competitors in its initial business and created, thereby, an advantage. Any firm obtains a competitive advantage when it can perform key activities better or more cheaply than others, or both.

Theoretically, it results in firm sustainability. The firm or business that creates this type of advantage based on a competence (not on delivery of a specific product or service) can apply this skill over and over again. It stays in business because it can keep solving new problems, not resolving the same one over and over again, however brilliantly.

“In reality, the ability to learn faster than your competitors may be the only (true) advantage” (Arie DeGeus, Royal Dutch Shell, preeminent strategist and scenario-builder). Nothing is constant in today’s environment; business is blur. The importance of knowing how to adapt and apply distinctive skills overshadows the importance of doing any one thing.

As an example, is AT&T in the same business in which it began? No, but it learned, as an organization, to exploit core skills (communications, consumer billing) to stay ahead of its initial competitors. Their sustainable advantage is the result not of doing something particularly well successively, but rather of doing what the organization has learned to do in constantly adapting contexts.

But isn’t design creativity enough? Michaelangelo didn’t create a firm. Nor did Beethoven. I.M. Pei has, and so has Yves St. Laurent. All have left, or will have left, legacies. Some leading architects and designers will leave work or bodies of work that will endure for generations, others will leave organizations that continue with work that may or may not endure. Those organizations will grow and adapt in the work they perform, over time transforming themselves. The most successful will exhibit a competitive advantage related to distinctive competence: again, the ability to learn to do certain things consistently, creatively and well in a way that positions them for leadership in their field.

Distinctive competence is created by firms and organizations, not individuals. “Star” work may last forever, but cannot be replicated by a new generation. Distinctively competent work, however, builds continuously upon itself to solve new problems, and the competence itself comes to reside in the qualities and characteristics of the organization that supports the individual performance. Is this competence and the sustainability that result preferable to the often-dazzling brilliance of stardom? You decide.

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