Theory and practice of competence-based competition

Competence-based competition is a theoretical lens which, when applied to the strategy formulation and implementation issues facing an organization, high-lights the competence building and leveraging activities of organizations (i.e. the portfolio of long- and short-term projects). Further, the lens highlights the particular sources of rivalry among present or potential competitors. The resulting 'pathways' picture emphasizes the present state of the organization's resources, capabilities and competences, their desired states and the set of projects that will most likely allow the organization to get from the present to a profitable future. The time dimension inherent in building resources and capabilities is accented as a key element of competitive manoeuvering strategies. The competence-based competition lens begins with the concept of core competence and asks how competence concepts can be brought to a better-defined level that is more useful for strategic mangers and operational-level managers. The lens is a sensible one for strategy researchers because it demands a logically consistent focus on both internal and external conditions facing the organization. The lens is a useful one for practitioners because it demands that the organization's long- and short-term goals be made explicit, and that the short-term goals be consistent with each other and with the long-term goals. Moreover, the organization's resources and capabilities and the ways in which they are combined should be better understood, and present and desired rivals may be more precisely identified. The structure offered by the theory of competence-based competition is helpful when core competence is a unit of analysis. What is offered is a reasonably systematic and confidence-inspiring method of defining an organization's core competence(s) and how they may be deployed in productive uses. Without such a structure, organization strategy formed with core competence as a centrepiece could easily go awry. The re-focus on lower-level processes which are components of competence also can provide some clues about how an organization can, given an infinitely large array of potential competences, choose profitable pathways. The organization must not only excel at some process that adds value to the customer, but must ensure that the competence underlying the excellence is distinctive relative to competitors' competences and can remain so in the foreseeable future. The process that can identify such distinctive competences (present or desired) is one of rigorous, critical, probing analysis by groups of employees, and possibly by customers and suppliers. Electronic Data Systems, for example, recently undertook an exhaustive process in which dozens of employees scheduled a retreat and first mapped the activities in which the organization engages and then the activities the organization does well. Next, the brainstorming process identified the activities that it does well that competitors do not, and finally the activities that are likely to ensure success - relative to competitors - in the future. Some good news, and much alarming news, quickly became apparent. The organization was performing well in the present market but was not poised for future success. Anxiety followed among the employees who were part of the team as they briefly wondered if they had just mapped the decline of the organization. However, continuation of the probing, critical analysis ultimately defined the new resources and capabilities that seemed most likely to build the desired distinctive competences. The process seems to have worked for Electronic Data Systems, and also seems to be the best prescription available at the moment. The Electronic Data Systems experience underscores the importance of involving employees throughout the organization - employees who know the minutiae of how the organization works and can see through a critical and creative eye - in the competence identification process. The information exposed through such brainstorming processes is, along with identification of present and desired rivals, a vital input to the formation of competitive strategy.