Do you know why your organization is good at what it does? What are the essential abilities that enable you to compete in your market? What is it that sets you apart from others and brings customers back? These are fundamental questions that every leader must be able to answer. Your ability to answer these questions with certainty drives your ability to adapt and address new challenges…but not for the reason you are thinking. Most people think these core capabilities must be leveraged for change. Perhaps, but the more important issue is that you need to know your core capabilities so that they do not become core rigidities.
One of my favorite “shake-up-my-thinking” articles is by Dorothy Leonard-Barton. The article, “Core Capabilities and Core Rigidities”1 is older, published in 1992, but it is a classic in my mind. Leonard-Barton says that “capabilities are considered core if they differentiate a company strategically.” That is, the capabilities that make you distinct and enable you to produce a product or service that is unique among your peers are “core capabilities.” On the other hand, any capabilities that are common across competitors or merely business maintenance oriented are not core.
So, core capabilities are good, right? Yes, they are! They are what Michael Porter would say helps you develop a competitive advantage and differentiate yourself from other players in the market. Leonard-Barton says that core capabilities are a “knowledge set” that falls into four categories: (1) employee knowledge and skills, (2) technical systems, (3) managerial systems, and (4) values and norms. I encourage you to engage people at all levels of your organization in a dialogue to identify the core capabilities that fall into each category. Taking time to explore each category will help you understand what it is that makes you special and thus facilitate the ability to further develop and leverage these capabilities.
There is negative byproduct of core capabilities, though. To help you understand that drawback, let’s imagine a young boy, Tom, learning to be a pitcher. He’s got a strong arm and has discovered the proper grip and arm movement to throw a curveball. In fact, Tom is good enough that most of the players on other teams haven’t seen this good a curveball and can’t respond effectively. Steeeerike! Tom has discovered a core capability and he depends on it quite a bit to win, and win he does! The team is at the top of the standings and Tom is one of the best pitchers (for now). Eventually, other boys in the league develop their skills and learn to throw the curveball, too. They’ve also been learning the fastball, change up, and other pitches, too. Tom, though, maintained his focus on the curveball and it ceased being a core capability—it became a core rigidity. He became too dependent on the core capability and Tom was no longer a league-leading pitcher. He was less than average.
Organizations do this, too. Once they discover what makes them unique, how they “win,” they become hyper-focused on those good things and fail to develop other capabilities. Their core capabilities become so strong in the organizational identity that no one thinks to look beyond what is known and ask, “What do we not currently know that we could?” Or “What challenge should we take on that we cannot address with today’s capabilities?” And “What is the problem our customers have that no one can solve, including us…yet?”
Core capabilities are good! Every organization needs to be world-class at something! They need to be known as the only place to go for a particular product or service. Core capabilities create that ability. On the other hand, you must also guard against creating core rigidities that undermine your ability to change and innovate.
What are your core capabilities? What makes you a strong competitor? At what point do those capabilities become rigidities? Have you passed that point?
1: Dorothy Leonard-Barton. “Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development,” Strategic Management Journal 13 (1992): 111-125.