One of the difficult discussions I sometimes encounter involves strategic competencies. A strategic competency is know-how that enables you to create value for your customers in a unique way. One of the critical attributes of this know-how is that – as with most skills – the more you use it, the better it gets. Another way of looking at know-how based competencies is that they can’t be taken away from you – not by competition, changes in technology, or the marketplace top 100 asset management firms. True, some know-how can become less valuable as markets change – think of Compaq’s early expertise in building high-quality “portable” computers that weighed 26 pounds (12 kilos) – but usually, this know how can lead to another competency that retains its value over time.
Some companies behave as if their assets are competencies. This is a big mistake. Strategic assets can be physical locations, individual employees, or even legislative situations (such as an airline’s protected status in a treaty governing air travel between countries). Such assets, while strategically valuable, do not appreciate with use – they tend to depreciate. Worse yet, in the case of assets like individuals or legislated advantages, they can disappear overnight. While you may have a successful strategy based on such assets for years, truly successful companies inevitably shift their focus to know-how based strategic competencies, for a much longer lasting competitive advantage.