Core Competence and the Competitive Edge

Resource-based strategic planning proposes that a firm can gain sustainable competitive advantage through the development and harnessing of its intangible assets, notably its organisational capabilities, knowledge, expertise, skills and experience that enable the firm or practice group to frame and pursue strategic objectives.    For the last couple of decades, the expression “core competence” has been used to describe a firm’s (and its lawyers’) activities, abilities and talents that allow them to perform at least the same level as their competitors or – preferably – at a superior level.

However, the term “core competence” has lost much of its resonance through over-use and nowadays seems to imply little more than that the firm is able to perform competently.  Just being adequate may not be enough for future success, so it is worth reminding ourselves of the three vital attributes that make up a firm’s core competence.

  1. Core Competence must imply sustainable value.  The first attribute is that the holy grail of strategy is the gaining of sustainable competitive advantage.  Nothing is for ever, and no competitive advantage can last infinitely.  However, sustainability implies a long term game and accordingly the development of skills and capabilities within a law firm needs to be focussed not just on this year’s performance, this year’s compensation or this year’s short-term objectives, but on a longer term view of the competitive landscape.  Very few law firms seem to be focussed on value creation, but it is worth remembering that any ‘open-market’ valuation of a professional service firm is based on at least a five year forward view of the firm’s expected profit line.  It is well worth pursing the same features that would ensure that the market would find your firm valuable, even where the firm’s ownership and succession strategy remains internal.
  2. Core competence should enable a firm to outperform its rivals.  The second attribute or core competence is that it ought to allow the firm to distinguish itself from its rivals and to outperform them.  In a professional sector containing many look-alike firms, being the only show in town is difficult to achieve, but many firms have found that their specialist skills, tailored solutions, and know-how resources have enabled them to become preeminent in their chosen fields of operations.
  3. Core Competence must have Strategic Importance.  The third element of core competence is that the capabilities should be strategically valuable, not just for value creation and enhancement and not only to enable the firm to become and remain competitive.  In brief, core competences should help the firm with its recruitment, retention and succession strategies, should enhance the firm’s brand and reputation and should enable the firm to pursue and gain better and more profitable clients.

Hence, the expression ‘core competence’ is not just synonymous with general skills, but is both broader and deeper, encompassing such words as knowledge, talents, specialisms, distinctiveness and competitive capabilities.  It is well worth asking the question “what makes our firm so special that clients will readily engage us in preference to our rivals?”