How core competencies can kill innovation

plush toy

For decades, I’ve been held hostage in executive strategy meetings where senior management pounded away at “sticking to our core competencies” so as to avoid the risk of fragmentation. I understood the principle but, having a thriving-on-chaos personality, I was never really comfortable with it.

Many senior managers are too rigid in their definition of core competencies . As a result, their organization’s ability to innovate falls within such a narrow band that there is no room remaining for creativity. Even worse, when there is some small degree of innovation, it is promoted as seismic change — effectively communicating to the employees that what in actuality is glacial innovation is great!

The road is littered with enterprises that were paralyzed by sticking to their core competencies or core processes at their own peril. Of recent note is Toys R Us, having just filed for bankruptcy protection. While part of this was related to missteps by their investment partners, the company has also had an epiphany about how they’ve positioned themselves in the market.

The knee jerk reaction is, like in many segments, to blame Amazon for eroding their retail and online business.  But there is something more fundamental about how their true customers, children, are reshaping that core competency.

Toys R Us operated in a world where children’s play time was considerably longer than it is today. According to their research “children’s free time has dropped by 25 percent since 1981 and kids today spend 50 percent less time in unstructured outdoor activities than children in the 1970s.”

This phenomena poses a bigger model problem than Amazon cannibalizing the toy market. It tells us that even if they were able to enhance their online business to keep pace with Amazon, the fundamentals of the market have changed radically simply because kids don’t play as much.

If your core competency is giving children and their parents a variety of product choices for play time, and they now spend half as much time playing as in the past, there’s going to be a revenue problem even if the e-commerce and bricks and mortar selling options are optimized.

So what to do when the options for innovative reinvention are so limited in the segment?

In this case, Toys R Us has done what many companies do: stick with the same core competency but change your tag line to reflect innovation. So the new business mantra will become “Today We Play” to better reinforce what the company describes as “a call to action for people to get up and do something.”

I’ve never been the biggest fan of  “innovation by tagline,” especially when a 3 year old is the end customer.

As with many companies that have also fallen victim to e-commerce category killers, it seems to me that there needs to be something much more disruptive than simply telling parents the obvious —  that their children are playing less.

Those of us in the IT field can witness the opposite of the “Toys R Us dilemma” which can be equally as risky.

I was debriefed by a VP for Digital Services about a meeting he had with a very well-known CRM platform.  The meeting was to discuss how to best utilize some of the features of this legacy platform for better analysis of the data the sales team was inputting — clearly this company’s core competency.

Despite the need to find ways of better utilizing the original core product, it was almost impossible to get this company to stick to the core CMS product that we needed to run our business. The conversation constantly gravitated to the notion that this was no longer a CRM platform, it was simply a component of a portfolio of cloud-based sales and marketing products that happened to draw from the “old” CRM.

The company was hell bent not to be painted as yet another CRM company in a market where multifaceted insight was critical. The talking points were well rehearsed and unwavering.  This was especially important given that their customer base could buy these peripheral insight services a la carte, disintermediate the incumbent and leave them as the Toys R Us equivalent of just a brick and mortar toy company. The entire exercise sounded like a shameless upsell.

The trick for marketers and business strategists is in this delicate balance: How do I look contemporary without sacrificing the brand equity I built in a previous more traditional business life?

So how does your enterprise balance more traditional core competencies with competitive advantage by standing out in the market through innovation ?


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  1. Lynn Christofferson says:

    I say, enable/cultivate innovation as a core competency.

  2. Hey there….No truer words have been spoken…Hope you’re well !

  3. Great article. Several thoughts struck me as I read it.

    I’ve seen a large number of organizations that completely misread the concept of Core Competencies. They think, “abc has always been important in our industry…we’re pretty successful…so abc must be one of our Core Competencies”. But they fail to follow through on two counts. First they never calibrate their actual performance against best-in-class on the basis of speed, cost, quality. They just convince themselves they’ve identified a Core Competency. Second they never validate that the performance (speed, cost, quality) matters to customers. If customers can’t see the difference, then the difference doesn’t matter because the customer cannot make a decision on the basis of something they cannot see. Third, they never look beyond known competitors and business models for Out of Context challenges. You may have the best Taxi dispatch radio system but what happens when Lyft enters you market? Or in your example, you may be the best toy store but what happens when kids play less?

  4. Michael…Thanks…great feedback ! …

    I just heard a speaker at a healthcare technology conference say that “the lightbulb wasn’t the result of improvements on the candle”.

    Seems to fit wth your metaphors !

  5. Ivo Prochazka says:

    You would have to take people out of the equation. It is inevitable that people will end up in their comfort zone by minimising risks thinking that the current market conditions will last for good. Who has got the courage to potentially lose all they have by innovating? Only lunatics I guess. I am surprised that archaeology is not a strategic capability of business management. History is full examples of civilisations, states etc. failing. If you overlay past knowledge with analysis of current data (big data, AI) you can proactively look for signs that there are problems ahead.

  6. Ivo,

    I love the thought of a required course in archaeology in business schools !


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