I am Marleen Dieleman, Associate Professor in the department of strategy and Policy at NUS business school. In this video, we are going to look at how focusing on core competencies helps leverage business success. Core competencies are bundles of elements, which help you to compete.
You might think of them as the DNA of an organization. They are not one product or one technology. They are a collection of skills and resources working together. To be really effective, they shouldn’t be too easy to imitate.
Let’s take the example of British luxury goods brand Burberry. Back in 2006, the global luxury goods industry was seen spectacular growth, but Burberry on the other hand, was not. To turn the company around, a new CEO was hired.
Angela Ahrendts, and an America, an unlikely hero to lead the revival of this old British firm. When Ahrendts came on board, she made an assessment of what was wrong with the company.
“We were doing so many different things and were selling a lot of different products, but none of it was exclusive or compelling”. Burberry had lost its way and has nothing to distinguish itself.
Burberry was established in 1856 by Thomas Burberry, a leading innovator in textile manufacturing. His company invented a new method for producing textiles called Gabardine. That were warm, easy to wear and water-resistant.
In 1911, the Burberry firm designed the clothing and tents used in the first successful expedition to the South Pole. A few years later, they created the clothing for the first-ever transatlantic flight. And, during World War 1, Burberry came out with its all-time classic trench coat.
In the decade followed, the trench coat grew to become Burberry’s the iconic product. Movie stars and Royalty warden, and in the 1970s, anyone who was or wanted to be classic had a trench coat.
When Ahrendts took over in 2006, Burberry had expanded into a wide range of luxury clothing and other goods. But, where were the trench coats?
They remained the company’s most famous product but were neglected. At one top-management meeting, Ahrendts noted that even the company’s bosses didn't wear them.
Ahrendts declared that it was time for Burberry to both modernize and go back to its roots. Burberry needed to build upon its history, reinventing the brand around its core competencies of iconic, innovative clothing, especially coats and outerwear.
Targeting younger customers in the emerging market, she merged classic designs with modern style and launched campaigns on digital media to market them. In a 2010 interview with Wall Street Journal, she reviewed one of the influences on her strategy. “If I look to any company as a model, it’s Apple. They’re a brilliant company, working to create a lifestyle, and that’s the way I see us”.
Burberry today continues to put quality and heritage at the heart of its brand. What made the company famous is core competencies of quality and craftsmanship, unique resources, heritage and brand, is back at center stage.
This package of resources and skills is rooted deeply into the company's DNA. These are not easy to imitate but when nurtured and used wisely, they can be priceless.
Competing based on their core competencies helped Burberry to get an advantage and rebuild its financials. It also opened up a range of new markets including the emerging markets and young people.
Building and maintaining core competencies is the key task for any strategist.
By the way, you may be curious to know where Angela Ahrendts is now. On the back of her success at Burberry, in 2014, she was hired by Apple to rebrand their global network of Apple Stores.