Re: Core Competency

I recently attended a leadership training seminar hosted by the Disney Institute. Aside from the jokes I’ve endured from friends and family for attending the seminar, I have conflicted thoughts on the program:

  • On one hand, the seminar’s facilitators’ cult-like admiration for Walt Disney, the man himself, left me feeling a bit overdosed on “fairy dust,” puppies and sunshine - (not to mention there are certainly mixed reports on Walt Disney's personal life and beliefs);

  • On the other hand, many of the core values of The Walt Disney Company are laudable and have clearly cultivated some of the world’s most valuable brands.

Giving thought to the common threads connecting these brands is a worthwhile exercise.

Disney

Disney and its subsidiaries own and operate a remarkable variety of businesses ranging from film and music production to destination resort and hotel management. Add to the mix a consumer product division, a media network (i.e. ABC, ESPN, Hulu) and digital entertainment, and you have a behemoth with approximately 180,000 employees generating nearly $50 billion in annual revenue.

The breadth of Disney’s operation begs the question: what are the company’s core competencies?

At the core, what skillset or strength enables the company to succeed? More specifically, what skillset or strength enables the company to outperform its competitors in a particular market? As Bain & Company defines it, “a core competency is a deep proficiency that enables a company to deliver unique value to customers.” Bain’s definition seems to be consistent with most other textbook-like resources on the matter; however, as I’ve been reading articles on the topic, it seems to be discussed in two very different ways: (i) the more abstract and (ii) the very literal.

In the case of Disney, the company’s core competencies are threefold:

  1. An unsurpassed commitment to customer service – (particularly for a company not focused on the “one percent”);

  2. Talented, creative employees focused on innovation; and

  3. World-class marketing expertise.

Disney’s core competencies aren’t “cartoons and rollercoasters,” or some other tangible product vertical. All companies need to start with the idea of a killer product or service (i.e. Mickey Mouse), or else the rest doesn’t really matter, but Disney’s strengths today are more abstract; they are the company’s ability to stay fiercely customer-focused, to constantly evaluate customers’ entertainment demands and to effectively market / deliver the goods.

The Greater Discussion

Given the above viewpoint, some articles such as Fast Company’s Death to Core Competency: Lessons from Nike, Apple, Netflix (Feb. 2013) have the tendency to focus too literally on the “cartoons and rollercoasters” of the discussion. For example, Nike hasn’t abandoned its core competencies because it’s moved from being a pure-play sneaker company to a much-more-nuanced consumer product company: Nike’s greatest strength is its consumer brand and marketing expertise. Whether the company is selling sneakers or wearable tech products, the company is still Nike and it still markets “cool” with the best of them:

“Then in the mid-1980s, Nike lost its footing, and the company was forced to make a subtle but important shift. Instead of putting the product on center stage, it put the consumer in the spotlight and the brand under a microscope—in short, it learned to be marketing oriented. Since then, Nike has resumed its domination of the athletic shoe industry. It commands 29% of the market, and sales for fiscal 1991 topped $3 billion.” (July 1992)

This conversation surrounding “what Nike is” (or isn’t) has been going on since the 1980s and 1990s – check out the Harvard Business Review article quoted above.

“Phil Knight: … for years, we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product.”

In today’s business environment it’s not fashionable to discuss the likes of Michael Porter, and his “five forces” don’t get a lot of airtime with anyone under the age of 50 – in the post-Liar’s Poker era, these things aren’t en vogue – and, in many ways, that makes sense.

Many of the old school ways of approaching business need to be abandoned, for sure. Marketing and product managers should be constantly reevaluating their business’s product/market fit, not just via annual planning cycles. The conversation with customers should be a two-way street, with a continuous focus on real-time social media conversations; however, the process of analyzing a company’s core competency simply needs to be reimagined, not abandoned.

Think about it…

Often, a VC investor doesn’t give a team of entrepreneurs millions of dollars to fund a business in which those entrepreneurs have decades of deep expertise – in fact, the NewCo in question usually aims to fundamentally disrupt the status quo. Assuming the “killer product or service” catches his or her attention, the VC often focuses the investment decision on the founding team’s true core competencies:

  1. Intelligence;

  2. Work ethic; and

  3. A commitment to innovate / persevere (read: “pivot,” if you like).

The Basics

I'm a lifelong learner, and I enjoy thinking about and discussing markets, business ideas and economics. 

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