Your Guide to Understanding Distinctive Competencies
At the most basic level, distinctive competencies are the characteristics of a company that differentiate it from its competitors. But distinctive competencies are also much more nuanced and purposeful than that. And understanding and capitalizing on your distinctive competencies is key to becoming a market-driven business that builds and sells products your customers want.
This guide will help you understand what distinctive competence is, how to identify and cultivate your organization’s distinctive competencies, and why it matters.
What is distinctive competence?
Distinctive competence is a great tool to help identify what makes your organization unique in your industry. More specific than core competencies—the things your company or team does well—distinctive competencies are the aspects of your business that differentiate you from your competitors and other suppliers.
But don’t confuse distinctive competencies with differentiators, either. They are much more than that; after all, anyone can be different. Rather, distinctive competencies are what make your company truly special, one-of-a-kind even.
So, how do you determine your organization’s distinctive competencies? Well, for starters, they must meet three criteria. They must:
- Be an attribute or skill that your organization excels in.
- Be something no one else in your market is doing.
- Be something that can’t be easily copied.
What is the difference between core competencies and distinctive competencies?
You may already be familiar with the term “core competencies.” Distinctive competencies can be thought of as a subset of core competencies. But while core competencies are basically a list of things a company does well, distinctive competencies go further.
A distinctive competency is not only something a company does well (a core competency) but also must be something no one else in the market is doing and couldn’t easily replicate. In other words, distinctive competencies are characteristics of an organization that are truly unique. Think of them as your company’s essence, its DNA.
Knowing your distinctive competencies—in addition to your core competencies—can help you better understand your organization’s position in the market and should inform your big-picture decision-making. Like core competencies, distinctive competencies can be developed and honed and can evolve over time. Your company may have one distinctive competency or many.
Distinctive competencies can be thought of as a subset of core competencies.
Why are distinctive competencies important?
Just as every organization should have a mission statement and goals, they should also identify and develop their distinctive competencies—arguably even before they establish their goals.
A company’s distinctive competencies should be regarded as guiding lights and should be considered in every business decision made. Playing to your distinctive competencies and making decisions that support and capitalize on them is necessary for business success. On the other hand, failing to regard your distinctive competencies or making decisions in direct opposition to them is likely to have detrimental effects. Knowing and strategically applying your distinctive competencies will enable you to gain and maintain a competitive advantage in your market.
What are some different types of distinctive competencies?
There are many types of distinctive competencies, and each organization’s distinctive competencies are different. When considering your distinctive competencies, consider every aspect of your business. Perhaps your distinctive competency lies in your user experience or your operational management. You also can have distinctive competencies in strategic management, company culture, customer service, social consciousness or other areas.
Just as important, here’s what distinctive competencies are not: They are not products or product features. That’s because products—even ones with patents—can be copied and thus almost never meet the second and third criteria for becoming a distinctive competency. Other attributes that can rarely be considered distinctive competencies are price and brand.
What are some well-known distinctive competencies examples?
Perhaps the best way to understand distinctive competencies is to look at some examples of distinctive competencies examples of well-known companies. While these companies may, and probably do, possess more than one distinctive competency, we’ll highlight the most obvious one for illustrative purposes.
Disney
Disney’s distinctive competency is the customer experience. They consider each aspect of their customers’ experience in every single thing they do, right down to never referring to folks as customers but as guests. From thoughtfully designing rides so guests are entertained even while waiting in line and hiding Mickey Mouse silhouettes in their subtle cruise ship decor to overhauling their retail stores to feel like a theme park and even making navigating transportation to and from their parks convenient and pleasant, Disney thinks of it all. There are very few companies that put as much thought into the customer experience as Disney—certainly none in the entertainment space.
Amazon
Amazon’s distinctive competency is their operational excellence. The company amassed a huge body of knowledge about the worldwide shipping and distribution system that other companies haven’t. Amazon is a great example of relying on a distinctive competency to evolve its business. It perfected its operational excellence with its original online bookstore and then expanded that knowledge to the larger online retail space. Then it took on distribution and established itself as a marketplace, and has even found success with brick-and-mortar stores.
Southwest Airlines
Southwest Airlines has made standardization its primary distinctive competency. That might sound like a drawback in a time where customization is so highly valued, but it’s actually brilliant. Southwest’s one-plane-fits-all approach (its air fleet is comprised entirely of 737s) benefits the company as well as its customers. After all, having only one type of aircraft makes it easier to train and change out crews, replace broken parts and hire mechanics, creating value in the form of on-time arrivals and better margins.
Cisco Systems, Inc.
You might assume Cisco’s distinctive competency is technology-related, considering it’s one of the world’s largest tech conglomerates, but actually, it’s the company’s acumen for acquisitions. The company has completed well over 100 acquisitions and has the entire process down to a science. In less than two weeks, Cisco can have every new employee converted to its IP, HR and finance systems, whereas it typically takes its competition months or quarters to do the same. Why does it matter? In addition to maximizing efficiency, the real driver behind Cisco’s streamlined acquisition process is that it allows the company to get to customers faster.
How to find your company’s distinctive competencies
If you don’t immediately know what your organization’s distinctive competencies are, that’s OK. A lot of companies don’t. And, more good news: Identifying them is a simple, though brain-intensive, process. Start with an internal brainstorm, then talk to your buyers.
Consider your distinct attributes in five areas.
During your brainstorming exercise, list out everything your company does exceptionally well. Most of these items should describe the business as a whole, but some can pertain to specific teams or departments, too.
To get started, consider your attributes in each of these categories: Purpose, Reputation, Innovation, Methods and Expertise (PRIME).
Purpose: Successful companies have a purpose—a passion and zeal for their products and the work they perform. These companies are market-centered with an appetite for solving problems. Seasoned executives have learned a passion for customers translates into value for shareholders.
A purpose focused on markets and their problems makes employees go that extra mile—it keeps them going when times get rough. It’s what author Simon Sinek describes with his Start With Why concept.
So ask yourself, what is your company’s “why”? What is your organization’s purpose?
Reputation: Sure, you can develop almost any product or service, but the question is will your customers embrace it? Consider your reputation in your market. It offers a lot of insight as to what your distinctive competencies are.
Does the market you serve expect you to solve a particular type of problem or offer a certain type of solution?
Innovation: Innovation brings a new idea or creative thought to an existing market or industry. Innovation can also be viewed as an application of better solutions that meet new requirements. For example, you might develop a new product that transforms the existing portfolio and opens a new market for your company.
Innovation may be expressed in a new type of technology, but it can also be a new delivery model, a new approach with pricing and packaging, a new methodology or a new service. It can reflect a new way of thinking about an old concept.
Consider what innovative ideas your company has come up with and what unique perspectives you have.
Methods: Methods and systems help scale a solution or an organization. By implementing methods and delivery systems, teams ensure consistency across the organization and into the customer base. Methods include procedures, techniques and practices. Systems include processes for defining products, delivering them to market, managing customer orders and sales status, and other operational infrastructure.
What systems and methods do you consistently leverage in your organization? Has your company implemented procedures to create your solutions? What practices or routines have you systemized to increase production or decrease cost? Do you subscribe to any exclusive formulas?
Expertise: Experts possess comprehensive and authoritative knowledge or skill in a particular area. Perhaps you have expertise in certain products, markets or industries, and can provide true thought-leadership in your domain.
Tread lightly here. Lots of companies claim to have expertise when they really don’t. If you’re considering this area as a distinctive competency, be sure to ask yourself how widespread the experience of your team for the markets and types of products you want to pursue is. Is the expertise found in only a few employees, or does everyone on the team (or everyone in the organization) possess this expertise?
Once you’ve amassed a list of potential distinctive competencies, put them to the test against the criteria. Remember, a distinctive competency must:
- Be an attribute or skill that your organization excels in.
- Be something no one else in your market is doing.
- Be something that can’t be easily copied.
Conduct buyer interviews to find your distinctive competencies.
To really get a solid understanding of your distinctive competencies, you must also get your buyers’ perspectives. And what’s the best way to do that? Ask them.
First, notice we said buyers and not customers. That’s because to get a good sense of your distinctive competencies, you’ll want to poll not only those who decided to buy from you but also those who chose not to buy from you and those who have yet to buy from you.
Ask questions like: Why did/will you decide to buy from us? What made us special? What do we do better/worse than the other companies/products you considered?
Knowing your distinctive competencies in addition to your core competencies can help you better understand your organization’s position in the market and should inform your big picture decision-making.
How often should we revisit our distinctive competencies?
An organization’s distinctive competencies should be their guiding light, and thus should be top of mind always. But don’t allow your commitment to your distinctive competencies keep you from listening to your customers and the market. As your customers become more savvy and discerning and the market becomes more saturated, you’ll need to evolve your distinctive competencies to anticipate their needs. Remember the Amazon example above? It’s hardly the only company that’s mastered retail, and yet, it continues to dominate because it’s forward-thinking and always evolving.
You’ll want to revisit and refine your distinctive competencies in pace with your market, which may mean every five years, annually, quarterly or even more frequently.
Learn more about distinctive competencies
Take the first step to becoming truly market-driven. Register for Pragmatic Institute’s Foundations class today. You’ll learn how to better understand your market and the problems it faces, and then use that market knowledge and your distinctive competencies to build and sell products people want to buy.