Try answering the following question, "What is your organization's core competency?" 

Got it?

If you answered with a product name you're at risk. I'm sure it's a very successful product, but it's tethering you to the past; success forms the most restrictive shackles. Your core competency should outlive any single product--sometims even an entire category of products. It is the foundation of an organization's long-term success and it's the foundation of an organization's ability to innovate--repeatedly.

As I look back on the companies I've worked with over many decades, it's clear to me that the ones that have experienced the greatest success also had a clear understanding of their core competency and made sure that everyone on their team knew it.

So, where does defining a core competency come from? Let me answer that with a short story.

One CEO's Confession

I recall working with one of the largest U.S. manufacturers of aftermarket autoparts. The CEO had asked my company to better align his executive team so that they could identify ways to focus on what they did best. My first suggestion was that we conduct a brief survey of the executives and managers across the organization in order to identify what their existing alignment looked like.

When the results came back it was painfully obvious that the executives and the management team had virtually zero understanding, much less alignment, on what the organization's core competency was.

I remember being especially blunt when we presented our findings to the CEO. This was something that would impede any effort to try to create alignment in his organization. It's not often that you turn down business, but in this case I was clear that there wasn't much for us to work with.

I remember what followed as one of the most pivotal moments in my career working with chief executives. The CEO stared at the charts that showed the wide disparity among his team in silence for what seemed to be an eternity at the time. I could sense my colleagues geting anxious about the silence.  He then looked directly at me and said, "I've really f*** up."  It was as much a confession as it was a revelation. 

It Starts at the Top

Core competency comes from the top. It speaks to the deepest mission and purpose of the organization as well as the reason it has license to survive and thrive against its competition. But it may also be one of the hardest things for a CEO to communicate when markets shift and a company has to leave an entire category of products in the past.  

For example, I once heard the late Andy Grove, former Intel CEO, say that Intel's core competency was "the guts of modern computing."  Yet, Grove was widely criticized when he moved Intel from memory chips to processors in the mid 1980s. That decision to focus on the core lead to incredible growth and positioned Intel as the company it is today.

Your role as a CEO is first and foremost to set the compass for your organization. If you do that correctly then everyone on your team will be able to identify the parameters of innovation; they'll know where to look and how to identify new opportunity. Define those parameters too narrowly and you're stuck within a product. Define them too broadly and you are littered with distractions.

In my experience the best way to find the sweet spot between those two extremes, and define your organization's core competency, is to look carefully at how your historical capabilities map to changing dynamics in the marketplace. There are two basic questions you'll need to answer in order to do that:

First, what's unique about the ways in which you've succeeded so far? Try to think in accurate and specific terms here, not colloquialisms such as "our people," or "we're customer friendly." You want to identify very specific ways in which these qualities manifest in real-life. For example, our people are always domain experts who have used our products as customers before they come to work for us.

Then, how do your capabilities map to new innovations on the horizon that you may not yet be playing a role in?  

The critical part of this exercise is doing it regularly and then communicating the results to your organization. By doing that you're able to define core competency as something that isn't stuck within the constraints of any one product or even one category of product. Instead, it's a unique set of capabilities that can constantly be applied to new opportunities.

One last thing, how do you know that you've succeeded in defining your core competency? It's when you can ask any member of your team the question and get the same answer.

But first, start by answering it yourself.