Core Competency Ownership Test
Own operations that differentiate you and outsource the rest
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 4
- Confidence
- 94%
The Core Competency Ownership Test begins with competitive advantage rather than a default preference for control. Define how an operation affects the customer and ask whether doing it internally makes the offer meaningfully better or harder to copy. Some subscription businesses with many personalised items may need their own distribution centres because operational control is central to the experience. ThirdLove reached the opposite conclusion for fulfilment: Zak said warehousing and distribution were not the brand's competitive advantage, so the company used a third-party logistics provider that specialised in the work. The decision is contextual, not ideological. The output is either internal ownership backed by a clear differentiating mechanism or outsourcing backed by a capable specialist and appropriate oversight.
Origin
Extracted from The Foundr Podcast
Core principles
- 01Do not internalise an operation merely because the company is growing
- 02Own a capability when it creates a meaningful competitive advantage
- 03Use specialists when they can perform a non-core operation better
- 04Judge the decision against the company's specific business model
How to run it
- 1
Define the operation
Describe the capability under consideration and the customer outcome it influences. Include any unusual personalisation, speed, or control requirements.
Pro tip Evaluate the complete workflow rather than an isolated task.
Watch out An activity can be essential without being a competitive advantage.
- 2
Test for differentiation
Ask whether owning the operation makes the product, service, or customer experience meaningfully better. Name the exact advantage rather than appealing to control in general.
Pro tip Look for a capability customers would notice or competitors would struggle to reproduce.
Watch out Growth alone is not evidence that the function should move in-house.
- 3
Compare specialist capability
Assess whether an external provider can execute the non-core work better than the company can. Compare quality, cost, reliability, and the oversight still required.
Pro tip Choose providers around the operating requirements that matter to customers.
Watch out Outsourcing responsibility does not eliminate the need to manage performance.
- 4
Choose ownership deliberately
Internalise the operation when it creates a defensible advantage; otherwise use a qualified specialist. Document the reasoning so the choice can be revisited.
Pro tip State what future change would trigger a new review.
Watch out Do not copy another company's ownership model without matching its context.
In the wild
ThirdLove uses a third-party logistics provider. Zak described fulfilment as a large undertaking and said it was not a core competency or competitive advantage for the brand, while other providers were better positioned to perform it.
→ The company retained focus on the capabilities it considered more central to its brand.
Zak contrasted ThirdLove with subscription businesses handling many personalised items. For those companies, running their own distribution centres can make operational sense because the fulfilment capability itself helps create the customer advantage.
→ The same test supports internal ownership when operations are genuinely differentiating.
Common mistakes
Confusing importance with advantage
A function may be necessary for every order while still offering no unique reason for the company to perform it internally.
Copying another operating model
A personalised subscription company and a consumer brand may reach opposite answers because their customer experiences depend on different capabilities.
Is it for you?
Best for
It is best for companies considering whether to internalise fulfilment, distribution, or another complex operating function.
Not ideal for
It is not ideal when legal, security, or safety obligations require direct control regardless of differentiation.
From the transcript
“we use a 3pl to me it's not a core competency for us as a brand”
“it's a competitive advantage but again it goes back to like what's your competitive advantage”
“ours is not distribution it's not our warehouse”
From the episode
358: Pro-Product vs. Pro-Marketing: How Heidi Zak of ThirdLove Faced Off With Victoria’s Secret
Heidi Zak