Most strategic planning focuses on protecting what you already know is valuable about your business. You’ve identified your core competencies, you’re investing in them, you’re keeping the knowledge in-house. Check. The harder problem is recognizing when something you’ve been treating as plumbing has quietly become the thing that customers are buying and actually differentiates you.
If you’ve read my earlier piece on core competencies versus core capabilities, you know the distinction: competencies are what your company does better than others—your competitive advantage. Capabilities are what your company needs to do to operate, but where the knowledge and execution doesn’t differentiate you. The challenge is that these categories aren’t static. What starts as a capability can evolve into a competency.
Some of your most important competencies don’t start life as crown jewels. They emerge. A capability built for operational reasons becomes central because the market shifts, scale increases, or competitors converge. If you don’t notice the transition, you keep resourcing, staffing, and talking about the business as if nothing changed, while the real value has shifted.
That misalignment creates two failures. Internally, your product, engineering, design, and strategy teams invest in the wrong places. Externally, you tell the wrong story. Your roadmap emphasizes features while customers are choosing you for execution details you barely mention. Sales discounts what feels “basic.” Marketing leads with parity. Meanwhile, your actual crown jewels are treated as assumed infrastructure. The danger isn’t that you lose the capability overnight. It’s that you slowly fail to protect, deepen, and articulate it.
Why Capabilities Evolve
Capabilities don’t become competencies at random. The shift usually happens for a few boring reasons:
- Maturity Shift As markets mature, obvious features converge. Differentiation moves from what you do to how well you do it. Reliability, speed, integration quality, and consistency start to matter more than novelty.
- Scale Complexity increases, edge cases multiply, and execution stops being trivial. If you’ve solved those problems in ways others haven’t, you’ve built something defensible, even if you still think of it as “just operations.”
- Gravity When a capability becomes robust enough, other products/components start relying on it to move faster. It becomes a gravitational center for the architecture. It’s not just “adjacency”; it’s that the capability lowers the cost of innovation for the rest of the org.
What Emergence Looks Like
Consider the example of a healthcare company that connects patients with health coaches. Over years of operation, those coaches reviewed large quantities of patient-reported data including symptoms, behaviors, dietary choices, and lifestyle factors. They were mapped to triggers and used to help patients make behavioral decisions with meticulously recorded results. Each sequence of patient interactions generated labeled data: this action correlated with this outcome for this type of patient.
The company didn’t set out to build a data asset. They set out to deliver a service. But after years of accumulated coaching interactions, they had something competitors couldn’t replicate: a corpus of labeled behavioral data mapping patient actions to health outcomes (both positive and negative). When they built recommendation algorithms to augment the coaching experience, those algorithms dramatically outperformed anything trained on generic health data.
Everyone pointed to the recommendation engine as the differentiator. But the engine was downstream. The real crown jewel was the years of labeled data, the unglamorous, operational byproduct of delivering the core service. A competitor could license similar ML models. They couldn’t license a decade of domain-specific outcome data. The recommendation system was one output of the data exhaust. The company didn’t plan for the capability to become strategic. It emerged from doing the work.
This pattern repeats. iRobot spent years building detailed maps of millions of homes—not as a strategic initiative, but because their vacuums needed to navigate. The mapping data, an operational byproduct of helping robots not bump into furniture, quietly became one of the most valuable assets in the smart home space. The maps were arguably worth more than the hardware business that generated them. They had a data moat and could have gone into other household robotics with that information and they didn’t see enough of that path to prioritize it.
The Signals
The challenge is recognizing when the shift is starting or has already happened. Seeing the signals is the easier part. Interpreting and acting on them correctly is the real work.
When a signal shows up, the mistake is reacting to it as if it were self-explanatory. It isn’t. The work is in understanding why this capability matters now. What problem does it solve that alternatives don’t? Is the pull coming from a specific segment or the market as a whole? Did you deliberately build this advantage, or did it emerge as a byproduct of doing the work well? Until you can answer those questions, the signal doesn’t tell you what to do. It just tells you where to look. And if you can’t explain it, then it’s not a signal yet.
Market Signals
- Customer Behavior Win/loss analysis, retention data, or qualitative research shows customers choosing you because of something you’ve been treating as invisible. The diagnostic question isn’t just that they care, but why. If you can’t explain what problem it solves better than alternatives, you don’t yet understand the advantage you have.
- Competitors Positioning on Table Stakes Pay attention when competitors start positioning on something you consider table stakes. That’s not automatically a threat, but it is a prompt. Either they’ve identified a shift you missed, or they’re trying to catch up to something you already have. If competitors are investing here, you need to understand whether you have a head start to protect or a gap to close. Maybe the market matured and you didn’t notice. Maybe a new customer segment emerged with different priorities. The difference determines whether you need to defend or catch up.
Organizational Signals
- Engineering and Product Focus Where are your best people spending their time? If they’re spending disproportionate effort improving a “non-core” capability, ask whether that work is creating customer value or just fighting brittleness. If performance improvements correlate with retention or expansion, the market is telling you where the value lives.
- Internal Expertise as Moat The people who created or deeply understand this system; their knowledge is now irreplaceable, not just valuable. Is this expertise documented and transferable, or does it live in heads? Could you hire for it, or is it earned through years of context? If the expertise is hard to replicate externally, you’ve built something competitors can’t easily copy. That’s a competency, whether you’ve labeled it that way or not. It also means you have key-person risk you should be managing.
- Dependency If the system, vendor, or team that owns this capability disappeared tomorrow, would the impact be operational or existential? “We’d be slower” is a nuisance. “We’d lose our differentiation” is a strategic failure. If it’s the latter, your categorization is wrong.
- Unexpected Enablement The capability is unlocking product directions that competitors can’t pursue because they don’t have the same foundation. But the diagnostic matters: Are those directions actually valuable to your business? Are you pursuing them, or just theoretically able to? Latent potential isn’t a competency. Realized advantage is. If you’re not leveraging the capability to do things others can’t, the signal is weaker than it appears.
The Brittleness Trap
Not every capability that attracts internal attention deserves to be elevated to a competency. Some systems become highly visible simply because they are fragile, poorly designed, or operating at the edge of their limits. They consume senior attention, pull in strong engineers, and show up repeatedly in postmortems, not because they differentiate the business, but because they’re failing. In these cases, the signal is loud but misleading. Treating operational pain as strategic importance is a common error, and one that can lead to over-investment in the wrong places. The distinction is subtle but critical: a capability that demands attention because it creates customer value is different from one that demands attention because it’s brittle. Confusing the two doesn’t create advantage; it just makes the organization very good at maintaining its own constraints.
What To Do When You See It
Once you recognize the shift, the response needs to be explicit. Strategically recategorize the capability as a competency and treat it accordingly. That means changing how you staff it, fund it, document it, and protect it. It means building on top of it intentionally, not incidentally.
It means educating your team on the strategic shift. Align go-to-market so sales and marketing can articulate why it matters. Move the crown jewels into the demo, not the appendix. If customers are choosing you because of something your sales team doesn’t mention, fix that.
Evaluate whether you’ve outsourced or deprioritized parts of it under outdated assumptions. This is where competency drift applies in reverse — you may need to bring ownership back in-house. Invest in depth, not just maintenance. Reduce key-person risk by making the expertise transferable. If it’s truly strategic, treat it strategically. And don’t overcorrect. Not every capability that could become strategic will become strategic. Latent potential isn’t a competency, active differentiation is.
The Takeaway
Competency drift explains how advantage erodes when you give it away incrementally. This is the mirror image: how differentiation can quietly emerge without being recognized as such. The healthcare company didn’t set out to build a moat. It earned one by doing the work, over time. The crown jewel only became obvious in hindsight.
The question isn’t whether emergent competencies exist, they do. The question is whether you’ll recognize them while you still have room to act, or only after they’ve been normalized, outsourced, or copied. Leaders who catch the shift early enough get to invest with intent. Both problems require the same discipline: paying attention to what customers are actually responding to, not just what your strategy deck says should matter.
