The knowledge management definition presented earlier, involved the reuse and creation of relevant knowledge. The word relevant links knowledge management (KM) to the concept of organizational core competencies. Once again, the challenge here is to discuss this subject without diverging too much into related topics that are not directly relevant to KM.

Core competencies: Definitions vary greatly. The term was originally coined by Pralahad and Hamel (1990) who defined it as "the collective learning of the organization, especially how to coordinate different production skills and integrate multiple streams of technologies". Since then it has been defined in multiple ways, but very generally, core competencies refer to the firm's primary expertise, which is a source of sustained competitive advantage. Arriving at a more precise definition is not necessary for our purpose here. Suffice it to say, that these are key capabilities, which, from the resource-based perspective of the firm, are the primary drivers of innovation and competitive advantage.

Core competencies thus have a large knowledge component, and managing them is, in the very least, a product of corporate strategy working with KM and innovation management. This simplified model has strategy dictating the overall direction, KM managing the knowledge dynamics, and innovation management turning core competencies into profitable core products. To understand the role of KM let us look at a brief overview of how core competencies are managed:

1. Identifying and assessing core competencies: The firm should map out its key competencies, possibly linking them directly to specific core products. Then, an evaluation must take place, assessing what one has vs. what one needs to have (as determined by strategy and the competitive environment). KM is responsible for identifying where the key knowledge is located, including the tacit expertise and knowledge embedded in products, routines, etc, as well as identifying knowledge gaps.

2. Sustaining core competencies: Organizational core competencies, like all knowledge assets, have the virtue of improving rather than depreciating through use. Conversely, lack of use will lead to erosion of any skill set. The role of KM here is twofold, on the one hand, it must keep stock of the state of key knowledge assets and, on the other, it must leverage key knowledge assets across the organization.

3. Building core competencies: Building new core competencies involves an interplay between knowledge, practice, coordination, and refinement. Knowledge assets must be built, enhanced, combined, and coordinated in an environment that supports experimentation and improvement. Building core competencies can be a complicated endeavor since sustained competitive advantage is derived from assets that are hard to imitate (Dierickx and Cool 1989). From a KM perspective, this implies the build up of specific tacit knowledge and expertise (i.e. uncodified knowledge that is generally more valuable, and inherently more difficult to copy and transfer), often across multiple departments or functions.

4. Unlearning core competencies: Organizations have a habit of trying to keep doing what they have always been doing. Unlearning a competency when it is no longer useful is one of the key aspects of a successful firm, and history is riddled with examples of companies that have failed to do so. In the process of unlearning, KM again plays an important role by identifying and managing the firm's knowledge assets in the right direction. This may be done through re-training, restructuring, creating new knowledge flows, external knowledge acquisition, outright removal, etc.

The specific dynamics of the processes of knowledge creation, knowledge acquisition, knowledge sharing, and knowledge reuse, which are central to the management of core competencies, have been discussed earlier. The purpose of this section is to emphasize that KM is not just a collection of individual initiatives. The build up of skills and competencies, involving the coordination of multiple KM disciplines with other organizational functions, must often be managed according to long-term strategic goals and coordinated across the organization.