Wednesday, April 14, 2010

Finding Your Core

Last summer I spent hours upon hours at my in-laws exploring different ways to expand piddix. I had already analyzed piddix's strengths and weaknesses, but didn't quite know what to do next. Should I make a finished product (cards, jewelry), perhaps start crafts shows again? So to help address my conundrum my brother-in-law suggested reading Profit from the Core and Beyond the Core. The books themselves aren't great and are most-definitely dated. As this review points out, the first editions were written at the height of the dot-com era and use Enron as the example of an amazing company while is seen as spreading itself too thin. But the theme of how to stay true to your core products, customers, and strengths is one I revisit every time I think of the best ways to expand piddix. This week intern-extraordinaire Lara has done a great job bringing out the most valuable information in both Core books. My suggestion? Skip the books and use Lara's excellent summary to help identify ways to grow your business while staying true to your strengths. And yes, my brother-in-law does wear a suit.

Profit From The Core, by Chris Zook with James Allen, 186 pages Beyond the Core, by Chris Zook 214 pages

Reviewed by Lara Schmidt of Fraserhead

Upon handing me these books, Corinna said, “These are the books men in suits read on planes.” Meaning these books are serious – in a Harvard Business School kind of way. This was a bit intimidating to me at first, especially since I don't even have business plan yet. The further along you are in your business—meaning, I suppose, the better you understand what you want and where you are going—the more useful this book will be to you. It is full of case studies, diagrams, charts and statistics that illustrate what makes companies succeed and what makes them fail. It will prompt you to take a very analytical look at your business to identify strengths and potential areas of growth. It asks good questions and encourages you to do the same.
Because I am still in the planning phase of my business, I skimmed through this book to find the pieces of information that might help me better understand the concepts and challenges I will face in developing my product and market share. While I still don't quite know what my “core” is yet, I feel better equipped knowing how to make it strong and lasting once I find it. If growing your business is important to you—and I think it certainly should be—this book will teach you where and how to look for new opportunities.

Thesis of Profit from the Core: “The foundation of sustained, profitable growth is a clear definition of a company's core business.” For some of you, defining the “core” of your business may be easy. If you're still wondering, however what a “core” is and where you might find yours, chances are you'll need to follow these steps:

Identifying the Core. Identify:
  1. Your most potentially profitable franchise customers
  2. Your most differentiated and strategic capabilities
  3. Your most critical product offerings
  4. Your most important channels
  5. Other critical strategic assets that contribute to the above
Taking a broader look at the recipe for success, I found this outline very helpful from a planning perspective:

Three Steps to Success:
  1. First, build market power and influence in the core business or in a segment of that business.
  2. Having done that, expand into logical and reinforcing adjacencies around the core.
  3. Then, shift or redefine the core in response to industry turbulence.
While both books preach that growth comes from the core, they also guide you through the process of identifying potentially successful adjacencies in which to expand.

Successful Adjacencies:
  • come from the strongest cores
  • have a repeatable characteristic that allows the company to build an adjacency machine that continually creates more growth opportunities of a similar nature
  • the best place to look for adjacency opportunities is in the strongest customers, not in the search for the hottest markets
  • the best adjacencies are driven by customer feedback
In summary:
  1. Find your core and define it as clearly as possible.
  2. Make your core your main priority. Build it strong
  3. Use customer feedback to identify new products or capabilities for your existing customers.
As a final warning I should tell you that these books are not easy to read. They are full of jargon and sterile business acronyms. That said, they do a good a job of prompting you to take your business seriously. “It is the management team that applies rigor, not a vague sense of creativity or gut instinct, that wins the long-term adjacency game,” they argue. It's easy enough to forget that rigor isn't just for the Harvard Business School, it applies to us creative types, too. Suit and tie, or not.

Two great resources to brush up on your business savvy are:
Harvard Business School's Baker Library and MIT's free online courses from the Sloan School of Management.

If you have any advice about how you defined your core I'd love to hear it. Leave a comment!

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