Profit From The Core
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Tip Sheet – Book Review – Clarity Company
Profit From The Core, Zook & Allen
Balancing Core Focus and New Ventures
As a company leader, you’ll forever face a certain predicament: you have to seek to strike a balance between a focus on your core business and venturing out into new domains. In Profit from the Core, Zook describes the principles that any company use toward long-term profitable growth.
Originally released in 2001, and recently updated, authors Zook & Allen demonstrate that a renewed focus on the core is more crucial than ever. A strong core will be the foundation for successful expansion, as firms seek to restrengthen their competitive advantage.
Repeat your success formula
The strongest, most sustainable and profitable growth requires a strong, well-defined core. The way to find such growth is to identify a repeatable formula that uses the most potent and differentiated strengths in your core; and then applies them in adjacent markets.
Most continuous profitable growth companies have leadership positions in their cores that constitute the central point of their strategies.
The greatest source of strategic error stems from an inaccurate understanding of the core and its full potential.
Strong cores often contain hidden assets that prove to be the seeds of the next wave of growth (as discussed in the author’s previous book, Unstoppable”).
Interestingly, the authors outline a number of apparent contradictions when revitalising companies for growth. We found some of the most intriguing of these to be:
- A better performing business unit often is likely to be operating the furthest below its full potential.
- The stronger your core business, the more opportunities you have both to move into profitable adjacencies, and then to lose focus.
- Management teams that have been most successful in building a strong core business and that have benefited from adjacency expansion are typically also the most exposed to industry turbulence.
- When developing and refining growth strategy, organisations tend to inhibit growth.
- From focus comes growth, and by narrowing growth, you can create strong expansion.
We noticed a number of parallels to concepts in “Good to Great” (Collins), e.g. the “Three Circles”: (a) what a company can be the best in the world at (and conversely, what it cannot be the best at), (2) what drives the company’s economic machine, and (3) values and what those in the company care most passionately about.
The authors point out that urbulent conditions create “confusion, blurred boundaries, less time to react, less tolerance for error, and often fewer resources”. At the same time, they also create “unique opportunities to strengthen and expand string cores, and even to invest to reshape the structure of [its] industry ahead of competitors.”
If you’d like inspiration and practical guidance for a growth operations manual, compass, and mine detection, here it is.
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