Profit from the core

James Collins and Jerry Porras conducted a six-year research project to determine “What makes the truly exceptional companies different from other companies”?  The result: “Built to Last” – a seminal book that provides a master blueprint that can be leveraged to build enduring organization.  In the book, the authors introduced several principles (for e.g., clock building vs. time telling, Big Hairy Audacious Goals, etc.)  that can withstand the test of time for generations to come.  In my opinion, Google founders have been heavily influenced by this book in their quest to create a visionary company.

In an analogous fashion, Chris Zook (along with James Allen) conducted a ten-year study that asked the question – “What are the key strategic decisions that most often determine growth or stagnation in business”?  The result:  “Profit from the Core” – a seminal book that provides a practical framework on how companies can become “sustained value creators”.  The central theme of the book is summarized by the conclusions below:

  • Building unique strength in a core business, no matter how small or narrowly focused, is the key to subsequent growth.
  • Most management teams underestimate the growth potential of their core and fail to mine all of its hidden value growth.
  • Most successful companies achieve most of their growth by expanding into logical adjacencies that have shared economics and reinforce the core business, not from unrelated diversification or moves into “hot’” new markets.
  • Many of the damaging mistakes in strategy derive from the tension between investing in the core business and growing into adjacencies as well as in the specific choices of adjacencies.
  • Industry turbulence often demands that the leader redefine his or her company’s core business at a time when it appears at the height of its power.

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