Profit From the Core : Growth Strategy in an Era of Turbulence

Features

• Cover Type: Hard Cover with 194 pages
• Published by: Harvard Business School Press
• Edition: 1st Edition February 2001
• Written in: English
• ISBN 10 Number: 1578512301
• ISBN 13 Number: 978-1578512300
• Book Dimensions: 9.3 x 6.3 x 1 inches
• Weighs: 1 pounds

Product Review
Spawned by a 10-year study of 2,000 firms conducted at Bain & Company, a global consultancy specializing in business strategy, Profit from the Core is based on the fundamental but oft-ignored maxim that prolonged corporate growth is most profitably achieved by concentrating on a single core business. To help companies identify this true essence, narrow their focus accordingly, and move forward in a manner that builds upon existing structure, Bain director Chris Zook and former Bain director James Allen present "a set of practical and proven principles, diagnostic tests, and questions for management teams to use as tools for reexamining or revising their strategies in search of the next wave of profitable growth." Bolstering their argument with real-world examples--including companies such as Disney, which succeeded by taking this approach, and Bausch & Lomb, which faltered by eschewing it--the authors show how to effectively uncover true corporate strengths, elevate them to realize their potential, identify related new businesses that could be successfully added, and even completely redefine a core when confronted with factors forcing such action. (For example: they offer a step-by-step method for mapping "adjacent opportunities" that may prove complementary, ranking them according to potential, and developing strategies to further evaluate and ultimately implement them.) The result is recommended for anyone tired of the management theory du jour who seeks a proven way to propel their company into the future. --Howard Rothman

From Publishers Weekly
In this short, focused and well-reasoned book, Zook, the head of worldwide strategy for the prestigious consulting and investment firm Bain & Co., and Allen, head of a venture-capital company, argue persuasively that focusing on what a business does best is the easiest and most efficient way for companies to grow and be profitable. This idea isn't new, of course: in the 1980s, Tom Peters and Robert Waterman, in their classic In Search of Excellence, called it "sticking to your knitting"; a decade later, most notably in the Harvard Business Review, Gary Hamel and C.K. Prahalad described the concept as focusing on "core competencies." But, Zook and Allen maintain, as firms rushed to embrace the Internet, executives forgot this basic truth. Taking the idea one step further, they contend that by looking at what a firm does best, executives will also find it easy to spot inefficiencies within their businesses. Based on a study of 2,000 companies, the book concludes that three factors differentiate growth strategies that work from those that don't: (1) make sure to get everything possible out of the core business, (2) expand into related businesses and (3) redefine the business before someone else (e.g., a competitor) does. Zook and Allen stress "how to," giving managers a list of questions to ask and signposts to watch for as their companies evolve. As managers everywhere are re-examining their businesses in light of recent fallout among dot-coms and major layoffs and restructuring among even the most stalwart of companies, this book's timing could not be better. (Mar.)
Copyright 2001 Reed Business Information, Inc.

Reader Reviews
After a two-year study of the key strategic decisions that most often determine growth or stagnation in business, Zook (with Allen) realized that clients of Bain & Company were eager to share the results of that study. Only later did he decide to write this book, one in which he presents and then develops "a useful framework for understanding and addressing the key decision points encountered in growing a business." He concluded that this framework is practical and could be applied (with appropriate modification) within almost any organization. In the Preface, Zook acknowledges that he was surprised by some of the findings which he briefly identifies. He then observes: "Central to our findings are three ideas: the concept of the core business and its boundaries; the idea that every business has a level of full-potential performance that usually exceeds what the company imagines; and the idea that performance-yield loss occurs at many levels, from strategy to leadership to organizational capabilities to execution." In the five chapters which follow, Zook (with Allen) examines "the types of strategic business decisions that most often seem to tilt the odds of future success or failure." Zook correctly suggests in this book that many organizations cannot resist the appeal ("the siren's song") of "miracle cures" of their problems. Zook focuses entirely on what has been verified in real-world experience, on what is practical, and on what will reliably achieve the desired results of sound strategic decisions. He and his associates learned a great deal from the study, confiding that "some of the results were quite counterintuitive to us." Several of the findings caught my eye and caused me to challenge a few of my own cherished assumptions. For example, that "the choice of the next hot industry was much less important in driving growth and profitability over the long term than were strategy, competitive position, reinvesting rates, and execution." They also learned that many of the most successful sustained growth companies are actually in lower growth businesses (e.g. Enron in energy, ServiceMaster in basic services, and Bechtel in engineering). Why? Zook suggests that "it might be precisely the difficulty of of these market environments that elicits superior business creativity in the search for new growth out of their core businesses." In other words, these companies ignored "the siren's song" and stuck to the aforementioned "basics": strategy, competitive position, reinvesting rates, and execution. In the last chapter, Zook quotes Sun Tzu: "The more opportunities that I seize, the more opportunities that multiply before me." He then asserts that this phenomenon "is at the heart of growth strategy and embodies the fundamental tension between protecting the core [i.e. `the basics'] and driving into more and better adjacencies, propelled by greater and greater success." The various mini-case studies provided are very informative. I also appreciative the dozens of check lists (e.g. "Ten Key Questions for Management"), charts (e.g. 3-1 "Adjacencies Radiate from the Core"), and chapter "Conclusion" sections, all of which serve two important functions: they distill key ideas, and, they can serve as helpful reminders when reviewed later. Obviously, the "goal posts" in today's business world approach and then withdraw, widen and then narrow, with sometimes maddening unpredictability. Wait until they are closer for an easier kick or kick now ("carpe diem") before they begin to back up? Wait until they are wider? What if they become narrower? This metaphorical situation is complicated by the fact that opponents are trying to block the kick in what may well be inclement weather or at least against the wind. Kick now or wait? One of the most interesting concepts shared in this book is what Zook refers to as "The Alexander Problem." Briefly, Alexander the Great and his armies eventually conquered an area stretching from Mount Olympus to Mount Everest. That was accomplished in less than four years. His resources became overextended. "His sticking point -- the failure to anchor in the core business (in his case, governance) and consolidate a rapid expansion --exemplifies the most common problem across all growth strategy": pursuing the wrong adjacency opportunities. With Alexander's premature death, his empire died with him. He was its core. The same is true of countless companies which expand into related segments which do not utilize, much less reinforce, the strength of their profitable core. "Business adjacencies are growth opportunities that follow a company to extend the boundaries of its core business. What distinguishes an adjacency from another growth opportunity is the extent to which it draws on the customer relationships, technologies, or skills in the core business to build competitive advantage in a new, adjacent, competitive area." Have you ever wondered why at least 70% of all mergers and acquisitions either fail or perform well below expectations? The board members and senior-level executives of those organizations obviously had not read Zook's analysis of "The Alexander Problem" in Chapter 3. Those who share my high regard for this book are urged to check out Crawford and Matthews' The Myth of Excellence, Fitz-enz's The E-Aligned Enterprise as well as The ROI of Human Capital, and Collins & Porras' Built to Last.