Finding Your Next Core

Business
Chris Zook
HBR, 2007
No Core Lasts Forever
 Five broad questions can help you
determines when its time to redefine
your core business

What is the state of our core customer?

Profitability
Market share
Retention market
Measures of customer loyalty and advocacy
Share of wallet

What is the state of your core differentiation?

Definition and metrics
Relative cost position
Business models of emerging competitors
Increasing or decreasing differentiation
Five broad questions can help you
determines when its time to
redefine your core business
(contd)
What is the state of our industry profit pools?
Size, growth and stability
Boundaries
Share of profit pools captured
Shift and projections
high costs and prices

What is the state of our core capabilities?

Inventory of key capabilities
Relative importance

Gaps vis--vis competitors and vis--vis future core needs

What is the state of our culture organization?
Loyalty and undesired attrition
Capacity and stress points
Alignment & agreement
Energy and motivation
Bottlenecks to growth
The guideline when its time to
redefine your core business
1. Assess The Need For Change
Periodically ask whether your current strategy
is exhausted. It may be if:
1. Your company is targeting a shrinking profit pool.
Apple: PC: 1995 (9%) 2005 (less than 3%) refocus
on iPOD (music)

2. A new rival has entered the new field

unburdened by your cost structure.
General Motors vs. Toyota (Lean manufacturing)

3. Your growth formula isnt sustainable

Loss of differentiation as industry matures
The guideline when its time to
redefine your core business
2. Recognize The Making of New Core
Successfull core redefinition elements
Gradual transformation Shifting the
center of gravity along an existing vector
of growth
The discovery and use of hidden assets
Leadership
A move from one repeatable formula that
is unique to the company to another
The guideline when its time to
redefine your core business (Continued)
3. Harness your hidden assets
Hidden assets can spur fresh growth from
new core if they provide clear, measurable
differentiation from competitor, tangible
added value for customer, and a robust
profit pool.
Hidden assets can be:
Undervalued businesses
Untapped customers insight
Underexploited capabilities