Finding Hidden Assets to Renew the Core and Fuel Profitable Growth
By Chris Zook
Harvard Business School Press -- 190pp -- $29.95
The Good Solid advice for finding the strengths that lie dormant within a company.
The Bad This volume reiterates many points made in Zook's earlier books.
The Bottom Line Helpful tips for companies approaching the latter stage of their growth cycle.
For companies, success means catching the next wave of growth. The problem is that so few of them manage to ride that breaker, instead straying into wacky investments, unrelated business areas, or markets to which they bring little expertise. Bain & Co. executive Chris Zook identified this tendency in his 2001 book, Profit from the Core. His advice to executives was simple: Understand and define your core business, then grow by exploiting its various aspects. Zook followed up that best-seller with Beyond the Core, a 2004 volume that looked at ways to supplement your essential business by offering new services to current customers or pushing products in novel ways. Now comes the third part of what Zook has begun referring to as "the core trilogy": Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth.
What more could the man possibly have to say about exploiting your main assets? Quite a lot, it turns out, though many of his points reiterate advice from earlier books. Based on studies by Bain and others, Zook estimates that two-thirds of companies will have to redefine their core business over the next decade because of forces ranging from globalization to the impact of the Internet. To thrive, they'll have to shift focus rapidly to a new model that plays to their strengths. While this thesis might seem to contradict Zook's earlier books, which warned about the perils of diversification, it plays off earlier themes by exhorting readers to analyze the cores of their businesses for areas of opportunity. It's also reminiscent of the ideas in several other books, from Blue Ocean Strategy (2005) by W. Chan Kim and Ren?e Mauborgne to How to Grow When Markets Don't (2003) by Adrian Slywotzky and Richard Wise.
Zook does add his own twist, noting that his goal is to help managers cope when companies approach the latter stage of their growth cycle, when the tried-and-true formula no longer delivers returns. Zook says businesses hit that wall much earlier now because of the fast-changing environment.
Unstoppable asserts that successful diversification requires knowing thyself, as far as your company's core assets go. First, interpret what's happening in your industry and what it means for your core business. Once you identify options for where to go, you should "X-ray your organization for hidden assets," Zook says, and refine the strategy based on what you find. Only then can you push ahead to mobilize the business to head in a new direction. A classic, if overused, example: Apple's (AAPL) use of its design and technology prowess to launch its digital-music business.
The toughest challenge, arguably, is knowing when to shift focus. By the time then-CEO Bill Ford Jr. sent around a memo last September, calling his company's business model "no longer sufficient to ensure profitability," life in Detroit had been dire for some time. Zook cites several examples of businesses that clearly are under pressure, such as The New York Times Co. (NYT), but which have yet to find many ways to leverage their strengths into new businesses. He also mentions Samsung, which did manage to reorient successfully, albeit by shrinking and focusing on a handful of consumer-electronics products.
Zook provides solid, if hardly ground-breaking, advice for finding the strengths that lie dormant within a company. These "hidden assets" normally come in three forms: so-called adjacencies to the core business (unexploited customer segments, geographic markets, or services), support organizations (such as IBM's services arm (IBM), which was once a sideshow to manufacturing), and noncore businesses or orphan product lines. Another possibility: feedback from customers about their changing needs, unique distribution channels, or areas of production expertise. Here, in a story also used in earlier books, he tells how American Express (AXP) targeted distinctive groups of high-spending customers.
It all sounds so logical, and yet the majority of companies that attempt to redefine their core businesses don't succeed. By the time they get the energy to shift priorities, they may be already stagnant or mired in crisis. As Zook says: "Only one in 10 companies achieves even a modest level of sustained and profitable growth over a decade, and that percentage is declining over time as the growth cycle speeds up." Daunting words in a book about becoming "unstoppable." But Zook offers some hope in saying that the solutions are usually within an executive's sight. It's just a matter of shifting focus--talking to customers, looking for new ways of differentiation, and seeking fresh product perspectives--to make the changes that get you back on the road to growth.
By Diane Brady