Business Growth Strategies: Build On Your Core

The best way to grow your business is to clearly define your core business, and then build on it. In fact, the foundation of sustainable growth is a well defined core. But what do we mean by core? Chris Zook, in his book Profit From the Core, suggests that in order to identify your core business you must identify these five assets:
  1. Your most potentially profitable customers
  2. Your most differentiated and strategic capabilities
  3. Your most critical product offerings
  4. Your most important channels
  5. Any other critical strategic assets that contribute to the above (such as patents, brand name, position at a control point in a nework.)
Jim Collins, in his book Good to Great, calls this your "Hedgehog Concept." He uses the metaphor of the fox chasing the hedgehog. The fox is faster, more nimble, and more cunning. Yet he is never able to capture the hedgehog. Why? Because the hedgehog has one core strategy: When the fox starts to attack, the hedgehog curls up in a ball. By doing this the sharp needles on the hedgehog become a sure defense against any predator. This core strategy protects the hedgehog every time. Collins suggests that every business needs a "hedgehog concept." That is the core strategy of the business to protect it, to sustain it, and to build upon. He goes on to define the hedgehog concept as:
  1. What you are most passionate about
  2. What you do better than most others
  3. What drives your economic engine
These 3 characteristics define your core business or hedgehog concept. The key to growing your business is to identify YOUR core business. One of the best ways to illustrate this is to consider Avis, Alamo, Enterprise, and Hertz. If you were asked, "What business are these companies in?" you would probably say, "The car rental business." But that is not their core business. Let me explain. Avis's core is airport rentals, particularly to corporate renters requiring speedy service, newer cars, a variety of business amenities, and a network of prime airport locations. They focus on service excellence and customer loyalty among corporate renters. Alamo's core is value-oriented leisure renters. They are typically located at airports that attract vacation and leisure travelers. They are the largest car rental provider to international travelers visiting North America. Plus, in major tourist areas like Orlando, FL, they have multiple locations to serve the needs of leisure visitors. Enterprise has a 70% share of the market for insurance replacement and repair rentals. They started with suburban locations and focused on meeting the needs of body shops and insurance companies. You will frequently find Enterprise at major airports but their core is in the suburbs. Hertz is totally different. Their vision is to be the global leader in mobility and equipment solutions. They major on the fact that they are "first." They are also about more than cars. At Hertz you can rent trucks, vans, heavy construction equipment, and tools. They also place a major focus on selling their one-year old vehicles to consumers at low prices. Their core is mobility and equipment solutions. So my point is that you must identify and optimize your core business. Even if you think your core is doing well, you can realize the most growth by focusing on increasing your core performance. Then when you are ready to expand, expand into profitable adjacencies. But always stay close to the core!

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