Customer Reviews

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

5 star:		(21)
4 star:		(3)
3 star:		(1)
2 star:		(2)
1 star:		(0)

 

 

Chris Zook thinks it's time for corporate leaders to get a big fat reality check on their dreams of continual, double-digit growth. He argues that the mindset that has developed around growth projections is totally unrealistic for most companies -- even considering the past decade of strong, economic expansion -- and he has numbers to prove it.

After examining the performance of close to 2,000 companies betweem 1988 and 1998, Mr. Zook found that only one in eight, or 13 per cent, managed to meet even modest growth targets.

If you don't understand and protect your core, you can't possibly select the right growth initiatives. If you select wrong, you face a double-whammy of wasting resources and leaving the true core undefended. This happens to start-ups and large corporations, to the weak and even more to the strong. Looking at the odds, it is probably happening to your business.

An excellent book!

NOTE: The review that follows was posted in 2001 and is of the earlier edition. Why is it featured here?

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.

In a time of mega mergers and consolidation this book has an intriguing perspective. The authors (Bain consultants) argue that embracing non core businesses is probably trouble. Drawing on a huge multi-year study and Bain database the authors show that growing companies with unfocused acquisitions in non core businesses are typically under performers. The book shows several examples of how Bain purchased under performing companies (divisions) from conglomerates and by investing and focusing on their core business ignited explosive growth.

You might be asking how then does a business grow. The authors would say first by defining the core business. What business are we really in and good at. Once the core business has been defined and focused on growth opportunities come from opportunities adjacent to the core business. A few example adjacencies could be new customer segments, new channels, new geographies, new value chain steps (forward, backward...), new business, and new products.

If you are trying to define a sustainable growth strategy then this book is worth the read. If you have many non core business that are under performing then this book is worth the read. If you have a successful business and are looking for the next growth vehicle you will want to read this book.

First, this is an excellent book to read. Well researched, edited, and from experts active in the field.

Second, the author makes many important recommendations about how you should manage your company... strategically. Again, these recommendations are based largely on research done by the author or his peers mostly at Bain & Co. regarding maintaining competitive advantage.

With the exception of Jack Welch (and previously Geneen at IT&T, I'm sure), large conglomerates can not maintain growth rates over long periods of time (ten years was the period used in the book).

So, the recommendations that your company stick to its knitting ("the core") is the foundation of the book. But many people already know this. So, most interesting, are the recommendations and research that show the nuances.

For example, the author shows how the areas around your core business offer the most profitable opportunities for fast growth... yet also contain the most dangers from encroaching competitors, or bad fitting investments. He calls this area your adjacency.

The author suggests that how you manage your adjacency largely determines your success at long term business growth.

There are too many concepts and details to summarize here. There is a lot of meat to the book (although it is not a huge book). Still it is fairly easy to read. You will not whiz through the book because you will often pause to consider the ramifications of the author's points. But it is not a difficult read.

The books major points are well illustrated with many examples (Dell, Microsoft, Starbucks, W.W. Grainger, etc.).

This book is most appropriate for management involved in strategy, and investors trying to figure out the appropriateness of acquisitions by companies.

Most of the pages in my book are underlined. The stories fit the observations and recommedations well. The research presented was most interesting, and was often summarized into easily read charts and tables.

I highly recommend this book. There are lots of implementable ideas in this book. As an investor you will be able to spot an inappropriate acquisition much more easily. ...

Chris Zook's, Profit From The Core couldn't have come at a better time. With the recent dot-com implosion, it seems almost perfect to say "I told you so," but that is not what these authors had in mind. This book presents a clear case for focus and mining a business' true core to establish long-term growth. The authors illustrate how, time and again, sustained value and long-term growth come from steadfast focus, rather than a wide-net approach to business strategy. It's pretty clear to me that any survivors over the past year will have adhered to this axiom.

Profit from the Core's common-sense approach to building a business is backed with meaningful, quantitative data. One idea, originally stated in Sun Tzu's Art of War, struck a particular cord with me: "The more opportunities that I seize, the more opportunities that multiply before me."

Zook and Allen have added the following insight: "Success multiplies opportunities. Proliferating opportunities complicate decision making and prioritization (a good problem to have) and therefore risk."

This challenge was clearly exhibited in the Internet consultancy market when many new startups and market leaders "lost their heads" in the crazy days of 1998 and 1999. While the opportunities were seemingly endless, companies that did not pursue a focused and logical path toward growth decreased their shareholder value, or, even worse, risked bankruptcy.

Profit From The Core presents an encouraging outlook on developing business strategy. Presented in a no-nonsense manner with solid data, the main concepts are based on common sense and easily applicable to business situations. I think most people will execute an adjacency mapping (which graphs how a company expands from its core) of their own business after they complete the book. This empirical approach will certainly prove helpful to an untold number of businesses.

Michael Knowlton CEO / Nascent State

This is not a terrible book- it has some interesting case studies which the authors use to prove their points. However, there is not a great deal in here that is new if you've read the sequel to this book first ("Beyond the Core", Zook), and have read other

There are some good points about this book. I like the parts about defining the business boundaries, mapping adjacencies, reacting to competitor threats, etc. However, I feel that I got a lot more out of the sequel than from this book. Perhaps I would have rated it higher if I read it first, or if I hadn't already read so many books on this theme. Surely Zook and Allen should not pay the price for this, so I have factored this in to my score.

Additionally, I suppose I can't blame them for writing highly of Enron and even using them as an example of successful "redefinition of the core"- everyone was fooled, although you think that the top consulting firm in Boston would have become suspicious, considering the great fall it sustained shortly afterward. Perhaps the sequel served in part to correct this mistake.

This book was premature; it would have been best to combine this with the sequel into one book. If you skip this and read only the latter, you won't be missing much.

Anyone who is serious about growing their business profitably MUST read Profit to the Core. This "back to basics", well researched publication begins with what may seem as a surprising conclusion--it is very difficult for a business to achieve both sustained growth and sustained profit over a period of time. In fact, the research reveals that the large majority of businesses fail to reach these fundamental goals. Chris Zook carefully and clearly outlines how to define your core business and why it is important to stay focused to maximize the potential profits and growth from your core business. However, the author recognizes the absolute need to consider adjacent business opportunities to protect or expand your core business, despite the risk and management dilemma this creates. An excellent chart illustrates where adjacencies may exist and how to evaluate such opportunities. Most importantly, this book tells you not what to think but how to think about the ideas presented, allowing you to adapt and apply these concepts to your business.

There is only one central idea in the book - how to make a company growth profitably. Chris and Allen showed a 3-step process to us.

Firstly, you have to well-define your core business. That is, the unique products and services, the major customers and the comparative advantages over your competitors. You have to unleash the full potential from your core business

Secondly, you have to expand the adjacencies of your core business so as to on one hand, develop new market on new products and services. On the other hand, reinforce your core business.

Finally, when your business is running in full potential, then redefine your business to enlarge the scope, and then continue to develop.

The above step is proven by hundreds of successful examples and concrete data and all of them are cited in the book. Undoubtedly, I will not hesitate to recommend this winning formula to everyone who is running a business as well as to the one who is planning to run a business.

Business intelligence is often opaque, but Chris Zook has cracked the code. He may not be John Grisham, but the book is every bit as captivating if you're trying to make sense of conflicting business models for this not-so-hot, new economy. Whether you're selling fritos, razor blades or bandwidth, Chapter 3 --the Alexander Problem -- should be required reading for any manager asked to find the next great market option. Thanks to Bain & CO for opening up the archives. There are pearls of wisdom from beginning to end. Zook's easy going style makes it a sure winner.

I've read many books on business and imho, this is one of the best. Unlike most, it is both insightful and practical at the same time. It's well written, easy to read, and I think it would appeal to a wide audience. The advice about growing from the core is right on target. If you've ever taken over a business that pursued a "grass is greener" strategy, you know what I mean. Building from the core makes so much more sense, and finally someone took the time to back it up with many interesting examples and facts.

More importantly for managers, the book's recommendations are practical to implement. It provides frameworks to analyze your own business and growth opportunities. I bought copies for my entire staff in preparation for an off site discussion that worked out very well. Despite feeling we'd maxed out in our current market, it took only a short time to identify a couple of realistic opportunities to grow from our core. These "core" opportunities certainly make more sense than other business ideas that had been kicked around (to which, we brought nothing more than market research reports and powerpoint presentations).

In my opinion, if you manage a business, or just like reading about them, you won't go wrong with this book or its advice.