Focusing on your core business is the key to success. This guarantees the best possible result and competitive position for your company. All activity is focused on what is known best. At the same time, the optimal return on investment (for resources) is obtained.
Change in environment
Our environment is changing continuously:
- Competition is more intense
- Globalisation of entire industries or sectors
- Growing demands of customers
- Automation of activities
Everything begins with the question: what business are we in?
- Products and services offered
- Target customers
- Market areas
Considering what business you are not in is at least as important.
Inspired by their success, many companies that were originally profitable expand their operations beyond their healthy core. These entrepreneurs are said to have a “magic hand”, that is, everything they touch turns to gold. Everything goes well at first, but usually there is soon a crisis ahead. In these situations the actual core of business operations and foundation of (long-term) success is often left at least partly unexploited.
The first step is to define the core business that produces the most competitive advantage. This differentiated core (customer perspective) is enhanced to operate optimally. The goal is to achieve market leadership in selected target markets. In small crisis companies this means a good position in a small customer segment or in a limited market area.
In the second phase you can start a controlled expansion to the edges of the core. This may mean new segments, distribution channels and geographical expansion.
In the final phase, you have reached a situation in which the built concept begins to reach the end of its road and it’s time to redefine the core business. The definition and evolution of core business have been researched admirably by Zook & Allen, 2001. http://www.profitfromthecore.com/core/home.asp
Throughout history there have been many of these kinds of case internationally, for example Samsung and Apple. From the field of Finnish corporations we can highlight Nokia and Ahlström, which changed from a versatile conglomerate into a fibre manufacturer. So focusing on core business is the key to success. If you are interested to hear more, please contact us.