Four steps to focus on your core business
Damien McLoughlin, Dean of the Michael Smurfit Graduate School of Business at University College Dublin in Ireland, started his presentation at Alltech Symposium this week with the fact ‘Companies are dying’. Most growth plans fail, but certainly the remaining 10% succeed.
McLoughlin maintained that the most failures are due to growth plans not being related to the core business. Creating and maintaining the competitive advantage is key for success. Look at Smithfield with its swine operation, look at Tyson with its poultry business, and look at OSI with its food service excellence - they all focus on their core businesses. In other words, each step from core keeps us away from success.
Two hard questions
Do leaders know what their core business is? Does the management team know what the core is? They both look as a matter of course and the most basic questions, but more than a few leaders fail to answer appropriately. Professor McLoughlin recommended four steps for managers to take:
- Have a well-defined and strongly differentiated core business and make sure that your team knows what it is.
- Follow the customers around your core. Think about your most loyal customers and why they hire you. There is likely a big gap between what you think you are selling and what your customers think they are buying. Then build value for them.
- Grow thoughtfully through adjacencies. Nestlé’s products have the same consumer and are sold through the same channels; they develop adjacencies that fit with their core and are a good path for greater efficiency.
- Build repeatable and successful formulas and create a model that you can replicate. The core is what nourishes and maximises profitability to all businesses and moving away from it can generate great losses.
The presentation by Professor McLoughlin was indeed very much ‘focused’ on his message: The focus is the key in every business for successful growth. Understand the core, discuss the core, fully exploit the core, and repeat the model around the core. This should result in profit generation in the core.
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