Chris Zook on “the current structural crisis in business”

In the Updated Edition of Profit from the Core published by Harvard Business Press (2010) and written with James Allen, Chris Zook provides updated key examples while adding new ones and renders “the lessons learned in a way that management teams can use can use as a tool to reflect on the way forward in today’s economy.” He notes that turbulent conditions such as those in 2010 create confusion, blurred boundaries, less time to react, less tolerance for error, and often fewer resources. “Yet they also create opportunities to strengthen and expand strong cores, and even to invest to reshape the structure of your industry ahead of competitors.”

Given what Zook characterizes as “the current structural crisis in business,” here are the key points he lists in the Preface:

• Sustained and profitable growth requires a strong, well-defined core.

• Most sustained profitable growth companies have leadership positions in their cores that form the epicenters of their strategies.

• The number-one rule if strategy is to discourage your customers from investing in your core.

• The greatest source of strategic error, we [at Bain] find, stems from an inaccurate understanding of the core and its full potential.

• String cores often contain hidden assets that prove to be the seeds of the next wave of growth – the topic of my most recent book, Unstoppable.

• The key to sustained and profitable growth is to find a repeatable formula that utilizes the most powerful and differentiated strengths in your core and applies them to a series of new “adjacent” markets.

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Note: Zook’s concept of “core” bears striking resemblance to Jim Collins’ concept of the “Three Circles”,” introduced in Good to Great: (a) What a company can be the best in the world at (and equally important, what it cannot be the best in the world at), (2) What drives the company’s economic engine, and (3) What those in the company care most passionately about.