Strategic Discipline Blog

What's your Core?

Last blog, The Founders Mentality Outperforms, we shared Chris Zook, The Founders Mentality: How To Overcome The Predictable Crises Of Growth San Antonio Scale Up Summit presentation with the three key elements of the Founders Mentality including three business examples of each in practice.

Today’s blog focuses on the first of three classic pitfalls in search of profitable growth.

This concept of the Founder’s Mentality is not far removed from the principles offered by Robert Bloom in the Inside Advantage.

Many of our Positioning Systems Gazelles Coached business struggle to discover profitable growth outside their Core.  If you’re not careful you can completely lose sight of what your Core is in pursuit of the illusion of profitable growth. Since the three pitfalls require substantial explanation, I’ll be taking two blogs to provide these three barriers Zook shared that keep most businesses from achieving profitable growth.  Today’s blog is about understanding your Core, and the first pitfall Zook shared.

Consider Zook’s work as both a warning and a tool to identify your Core, take the required steps to stay close to it, then to pursue profitable Growth.  To know what this looks like, go back to our last blog, The Founders Mentality Outperforms. Review the three key elements of the Founders Mentality for Insurgency, Front-Line Obsession, and Owners Mindset. The company examples are: Nike, Oberoi, ABI.

Chris Zook emphasized, “Understanding Your Core is Hard!”

UNDERSTANDING YOUR CORE IS HARD

You must start with a deep understanding of your Core.

What’s your opinion of Domino’s Pizza?

If you’re like the most people you don’t rank it very high.  In fact, Domino’s is Number #9 in terms of taste.

Yet with 14000 locations it’s achieved 92 consecutive quarters of growth.

Domino’s is the best performing pizza chain.  It’s best in packaging, delivery, franchising model, app, and software development.  Your Core really comes down to 3-4 capabilities for great companies.  Dominos has figured out its core.  Its core is these 3-4 capabilities it does better than any other pizza chain.

Domino’s Pizza CEO will tell you, they’re not only in the pizza making business, but in the delivery business.

FIRST PITFALL TO PROFITABLE GROWTH

Pitfall #1 – mis-defining your core and the boundaries of where you should focus it in the marketplace. Sounds simple, just like the 5 Ben Hogan principles of golf. Easy to say, very hard to do, and fraught with peril.

1. Distinctive and powerful assets and capability
   1. Determines your most loyal customers
   2. Huge source of pride in your people (Zook offered too often few employees know.  Furthermore, you can delude yourself to believe you’re something that you’re not    
2. Define your Core and where to apply it

Examine the Graphic to understand the challenge with defining your Core.  Zook shared a several short stories about business failures to explain the principle for this graphic.

1. Too Broad (Myspace: (Do you remember Myspace? In 2008 Myspace was #1 ahead of google in social networking. In 2007 ~ News Corp (Rupert Murdoch) purchased it for $1 billion. News Corp failed to recognize the need to invest in their core. The result: Myspace got involved in everything, ended up being excellent at nothing.)
2. Too Narrow (Blockbuster: In 2008 Netflix offered to sell his company for $50M to Blockbuster.  Blockbuster determined it would stay focused on its retail locations. You know the outcome of this decision.)
3. Wrong Shifting (Lego) Lego was founded during the Great Depression. When no one was buying furniture, they started building toys. In the 1990’s Lego hired an outside CEO. He began to abandon LEGO’s core, determining “we are the top brands to families.” Result: Zook indicates, none of the products made money. When a family member re-entered the business, they exited all these businesses. LEGO got 400,000 of LEGO addicts to help them develop new products. Part of Legos growth is due to most Legos are only used one time for one model.
4. Multiple Battlefields (US Concrete) 40 years ago US Concrete was formed when a group of investors discovered there was no company on US stock market for premix concrete. They began to buy other concrete businesses. Due to no leadership, no strategy, US Concrete went bankrupt.  Their headquarters was in Houston. Nowhere near the quarries. A new CEO decided to sell weak areas, focusing on largest markets (California was first).  With better focus on their Core Business they’ve gone from $400M to $1.2B.  Stock rising from $2 to $52.

THE PARADOX OF LEADERSHIP

Zook introduced this slide to share the how a few special capabilities define the core of great businesses. It’s a tool for you to think about.  You see 15 boxes, yet there are 900 company differentiators. But could be more, or less. It’s the idea. He shared a box for Domino’s Pizza with their specific boxes and differentiators for the Pizza industry. What are yours.  Again, it’s the idea. 

Zook shared another scary idea, “The stronger the position of your business the more likely it is operating below full potential”

Why is this? Zook shared this from tennis great, Roger Feder.  Feder has leaned that he can invest intense work on his weaknesses which will make him a better player. While he may be better overall he won’t be feared by anyone.  To be feared, to be revered, he’s knows he must work on his core.  Work on your core!

Looking for help with your Core, contact dwick@positioningsystems.com

Most Growth Barriers are Internal - NEXT BLOG

Pitfalls number 2 and 3 are next. Why most barriers to growth can be traced to deep internal factors, and why Starbuck’s Howard Schultz returned due to “self-inflicted wounds.”