- Shopping Bag ( 0 items )
Soundview Executive Book SummariesGrowth is not a choice: It's an imperative. But the risks are substantial. Only a quarter of all growth initiatives succeed, and three-quarters of the top business disasters of the past five years involved growth initiatives gone terribly wrong. Yet in spite of these dismal odds, some companies experience growth rates that are three times as high as the average over extended periods.
In his previous book, Profit from the Core, strategy expert Chris Zook revealed how the most enduring growth performers succeeded by focusing and building around one or two well-defined, dominant cores - and how otherwise well-positioned firms sabotaged their growth by prematurely abandoning their core in pursuit of the next "hot" topic. Now, based on extensive research on the growth patterns of thousands of companies worldwide - including CEO interviews with the top 25 growth performers - Zook argues that in order to continue to grow, companies must eventually expand beyond the core.
A Primal Urge
If businesses have a primal urge, it is the need for profitable growth. That growth is the source of value creation to shareholders. Beyond the Core focuses on the question of how to expand a core business into adjacent areas in a way that is profitable and contributes to the strategic objective of expanding, defending or redefining the core business. Zook identifies the most universal success factors and provides some ideas that management teams might find useful in improving the odds of an inherently risky undertaking.
Pushing out the boundaries of a core business is one of the most difficult management challenges. The typical odds of success are low. Managers have a built-in bias to underestimate and under-prepare for the ultimate complexity of these moves. Stock price swings and volatility are driven strongly by perceptions about adjacency expansion. And a large proportion of CEO departures occur in the presence of adjacency expansions gone wrong. Yet, in spite of these risks and penalties, the movement into adjacencies is the way that businesses ultimately find their next wave of profitable growth, without which they eventually stagnate and may even decline.
The Decision for Today's CEO
In his interviews of CEOs for this book, Zook started by asking what they believed were the key events in the development, shaping and growth trajectory of their company. Invariably, they listed key adjacency moves among the most defining events. Andy Taylor of Enterprise Rent-A-Car pointed to the decision to move from leasing cars into renting cars to dealerships, which triggered the business Enterprise has today. Tom Stemberg, founder and chairman of Staples, the lead office products retailer, talked about the movement from retail stores into distribution to small businesses, which spurred a sequence of adjacency moves that reshaped the company. Bob Norton of FTD florists emphasized how critical it was to make an adjacency move with the introduction of FTD.com, which allowed the company to link directly to customers to supplement its network of links between florists and defend its core against new competitors. These types of difficult, sometimes even agonizing growth moves punctuated the historical timelines in the minds of each CEO.
The Promise of Growth
The promise of growth lies in methods that allow you to decide correctly, to tilt the odds in your favor, and to control the cost of failures when they inevitably occur. The examples, data and frameworks analyzed in Beyond the Core can help managers make and manage adjacency decisions better. Copyright © 2004 Soundview Executive Book Summaries