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Strengthening the core business is often overlooked as a critical ingredient for growth. Business leaders tasked with strategic growth can become fixated on adjacent & transformational opportunities. New and exciting paths have more intrigue, and some could define a legacy. Disruptive companies steal the spotlight in the news for meeting unmet customer needs, creating new markets, and achieving record valuations. Amazon, OpenAI, and Uber are great examples, but they are outliers. For most, successful growth requires reinforcing the core – to fund growth and maintain a right to win.
A common misstep when pursuing growth is missing the closest opportunities. Leaders often know more about their core and easily find fault in core opportunities. Focusing on the unknown, however, naturally comes with more openness to possibilities. And yet, fixating on new growth can lead to prioritizing long-term, high-risk investments at the expense of core business growth. While exploring new possibilities is enticing, focusing on the core often yields the highest chance of success, the greatest ROI, and the quickest impact. Neglecting today's profit areas introduces risk and slows new growth.
A well-known example is Nokia, which once dominated the mobile phone market but faltered when it shifted focus from its core strengths towards new ventures, missing the smartphone revolution. In contrast, Microsoft continues to be a leader in many of its markets. Microsoft, under Satya Nadella, made a major shift to cloud computing, but did so while reinforcing its core Windows and Office products. Reinforcing the core allowed Microsoft to thrive and expand into new areas like cloud computing with greater success. This illustrates how prioritizing the core can provide a stable foundation for sustainable growth and innovation in adjacent markets.
To better define the role the core business plays in growth, consider opportunities in three distinct categories: Core, Adjacent, and Transformational. We’ve adapted a framework introduced by mathematician H. Igor Ansoff and modified by Monitor’s Bansi Nagji and Geoff Tuff to outline relative risk and proximity to the core at a more granular level. By plotting opportunities across the Growth Portfolio Matrix (see illustration), leaders can more clearly see where the risk lies and whether their growth portfolio introduces risk or diversifies to reduce it.
What does it mean to reinforce the core? Each company is different, and the growth stage plays a part: A company could fall anywhere between high growth (Tesla, Nvidia), stable (Coca-Cola, Johnson & Johnson), or in decline (Barnes & Noble, RadioShack). Regardless of stage, four actions that any business can take to reinforce the core are as follows:
C.O.R.E. Actions:
- Cultivate Customers & Channels: Focus on the right customers and channels to generate long-term value. Shed unprofitable customers (cautiously) and attract profitable ones that align with your company’s values and goals. Pursue missed opportunities, recapture lost sales, and find ways to add more value.
- Optimize Product & Service Portfolio: Refine offerings and rationalize to reduce complexity. Streamline the product portfolio to remain competitive and focused. Reallocate capital and capacity to the most profitable offerings and targeted opportunities across the Growth Portfolio Matrix.
- Renew Pricing: Revisit pricing to adapt to the current environment. Ensure your pricing strategy matches your position in the market. Assess offerings as a set and re-evaluate the impact of inflation. Develop pricing intelligence to test and validate price points and closely monitor evolving market conditions.
- Evolve With Core Customers: Innovate within the core to adapt to changing customer needs and stay fresh. Look for ways to create more value for core customers by evolving from products & services to insights & experience. Practice sound capital allocation to continue appropriate investment in the core to balance non-core pursuits.
Reinforcing the core is an ongoing process. Choices on customers, products, and pricing can have a compounding effect when considered in parallel. If executed properly, these actions can create value in the short-term and support transformative growth over the long-term. Complimentary opportunities across the Growth Portfolio Matrix (core, adjacent, and transformational) are essential to deliver outsized growth, and the core is the foundation from which growth is built.