Page 173 - (DK) The Business Book

WORKING WITH A VISION 171

See also: Study the competition 24–27 ■ Stand out in the market 28–31 ■ Gaining an edge 32–39 ■ Porter’s generic
strategies 178–83 ■ Why takeovers disappoint 186–87 ■ The MABA matrix 192–93

is struggling to win sales for its some companies decided to
core product, it may be tempting “outsource”—contracting a business
to consider diversifying, but this activity to an outside company—
often ends up being a distraction. peripheral activities that they had
During the second half of the previously performed internally.
20th century, there was a trend The trend of outsourcing gathered
for companies to acquire unrelated momentum as companies realized
businesses. Gillette, a leader in they could cut their business back
razors, bought PaperMate pens; to the core and achieve leaner, more
Dalgety, which made Homepride efficient, cost-effective operations.
Flour, acquired a pig-breeding For example, a company that
company; and Cadbury, best known manufactures refrigerators may McDonald’s acquired several food
for candy, took control of Schweppes decide that its core business is chains, such as Donatos Pizzeria, during
beverage business. The trend began simply the design, manufacture, the 1990s in an attempt to enter new
market sectors. In 2003, it sold them to
to turn in 2003, when McDonald’s and marketing of those refrigerators.
refocus on its core business—burgers.
began to sell off diverse restaurant It might outsource delivery (which it
chains it had acquired, including sees as not adding value), and its
a pizza brand purchased during the information technology (IT) needs internal functions and customer
1990s. This was because it wanted (which it views as a specialized interaction. Outsourcing is useful
to focus on its core business: function). In the short term, handing for lesser functions, but only as long
McDonald’s. Other companies over these activities to a third party as it works well—if it fails, it can
soon began to divest unrelated would seem to make sense. But in adversely affect the core business.
businesses to protect the core. the long term, it could be a mistake. Whenever companies outsource
Delivery might be an important part or acquire a separate business to
Understanding the core of customers’ perceptions of the take over a peripheral function, it is
The theory behind selling secondary product, and the business could vital that management take steps
interests is that the business should suffer if the outsourced delivery to protect the “main thing.” Any
focus its energy and resources on company is unreliable. Similarly, secondary units or third parties
what it is good at. This idea was IT is increasingly integral to the must be fully aligned with the vision
taken further during the 1990s, when success of a business, both for and values of the organization. ■

Core competencies

An organization has a particular Prahalad and Hamel describe
set of diverse production skills the corporation as a tree.
If you cannot be the best and individual technologies. Its roots are its unique
in the world at your core These are its core competencies, competencies, and from these
according to business experts roots grow the organization’s
business, then your core
C. K. Prahalad and Gary Hamel. core products, which in turn
business absolutely
Unlike physical assets, which nourish separate business units.
cannot form the basis
inevitably deteriorate over From these business units come
of a great company. time, competencies become the end products. The idea of
Jim Collins enhanced, because they are core competencies can be used
US business expert (1958–) applied and shared. They are to identify those things within
strengthened by involvement, an organization that are not
communication, and a shared “at the core,” which might be
commitment to working across a distraction, consuming a
an organization’s boundaries. company’s valuable resources.