Find Your Next Core Business

<I>Unstoppable</I>, the third in a series of books based on research by Bain & Co., explores ways to sustain profitable growth.
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Over a 10-year period, only one in 10 companies achieves more than a modest level of sustained and profitable growth worldwide -- and it is becoming more and more difficult to find such growth.

Unstoppable

, the third in a series of three books based on seven years of research I led at Bain & Co., is about what to do when your growth formula of the past begins to reach a limit, and how companies find their next wave of profitable growth.

The books, which contain research based on a database of over 8,000 companies and on hundreds of case studies, including interviews with executives on the scene at the time, parallel what we have named the "focus-expand-redefine" cycle of growth.

The first book,

Profit from the Core

, was on the topic of understanding your core, and it discussed methods to achieve growth in your core market.

Beyond the Core

provided data, methods and examples about how to push the boundaries of your core into new areas, which we called adjacencies. A key insight was the power and importance of developing a repeatable formula for growth.

Unstoppable

is about the third phase of the cycle, when growth begins to hit a wall and you need to create the next-generation version of your business model, make fundamental changes in your core, or even jump to an entirely new core. Resounding daily drumbeats of examples are available in the business press every day.

For instance, telecom providers are fighting a battle to see who can come up with the next growth engine in telecom, now that nearly all consumers have mobile phones and prices per minute are declining fast. Another example is that newspaper companies such as the

New York Times

(NYT) - Get Report

, after a run of profitable growth in the 1990s, are encountering the very difficult problem of how to transition to a new model, now that the Internet is unbundling, step by step, the information contained in newspapers and providing much of it faster and cheaper.

And we are seeing some sectors such as energy shift from the epitome of stability to turbulent as electric utilities around the world confront the limits of fossil-fuel-powered plants and the new world of alternative energy.

Our research demonstrates that this focus-expand-redefine cycle is spinning faster and faster as business speeds up, and that more and more companies are confronting the three dilemmas of redefinition:

  • How do I know whether it is time to look at redefining my core?
  • What is the foundation of the new core business?
  • How do I engineer the shift, given that I still need to deliver today's results?

A key finding from our analysis of companies that have managed to redefine their core business is that over 90% that accomplished this difficult feat did it using assets that they already had at hand -- what we call "hidden assets."

The alternative, of course, is to fall prey to siren songs to leap into hot new markets, or to pursue "big bang" acquisitions that attempt to solve the strategic problem but often just compound it. Our research shows that the odds of success of these moves is less than one in 10, but the odds can be increased many-fold by finding a path using hidden assets.

Such hidden assets are of three types. One is underutilized customer assets, such as a brand or strong customer segment or customer database. The remarkable renewal of

De Beers

, creating over 12 times market value improvement in the past seven years, was based on customer assets.

A second type is an unexploited growth platform, which could be a cluster of products, a world-class support function, or a business spawned by the core itself.

General Electric's

(GE) - Get Report

creation of GE Capital, the renewal of

IBM

(IBM) - Get Report

from products to services, or the turnaround of

Marvel Entertainment

(MVL)

are all cases of redefining the core on the basis of such hidden assets.

The third type of hidden asset is untapped capabilities. Arguably, the renewal of

Apple

(AAPL) - Get Report

is an example of a company that completely redefined itself organically, using capabilities in design, software interfaces and customer utility.

Unstoppable

provides a wide range of examples and ideas for executives who are facing -- in part or all of their business -- the daunting challenge of finding a new growth engine for the future, and who want to pursue that end without destroying today's momentum or delaying so long that they fail to reinvent their future in time.

Chris Zook, a partner at Bain & Company, heads the firm's Global Strategy Practice. He is a frequent contributor to Harvard Business Online's Conversation Starter.