A lot has been said in these last 12 months about how the economic downturn would affect the corporate environment. Many predictions were made right at the offset of the meltdown. Many companies went into either a “downsizing” mode or a “stand still” do nothing attitude. A lot of people lost their jobs and many others are just barely holding on.
But the reality is that the “shake down” not only brought many organizations down to their knees, but on the upside, forced them to look straight into the mirror and see the ugly. It takes one to be down in the hole, to be able to assess what out them there in the first place, and what now needs to be done to get out.
In 2000, Grady Means and David Schneider, Change Management Executives for PWC, co-wrote the book “Metacapitalism”, in which they advocated that in the future, companies would focus only on the core of their business, and that meant just two things: Brand equity and Customer Relationship. Everything else, considered support activities for the two, would be outsourced, so it could free up more energy to concentrate on the two.
Perhaps, they would have never thought that the spark for such a vision would come from such a traumatic event, where actual human lives have been affected. However, what we see now, as probably the greatest impact of the world recession and its aftermath, is the B2C – back to core. Many organizations have gone back to the drawing board to assess where does lie the most important things related to its core business and that it should stay focused on?
Back to Core is now a movement that we see happening in all types and sizes of organizations. The immediate result of that is the elimination of what is perceived as superfluous and unnecessary. Right after, what is important but not relevant, and a third party can take care of it with an even greater level of energy.
But going back to core, besides forcing companies to re assess their values and focus, it creates new challenges, as we are faced with an ever so more “moving environment”, where the only absolute is constant change. Continuous change raises the bar for all organizations and creates the need for them to drive innovation, so they can stay competitive.
Innovation is what will actually help companies stay focused in their core in order to take market share away from their competitors. In fact, the lull in innovation, facilitated by the current economic environment will create opportunity for companies to focus on their cores and differentiate themselves, and ultimately paving the way to increase their market share.
In a recent seminar, Geoffrey Moore, Director of TCG Advisors, mentioned “race-car drivers fundamentally can´t pass another car on a straight stretch. Where they pass each other is on the curve. Share is up for grabs now.”
Innovating in a weak economy, however, requires risks that many companies aren´t willing to take. Paradoxically, a downturned economy also compels companies to cut costs and focus on maintenance and other-mission critical functions. Cost cutting and routine maintenance functions – what Moore terms “context”, – also need to occur, he said. However, companies will all too often neglect innovation at the expense of context, or they will spend time just trying to catch up to competitors – what Moore called “neutralization”.
Companies need to be able to create competitive advantage and strength of attraction that the competitors can´t match, and this comes from first focusing on the core of their businesses. This can only be achieved if companies first take a long look at their core activities, and then have the wisdom to understand the right balance between risk and reward through innovation.