Your core, is the unique quality that allows you to deliver your value proposition and your competitive advantage. How to define your core business can be explained as an absolutely unique quality that allows you to deliver that value proposition. It is different from your competitive advantage—it’s what allows you to have it.
Your core is an exclusive preserve of the company and cannot be imitated easily by competitors. You only have one core. It is an internal riddle, and you don’t get to learn it from your customers. It is not easy to figure out exactly what your core is.
For example, Walmart in Southeast Asia; great big, super-big department stores. What is their value proposition? Well, Walmart says it’s the cheapest, it’s always the cheapest, and they’re the cheapest price out there. What core allows Walmart to be the cheapest price? Could it be labor hiring practices? They hire a lot of retirees, yes; part of it, but it’s not the core.
Could it be the way they drive hard bargains because they can sell large products, and so they can really drive the prices down from the suppliers? Yes, that’s important, but it’s not the core. Maybe it’s because they buy everything in one store and because they have everything together, they can do it cheaper; important but not the core.
When you start trying to think through this process of how to define your core business , it’s not obvious upfront.
Once you see it, it is, but not from the beginning. Walmart’s core is a global infrastructure that allows them to buy, move and deliver these products so effectively and so efficiently. If they didn’t have that global infrastructure, trucking and shipping and buyers and stores and all of it together, they wouldn’t be able to do what they do. Identifying the core is not simple.
Once you identify your core, you can also add moats around it just like a castle to protect your core and make it unassailable by the competition. Here’s the most important point to remember. Without a strong core, you create a market that somebody else can dominate by meeting the end user needs more effectively.
There was someone recently who had a business invention that solved a $2 billion a year annual problem in the United States that occurred every year at a certain time of year; $2 billion problem. He had a solution to that problem. The problem with his solution was that there was no core competency around that solution.
He could go out and start selling it and make good money. But one of the big players could come right along, throw a couple of million into research and development, like about 50 million, because they got the money and could steal his market overnight. Your core competency is that differentiator. Your core competency is what uniquely qualifies you to deliver that value proposition.
Requirements For A Great Core
Let’s look at some requirements for a great core (a criteria in how to define your core business);
1) It’s got to be unique: difficult for anybody else to duplicate.
You find that in starting to look at the assets of the team and the assets of the company; who you are and what’s unique about you. You want to build on that uniqueness. Domain expertise may be part of that uniqueness. It should be something that would be difficult for others to duplicate.
2) Grows: Increases in strength over time relative to competitors
You want it to grow over time relative to your competitors. Whatever your core is, not only is it unique, you keep growing it and building it. Can you grow that core?
3) Ties directly to your value proposition
It ties directly to your value proposition and all your products and services. It’s very important as a tie to the products and services.
Here are some thoughts on selecting and developing your core;
• What does the customer need?
Whatever core that you’re going to take advantage of, it’s got to be aligned with the needs of the customer.
• What assets do you have?
You want to build from your uniqueness. You want to build from your strengths. That’s why it’s so important to do asset assessments. Who are you and who is the team? We want to build from those strengths. What are you really good at and what do you love to do? Because when you’re passionate about something, you’re going to do it a lot differently than just doing it to make some money.
• What are you really good at and love to do?
• Choose one you won’t get beat in (unique)
You want to choose something that you’re not going to get beat. It has got to be unique. Then you’re going to focus the entire organization around it.
• Build assets to protect this position
In Walmart’s case, their buyers are a piece of it, their trucking fleet is a piece of it, and their stores a piece of it, and they get to keep growing all those grow.You want to keep building up other assets to protect that position of the unique global capability.
• Must satisfy basic customer requirements
It is important that you satisfy your customers’ basic requirements because if you don’t satisfy their basic requirements, then they’re not going to buy from you. But if the basic requirements are satisfied, then that core makes you unassailable.
• Build moats around your core to protect it
What are the things that can you add in that would make it hard to do and hard to assail the position that you’re in?
You need to think about what makes you uniquely qualified to deliver that value proposition to your company or to your customer. Why are you unique? If you can’t find that uniqueness, you could end up creating a market that somebody in your competition could just steal because they can meet the needs better for your customer.
Wrapping Up
What is your core and what kind of moats can you put around it to make it harder to even get to the core and come after your position? That’s what we’re talking about when we’re talking about this whole concept of your core and how to define your core business.