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The condition of the core business is the central character in all the dramas concerning adjacency moves. Even the most attractive growth opportunity can turn unattractive, unrealistic, or even destructive when bolted onto the wrong core business, or onto the right business at the wrong time.

Core businesses differ widely in their abilities to support a major new growth initiative. The three critical dimensions along which they vary are competitive position, market dynamics, and financial performance. It is critical to understand exactly how your core business is positioned along the dimensions in this simple matrix.

Full potential through the power of fewer things
Choosing the right path
Most companies participate in many businesses, though one or two dominant cores usually deliver the true economic profit. These strong cores are often surrounded by weaker positions that have their own adjacency opportunities. If you have a portfolio of businesses, it is critical to have a common framework like the axes of the matrix and a clear point of view on the relative position of each of the different cores. The odds of adjacency success vary so much by position in the matrix that this should be a precondition of decisions to fund new growth initiatives.

When looking at the mass of examples, interviews and statistical analysis of success, a few universal laws of gravity emerge:
  1. Major adjacency moves are virtually never the salvation for a very weak core in a distant follower competitive position.
  2. For followers, the most viable paths to the creation of value entail consolidating with a competitor or finding deep within the business a strong, profitable core where the principles of full potential and adjacency expansion can be applied. In a sense, "shrinking to grow."
  3. Adjacency moves are critical to the survival of businesses with a melting core.
  4. Businesses that have a strong core but are severely underperforming operationally and financially should almost always work on attaining full potential of the core first.
  5. Businesses that have a strong core or a strong leadership position, but are close to full potential are probably entering a phase in which the quality of their adjacency moves will shape their future
  6. Companies with a portfolio of core businesses should ask themselves whether they are defining the boundaries of those cores correctly, whether they really understand the competitive position of each business, and where each fits in the positional matrix.
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