Define Your Core Business

Most successful new businesses begin by taking advantage of a new, untapped opportunity that develops in the marketplace. These businesses can grow organically for many years by continuing to take advantage of their formula for success.

Take Nike, for example. During the 1980s and 1990s, Nike repeatedly took advantage of the burgeoning athletic gear market. The company leveraged its presence in athletic footwear to expand into athletic apparel and, ultimately, into athletic equipment many times over. Beginning with running, Nike would eventually expand into basketball, tennis, soccer, golf and other sports by repeating this growth formula over and over again, in the U.S. and internationally.

There are many lessons entrepreneurs and business leaders can learn from Nike’s success, but one key lesson is to define your core business. This lesson appears very straightforward and easy to understand, but we find many businesses never define their core because they were built to take advantage of an initial opportunity. They often lose their way once the opportunity begins to erode and have no long-term strategy for the next phase of growth. As Bill Gates said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” While Nike was successful, Reebok, its chief rival with similar market share, ultimately failed due to inconsistent moves into adjacent markets like soft goods, non-athletic footwear and even boat manufacturing. Reebok never defined its core business and ultimately had no compass to guide its growth efforts.

How can you define the core of your business? We suggest you answer seven questions:

  • Products and services: What do you sell?
  • Customer segments: To whom are you selling?
  • Geography: Where are your customers?
  • Sales channels: How do you acquire customers?
  • Delivery model: How do you serve customers or distribute products and service?
  • Capabilities: What are your competitive advantages ans disadvantages?
  • Brand position: How are you differentiated in the market?

Nike leveraged its core customer segment (athletes), delivery model (retail channel) and brand position (“Just Do It”) to successfully offer adjacent products. Meanwhile, Reebok chose to enter new markets that required new distribution relationships with an inconsistent brand position. Reebok fell into four key traps in defining its core: They allowed adjacent opportunities to distract from their core; they extended too far beyond their core capabilities; they redefined their core as a lifestyle brand as opposed to an athletic brand; and they abandoned their core too quickly. The ancient Greeks inscribed “Know Thyself” in the Temple of Apollo at Delphi. Business expert Stephen Covey said, “The main thing is to keep the main thing the main thing.” Both knew that an easy concept can be so difficult to follow in practice.