Romancing the core

December 11, 2006
Ronald B. Schilling, PhD
Ronald B. Schilling, PhD

The key to any company’s strategy is an understanding of its core technology and how the company plans to expand that core. To remain a leader demands mastery of this core-expansion game, as “he who has the largest core wins.”

The key to any company's strategy is an understanding of its core technology and how the company plans to expand that core. To remain a leader demands mastery of this core-expansion game, as "he who has the largest core wins."

Growing the core can be done in a number of ways - internal development, partnerships, mergers/acquisitions - but the important thing is to have a core growth strategy in place.

A strategic tool to help in this process is "the core tool." Often the core strategy is spelled out as part of a company's vision statement (DI SCAN, 7/3/06, Strategic thinking tools). By its incorporation in the vision statement, the core strategy is recognized as critical to achieving the company's purpose.

Strategic relationships may be partnerships between the company and independent firms, between a university and the company, or between divisions within the company, which commonly develop after mergers and acquisitions. The key is to understand how each relationship adds to the core technology such that the resulting core growth will clearly keep the company in a leadership position.

Relationships with independent companies can be vendor/customer, where the company sells products to a customer (e.g., an OEM) and is simultaneously involved in joint development with that customer associated with the products being sold. These relationships almost always get priority, since product sales are involved. If all intercompany relationships are of this variety, however, and they do not add to core growth at the same time, then the company may have trouble maintaining a technology leadership position. A strategic balance is always required. Sales put bread on the table today. Core growth ensures lots of bread for the future.

Let's look at some examples of a core strategy. Suppose we have a product that is changing very rapidly. This can occur when there is little agreement among customers as to what they are looking for, such as with electronic medical records, for instance. What is a reasonable strategy for a company looking to participate in EMR without going all the way to a complete product design?

Referring back the core strategy, let's consider an EMR-enabling technology as the example company's core. By working with a number of key university (or other) sites that want to do their own development because no available EMR satisfies their requirements, the company has an opportunity to expand its enabling technology. By selecting the university sites strategically, it can work with each site and gain from each joint development.

In the end, the company will optimize its core growth, which is the name of the game. For EMR development, this would mean expanding the enabling technology based on the results of joint development activities. Eventually, the enabling technology will become broad enough to serve the needs of large swathes of the market and the time for product launch arrives.

The core tool has a wide variety of applications. An interesting one is in organizational planning. Let's consider an individual example, rather than a company one, with the core a specific position the individual desires to attain in the future: for example, the position of CEO. With "CEO" in the core position of the figure, the activities that pertain to the job responsibilities of this position (e.g., finance, sales, service, development, research, marketing) form the outer ring in place of the numbered strategic relationships. For each segment, the individual would color code the portion of each activity in which he or she is experienced; e.g., based on a finance position held in the past, half the finance section might be colored. A current position as CFO would mean 100% color shading.

This approach distinguishes strengths (in this case, meaningful experiences) from weaknesses (gaps that need to be filled). It should be noted that not all of the activities need to be filled to achieve the CEO position, but the tool is very useful in working with the human resources department to plan strategically for the future.

In summary, the core tool provides a means for focusing on the critical steps required to optimize a "core," whether it is a technology (the largest core wins) or a management position (the best prepared candidate wins).

Ronald Schilling, Ph.D., is an editorial advisor to Diagnostic Imaging and president of RBS Consulting in Los Altos Hills, CA. Comments can be addressed to ronald11341@aol.com.