Every company eventually faces a plateau in growth, prompting a critical decision: to overhaul the business model and pivot to a new core business or not. Successfully navigating this transition can transform a company from being at risk to becoming increasingly dominant. Surprisingly, the most successful transitions don't necessarily involve diving into new markets or adopting cutting-edge technologies. Instead, they often capitalize on the company's underappreciated assets—resources that were previously overlooked or underused, but are then repositioned at the heart of the new business model. Recognizing the right moment to redefine your core business involves a deliberate process.
Understanding market dynamics and the pace of change is crucial for businesses aiming to achieve sustainable growth. The Focus-Expand-Redefine (FER) cycle is a framework that helps companies navigate through different stages of growth and market forces. In the Focus phase, businesses establish their core differentiation and strive for superior cost economics. The Expand phase sees companies venturing into adjacent markets, leveraging their core strengths to grow. The Redefine phase involves seeking new profit opportunities and investing in new capabilities to maintain competitive differentiation. Companies should continuously assess their position in the FER cycle to make informed strategic decisions. For instance, during the Focus phase, the priority is to define the core business, differentiate from competitors, lower costs, and discourage new entrants. In the Expand phase, the goal shifts to building on the core's economic strength and exploring new markets, customer segments, or distribution channels. The Redefine phase requires identifying future market targets, developing differentiation strategies, and investing in new capabilities. Marvel Entertainment's turnaround from bankruptcy in 1996 to significant profits by 2005 exemplifies the effective application of the FER cycle. Marvel shifted its focus from comic books to leveraging its characters in the film industry, recognizing the nostalgic attachment of its audience. The need for strategy redefinition has increased as industries face more turbulence. Bain & Company's analysis suggests that the number of turbulent industries has risen from 15-20% in the 1970s to about half today. This acceleration is driven by global competition, technological advancements, and the rapid movement of capital and talent. Successful transformations are often modular, targeting leadership economics in the new core, and building on hidden assets. Recognizing the need for change, leveraging hidden assets, and redefining the core at the right time are essential for companies to thrive amidst constant change. As Chris Zook of Bain & Company notes, many companies possess hidden assets that can be the key to unlocking new growth opportunities.
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