Even in the best markets, survival and growth can be a
When we looked at companies that made the Fortune 500 list in
1994, our research found that 153 either went bankrupt or were
acquired within 10 years while 283 companies out of the 500 faced
serious threats to their survival or independence during the
decade. However, half of this group met the threats
successfully—many did it by joining the ranks of businesses that
are redefining their cores.
It's an approach that has helped companies in Asia as different
as South Korea's Samsung, the Chinese-financed trading company Li
& Fung, and mobile phone company, Nokia.
Nearly every large enterprise moves through what might be called
the focus-expand-redefine (F-E-R) cycle.
In the focus phase, companies concentrate on building their core
business to its full potential.
In the expand phase, they take advantage of these capabilities
and market positions to move into adjacent markets. But at some
point, many companies find growth and profitability starting to
This is the time to redefine the core. Today, there's little
doubt that the F-E-R cycle is in a fast-forward mode as companies
face a host of threats—new competitors shaking up entire
industries, new technologies lowering costs and shortening product
life cycles and capital, innovation and management talent flowing
more quickly around the globe.
Redefinition today is essential. But the issue for executives is
how to do it. Some companies resort to moves like pursuing a big
merger or leaping into a hot new market.
But others have found a far less risky alternative—uncovering
hidden assets that have been overlooked, undervalued or
underutilized and redefining their company around them.
Most hidden assets fall into three categories—untapped customer
insights, undervalued business platforms and underexploited
capabilities. Each can provide the foundation on which a company
can redefine its core.
Untapped customer insights can help companies that have taken
customers for granted. Many executives readily admit to losing
touch with customers.
In fact, in a recent series of business seminars, less than 25%
of participants agreed with the simple statement: "We understand
Consider mobile phone maker Nokia, which entered India in 1996.
It faced tough market conditions, including intense competition
from established players, as well as slow mobile phone growth.
Undeterred, Nokia carefully developed customer insights to adapt
products to Indian market needs.
It launched a low-priced, multilingual handset targeted
primarily at Indian consumers, who often conduct business in two
The company also created the Nokia 1100 to attract rural
customers—a mobile phone that serves as an alarm clock, a torch
(for power cuts), and a radio. This hardy device became a best
seller in India and abroad. In just three years, Nokia grew its
Indian market share for GSM phones from 46% to 79%.
Undervalued business platforms also can fuel a
After struggling throughout the 1990s, Samsung analysed its
assets and came to the surprising discovery that its core
semiconductor business was actually an undervalued business
Samsung flew in plane loads of technical consultants with the
goal of becoming the world's best-practice producer at each stage
of semiconductor manufacturing.
Working diligently, Samsung went from "average" to "best" at
cycle time for building a new semiconductor fabrication facility,
as well as the fastest to get high yields from those plants.
In the process, Samsung liberated the potential of its
inefficient semiconductor platform to fuel its high-end consumer
electronics business—and at just the right time. It was also one
of the few companies in this sector to possess all the needed
technologies, and at a low cost.
Meanwhile, it began to emphasise innovation, going from being a
laggard in the filings of patents to one of the world's
Underexploited capabilities represent the last and often the
most obscure hidden asset. Given resources and time, companies can
combine capabilities to create new properties and powers, with
enormous commercial power for change or renewal.
When Li & Fung, one of the first Chinese-financed trading
companies, reached its growth limits, it reinvented itself by
exploiting a hidden asset in logistics: its knowledge of and
proprietary access to the broad, complex maze of specialised
manufacturing plants throughout China.
Over the past 25 years, Li & Fung has used this intricate
knowledge to turn itself into one of the leading
logistics-management companies in the world.
Replicating the success of these Asian companies starts by
taking five steps.
- Define your most loyal and valuable customers.
- Figure out key sources of differentiation, whether they are
strengthening or eroding, and why.
- Focus on your industry's profit pool and determine where
profits can be earned.
- Assess your company's capabilities.
- Probe your organisation's culture and ask yourself whether that
culture is ready for change.
Finding hidden platforms for growth may also require new ways of
looking at your business and the environment in which it competes.
Try asking frontline employees for their perspective; they deal
with customers every day. Look for ideas outside your four
Some of the most successful corporate rejuvenations are
innovations from another business unit, vendor, customer or even
In a world of constant change and distractions, keeping the
future in view has never been more challenging.
Management teams that understand their core, and begin to
redefine early enough, still face a difficult task. But with such
foresight and action, they substantially increase the odds of
Chris Zook is a Bain & Company partner based in
Amsterdam. He is the author of Unstoppable: Finding Hidden
Assets to Renew the Core and Fuel Profitable Growth (Harvard
Business School Press, 2007). Edmund Lin and Till Vestring, both
based in Singapore, are partners in Bain's Southeast Asia