LEXINGTON, Ky. ― Ninety percent of all businesses fail.
Often, it’s because the businesses move away (diversify) from their core.
“Your core is the set of products, customer support and technologies with which you can build the greatest competitive advantage,” Damien McLoughlin, professor and dean of business at the University College Dublin in Ireland, told those attending the Alltech International Symposium on Monday.
“Each time we take a step away from the core, the likelihood of failure of our growth plan increases,” he said.
So, businesses must ask themselves two hard questions:
- Do you know the core of your business?
- Does your management team know the core of your business?
For farmers, the core may be fairly easy to identify, since most of them are in the business of milking cows or growing crops.
But there are things that can give one farm a competitive advantage over another, such as meticulous record-keeping, cow comfort or milk quality.
McLoughlin offered these four rules for growing businesses or even industries ― in the case of the dairy industry, how to sell more milk, cheese and yogurt.
- Have a well-defined and strongly differentiated core business. One way to determine this, he said, is to get out an Excel spreadsheet and identify the most important customers. What products are they buying?
- Follow the customer. What are people buying? What are the profit pools that surround these customers?
- Grow through adjacencies or initiatives that are adjacent to the core. For instance, a company with nutrition at its core may be able to grow through new food products.
- Build repeatable models. In the case of a successful company, stay with the things that made the company a success in the first place. Often, the founder of a business will keep a keen focus, but the focus can blur when the founder leaves.
At Alltech, the host of Monday’s symposium, the same person who started the company 33 years ago with a $10,000 investment is still running things ― today, with annual sales revenue in the hundreds of millions of dollars, and $1 billion on the horizon.
That person, T. Pearse Lyons, has kept the company focused on its core. The company started with yeast fermentation products at its core and has pretty much stayed there.
Lyons is a strong believer in product branding. Branding adds value, keeps a product from being viewed as a commodity, and builds name recognition and customer loyalty.