Central Question: How can I avoid the sucking sound of the core?
One-Sentence Answer: Active leadership, new voices, safe spaces, and smart borrowing can help protect innovators from the sucking sound of the core.
One of the most powerful—and most dangerous— management concepts introduced in the last fifty years was contained in “Core Competence of the Corporation,” a 1990 Harvard Business Review article by Gary Hamel and C. K. Prahalad. The concept is powerful because it has helped hundreds if not thousands of companies become very clear about what they can do that makes them special. It is also very dangerous, because the more a company focuses on what it perceives as its core competence, the more it risks running into what we’ve termed the “sucking sound of the core.”
I put my grandfather on the Mount Rushmore of Innovation to serve as a reminder of the double-entry notion of corporate capabilities. Remember, every corporate capability has a corresponding disability. This is why it is so important to remember innovation master Vijay Govindarajan’s advice of forgetting some core capabilities and learning new ones.
The more successful you are, the greater the pull of the core. As a simple analogy, think about learning a new language. When my family and I moved to Singapore, my then four-year-old son started taking immersive Mandarin classes every afternoon for an hour. He quickly picked up the language, because he didn't have to unlearn complex grammatical rules. It is much harder for me to get his level of proclivity, because I have to work to unwire a lifetime of grammar lessons.
Breaking the sucking sound of the core is hard, but it is possible. One great example is Dow Coming’s Xiameter.
I love the example because the story isn't widely known, even though it has appeared in a number of Innosight-authored books (the best detailed example is in Seizing the White Space). Further, it provides rich instruction on how to break the sucking sound of the core.
Dow Corning epitomizes the Midwest of the United States. The people are smart, unfailingly polite, and passionate about the production and distribution of silicone-based products. These products are used in thousands of applications, ranging from personal-care products like shampoos to sealants on the space shuttle. Dow Corning is one of three major employers in Midland, Michigan (The Dow Chemical Company and Chemical Bank being the others), and it plays a critical role in the town.
In the early 2000s, Dow Corning identified a threat that keeps many Western executives up at night — the specter of commoditization driven by Chinese competitors. The company saw that it was losing market share in the least demanding tier of its industry. Dow Corning historically competed by having scientists who would work alongside its customers to tailor-make its silicone products for their specific needs. While the firm’s large volumes made it the industry’s low-cost producer, the overheads involved in its basic model rendered Dow Corning noncompetitive against pure price-based competitors.
To its credit, Dow Corning recognized the threat. It also recognized that responding to the threat would require a combination of organizational and business model innovation. It formed a team under the guidance of then controller Don Sheets. The team’s charter was to find a way to flip the commoditization threat into a growth opportunity.
The model Sheets and the team developed involved, in essence, a new sales channel. Instead of having a direct, consultative sales process that required high-cost scientists, customers go to the Xiameter Web site and order chemicals online. Instead of ordering any amount of chemical, customers could only order in bulk. And instead of having complicated price negotiations, Xiameter customers would get market-competitive prices. The business was a massive commercial success for Dow Corning, quickly returning the company’s initial capital investment and helping it grow both its low-end and its high-end business.
Reviewing the case history helps to highlight four elements that helped the team ward off the sucking sound of the core:
1. Active senior leadership: Sheets eventually rose up to be Dow Coming's chief financial officer. The project was started by then Dow Corning CEO Gary Anderson. Stephanie Burns, who replaced Anderson in 2004, actively championed the effort.
2. Not the usual suspects: Sheets sought a specific type of team member, one that wouldn't be afraid of doing things differently. He had an interesting approach to recruiting Dow Corning people to the team. When he met a prospect who seemed to have potential, he'd offer the person the job on the spot. Those who took it had the ability to follow the adage of Facebook CEO Mark Zuckerberg: “Move fast and break things.”
3. “Safe space”: Dow Corning intentionally kept the Xiameter effort largely separate from the core business, which allowed it to “forget” key elements of Dow Coming’s core capabilities.
4. Smart borrowing from the core: Xiameter had a new logo, sales channel, order flow, and so on. It did utilize the same enterprise planning system that the core business used, because it found that the rules embedded in this system enabled its business. The team followed Govindarajan’s advice about borrowing — instead of looking for cost savings, they looked for things that would provide competitive advantage.
The last point bears repeating. Instead of looking for cost savings, they looked for things that would provide competitive advantage. Capabilities are double edged. Every asset has a corresponding liability. And nothing is free. Borrowing a core brand means adhering to whatever guideloines exist around that brand. Borrowing the financial tools from the core business means taking whatever implicit assumptions lurk beneath that model.
I’ve seen the sucking sound of the core derail a number of promising growth ventures. The right leadership actions, however, can let a venture break free and realize its inherent potential.
How-to tips * Create a detailed blueprint of what you should borrow and what core capabilities you absolutely must forget.
* Identify two historical efforts that succumbed to the sucking sound of the core and subsequently had less impact than they would have otherwise.
Reprinted by permission of Harvard Business Review Press. Excerpted from The Little Black Book of Innovation.
THE LITTLE BLACK BOOK OF INNVOATION
AUTHORS: Scott D. Anthony
PUBLISHER: Harvard Business Review Press
PRICE: Rs 750
