Core vs. Adjacency Growth in Digital Businesses (104)

This week’s podcast is about core vs. adjacency growth. This is a good framework for thinking about growth in digital businesses.

You can listen to this podcast here or at iTunes and Google Podcasts.

Most of this is a summary of work by Chris Zook at Bain's strategy practice. I am citing the books:

• Profit from the Core
• Beyond the Core

Most all sustainable growth is based on 1-2 strong cores. 

• A profitable core is centered on the strongest position in terms of loyal customers, competitive advantage, unique skills, and ability to earn profits.

Six growth adjacencies:

• New customer segments:
  • Micro-segmentation of current segments
  • Unpenetrated segments
  • New segments
• New geographies
  • Global expansion
  • Local expansion
• New channels
  • Internet
  • Distribution
  • Indirect
• New products
  • New to world
  • Complements
  • Support services
  • Next generation
  • Just new products / services
• New Businesses
  • New to world needs
  • New substitutes
  • New models
  • Capability adjacencies
• New value chain steps
  • Forward integration
  • Backwards integration
  • Sell capability to outside

How to assess an adjacency move:

• Factor 1: Adjacency is tightly tied to a strong core.
• Factor 2: An attractive adjacency market in terms of profit pools
• Factor 3: The ability to capture economic leadership in that market. Competitive advantage as an attacker and then an incumbent.

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Related articles:

• Growth, ROIC / RONIC and Growth + Sales in Digital Valuation (Asia Tech Strategy – Podcast 102)
• An Intro to Growth and “Birds in the Bush” in Digital Valuation (Asia Tech Strategy – Daily Lesson / Update)

From the Concept Library, concepts for this article are:

• Growth: Core vs. Adjacency
• Digital Operating Basics

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I write and speak about digital China and Asia’s latest tech trends.

I also run Tech Strategy, a podcast and subscription newsletter on the strategies of China / Asia tech companies.

This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.

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