August 5, 2014 | Dr. Stephen Timme
I came across this funny posting on the internet about “what were they thinking?” -which got me to thinking… Acquisitions can be a value-enhancing strategic move. This is great when a corporation is looking to make their supply chain more efficient or when they’re trying to gain market share by purchasing companies that sell similar or complementary products or services. However, sometimes a corporation will get overly focused on expanding and lose sight of their core competencies. Using the sign above as an example; can you tell if they are mainly a taxidermy or cheese store? Would you really want to get cheese from a place that specializes in taxidermy? Corporations that over-extend into a market they have no experience in can lose their identity, their mission, and dilute their brand. In much the same way, sales personnel can lose sight of their product’s or service’s core competencies. I’m guilty of this myself as a former sales person. We get so caught up on the flashy features of a product that we lose track of what the core competencies are or what the primary function is of the product we’re trying to sell. For example, if your product’s core competency is to lower a client’s selling, general & administrative expenses, don’t focus on the feature of its easy-to-use software. Or if you mention the feature, bring it back to cutting costs. Explain how the software’s ease of use will cut down on training expenses of new employees or how it can reduce switching costs. Working in the freight industry I had to learn this the hard way. My company was known for having an easy to use online pick up system. I would explain to the warehouse manager how great our website was, even doing a live demo of how to schedule a pick-up. I would get positive feedback from the client but when it came down to signing the paperwork, the answer was often, “we decided to go with someone else.” My problem wasn’t that I explained one of our features - it was because I lost sight of our core competency. The warehouse manager’s main concern was not the use of our website but making sure that shipments were handled with care and delivered on time. If you’re unaware of what your core competency is, take a look at where you excel. If you’re the best darn taxidermist on this side of the Mississippi and people travel hundreds of miles for your technique, but you really like cheese, don’t add a cheese store to your core business. A better acquisition might be a hunting supply store or a meat processing business. This would help to create foot traffic for the taxidermy (supporting your core competency) and you already have some experience in this industry. You can still own the cheese store, but let it be under management of someone whose core competency is making cheese and for goodness sake, let them have their own sign! So what are some of your core competencies? Professional? Personal?
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I came across this funny posting on the internet about “what were they thinking?” -which got me to thinking… Acquisitions can be a value-enhancing strategic move. This is great when a corporation is looking to make their supply chain more efficient or when they’re trying to gain market share by purchasing companies that sell similar or complementary products or services. However, sometimes a corporation will get overly focused on expanding and lose sight of their core competencies. Using the sign above as an example; can you tell if they are mainly a taxidermy or cheese store? Would you really want to get cheese from a place that specializes in taxidermy? Corporations that over-extend into a market they have no experience in can lose their identity, their mission, and dilute their brand. In much the same way, sales personnel can lose sight of their product’s or service’s core competencies. I’m guilty of this myself as a former sales person. We get so caught up on the flashy features of a product that we lose track of what the core competencies are or what the primary function is of the product we’re trying to sell. For example, if your product’s core competency is to lower a client’s selling, general & administrative expenses, don’t focus on the feature of its easy-to-use software. Or if you mention the feature, bring it back to cutting costs. Explain how the software’s ease of use will cut down on training expenses of new employees or how it can reduce switching costs. Working in the freight industry I had to learn this the hard way. My company was known for having an easy to use online pick up system. I would explain to the warehouse manager how great our website was, even doing a live demo of how to schedule a pick-up. I would get positive feedback from the client but when it came down to signing the paperwork, the answer was often, “we decided to go with someone else.” My problem wasn’t that I explained one of our features - it was because I lost sight of our core competency. The warehouse manager’s main concern was not the use of our website but making sure that shipments were handled with care and delivered on time. If you’re unaware of what your core competency is, take a look at where you excel. If you’re the best darn taxidermist on this side of the Mississippi and people travel hundreds of miles for your technique, but you really like cheese, don’t add a cheese store to your core business. A better acquisition might be a hunting supply store or a meat processing business. This would help to create foot traffic for the taxidermy (supporting your core competency) and you already have some experience in this industry. You can still own the cheese store, but let it be under management of someone whose core competency is making cheese and for goodness sake, let them have their own sign! So what are some of your core competencies? Professional? Personal?
