This document discusses strategies for companies to pursue adjacencies - new business opportunities related to their core business. It finds that success rates decline the further an opportunity moves from a company's core. Different types of adjacencies are described that could radiate from the core, such as new products, services or geographies. When evaluating adjacency moves, companies should consider if the opportunity builds on core strengths, drives profits, and allows for leadership. A company's ability to transform through adjacencies depends on having a strong core, pursuing related opportunities, and processes to manage complexity.

1. Adjacency Moves from the
Core
for Growth
David Sidhu
David Sidhu & Associates

2. 2
Agenda
 Success Rates of Different Strategies When Rules of The Core Change
 Many Types of Adjacencies Can Radiate from the Core
 Evaluating Adjacency Moves
 Assessing Distance From the Core
 Core Vs. Adjacency Determining the Degree of Integration
 Success Declines with Distance from the Core
 Transformation Through Adjacencies: The Four Multiplier Factors

3. 3
Success Rates of Different Strategies When
Rules of The Core Change
Defend status quo
(in turbulent industry)
Odds of success are 5 – 10%
Big-bang
acquisition/transforming move
Odds of success are 5 – 10%
Diversify to hot market
Odds of success are 10 – 15%
Redefine around unexploited
capabilities
Odds of success are 20 – 30%
Redefine around hidden
customer assets
Odds of success are 25 – 35%
Redefine around undeveloped
(existing platforms)
Odds of success are 30 – 40%
Source: Chris Zook: Unstoppable

4. 4
Visualizing
the ideal
Evaluating
Adjacency
moves
Balancing
adjacency moves
with the core
Executing
adjacency
moves
Transforming the
core through
adjacencies
Source: Chris Zook: Growing Beyond the Core

5. 5
Many Types of Adjacencies Can Radiate from the
Core
New to
world
Complements
Support
services
New
Geographies
New
Products
New Businesses
New Value
Chain Steps
New Customer
Segments
New channels
New
segments
Un-penetrated
segments
Micro-segmentation
Of current segments
Local
Global
expansion
Forward
integration
Backward
integration
Sell capacity
outside
New-to-world
needs
New
substitutes
New
models
Internet
Distribution
Indirect
Source: Chris Zook: Growing Beyond the Core

6. 6
Evaluating Adjacency Moves
 Success Factor One: The Best Adjacencies Build on and Reinforce the
Strongest Cores
 Success Factor Two: Drive Adjacencies Toward the Most Robust Profit
Pools
 Success Factor Three: Insist on the Potential for Leadership Economics
Source: Chris Zook: Growing Beyond the Core

7. 7
Assessing Distance From the Core
 Customers: Are they the same as, or different from, those currently
served?
 Competitors: Are they the same as, or different from, those currently
encountered?
 Cost Structure: Is the cost structure (infrastructure) the same or
different?
 Channels of distribution: Are these the same or different?
 Singular capability: If there is a singular capability (brand, asset,
technology) that gives the core business its uniqueness, then is this
relevant in the new opportunity?
Source: Chris Zook: Growing Beyond the Core

8. 8
Core Vs. Adjacency Determining the Degree of
Integration
Complete
separation
Back end
separation
and front end
integration
Front end
integration
and back end
integration
Complex
hybrid
Product
management
model
Complete
Integration
Most
integrated
Mixed
degree of
integration
No
integration
Determining Factors
Economics Decisions
Culture and
People systems
Difference
acknowledged
around common
core principals
Monolithic
culture and
common systems
Independent Separate cultures
and norms
Complex
mixture of
independent and
joint decisions
Joint
decisions on
all topics
No Sharing
<50% customer
sharing
<50% cost sharing
50% cost and
customer
sharing
<75% cost
and customer
sharing
Source: Chris Zook: Growing Beyond the Core

9. 9
Success Declines with Distance from the Core
3 Steps
2 Steps
1 Steps
Core
Diversification
Declining odds of success
Economicdistance
fromcore
37% 28% <10%
Source: Chris Zook: Growing Beyond the Core

10. 10
1. Strong or
dominant core
2. Adjacencies that
satisfy criteria
3. Repeatable
adjacency
formula
4. Replicable adaptable
processes to manage
adjacencies
Transformation Through Adjacencies:
The Four Multiplier Factors
• Potential leadership economics
• Robust profit pool
• Relatedness to the core
• Complexity management
• The new math of execution
• Exit management
Source: Chris Zook: Growing Beyond the Core

11. 11
Summary
 Success Rates of Different Strategies When Rules of The Core Change
 Many Types of Adjacencies Can Radiate from the Core
 Evaluating Adjacency Moves
 Assessing Distance From the Core
 Core Vs. Adjacency Determining the Degree of Integration
 Success Declines with Distance from the Core
 Transformation Through Adjacencies: The Four Multiplier Factors

12. Questions?
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