Core and Context

What is it?

Core and Context is a distinction that separates the few activities that a company does that create true differentiation in customers eyes (CORE) from everything else that a company need to do to stay in business (CONTEXT).

Geoffrey Moore articulated this framework in his great book “Dealing with Darwin”, arguing that a company should manage these two different sorts of activity in fundamentally different ways.

 

 

 

 

 

 

 

 

 

 

 

Products and capabilities tend to rotate around this matrix clockwise:

  • New Products start in the bottom left quadrant, since the reason for their existence is to create differentiation for customers but have no P&L impact initially. This is where the Minimum Viable Product mindset of the Lean Start-up rules, with the focus on learning and innovation, not worrying about the robustness needed to scale successfully
  • Successful new products will swell in profitability, becoming mission critical. The management focus changes from innovation to the hard-nosed practicality needed to deploy this innovation robustly at scale across the entire company
  • Nothing lasts forever. Customer needs evolve and competitors are racing hard to match your innovation. The innovation stops differentiating and becomes a hygiene factor. The management approach needed is to manage the product – the tactical tweets and turns needed to get the most out of a big product differentiation at full maturity
  • Finally, with the innovation commoditised, it ceases to matter for customers or to the company. Then is the time to OFFLOAD, focusing on  cost reduction, standardisation and outsourcing to companies where this activity would be core to them and could give it full attention

The company needs to constantly fight organisational entropy, actively removing activities from context and adding to core.

When is it useful?

This concept is useful during strategic analysis of your portfolio. Analyse your products, channels, customer segments or geographies to identify which of the four quadrants it is in. Then check – do you have the right management approach for each one?

Secondly, once you have identified your strategy, apply this framework to it as a checklist to identify how to manage the different initiatives that are launched.

An Example?

An example is customer data analysis in an FMCG company.

  • INVENT. Initially a “skunkworks” team was set up in one market, and they played around with different approaches to CRM, matching insight with big data analysis to identify patterns. After a year of experimenting, they learnt which digital prompts triggered a consumer purchase
  • DEPLOY. The company dedicated a separate team to deploying this in all major markets. They managed IT projects to ensure it worked with local market systems, ran training workshops on localisation for marketers and planned reinforcing communication from the Marketing Director. Initially, they deployed some of the insights to realise quick wins and build credibility with in-market teams. Metrics were established to course correct and identify markets with best practices to share.
  • MANAGE. Over time, customer data analytics was regarded as just another tool in the marketers armoury. Competitors were doing it, it was taken for granted that every digital touchpoint was captiured in a unified big data platform. Even though it was mission critical for the company for thie data analytical machine to run well, it no longer created much edge. In response, the company centralised the team, building one shared service cwentre to manage the workflows as efficiently as possible
  • OFFLOAD. Finally, the company was approached by their cloud hosting company looking to enhance their value -added . Because the FMCG company  had invested in standardising and simplifying all the processes, it was very cost efficient to hand-over, there was no “fat” permanently baked into the outsourcing margins.

I want to know more

Start here, if you like it read Geoffrey Moore’s book, Dealing with Darwin