Defining Core

On the Elevator

Have you ever ridden an elevator with an important business colleague and wished you could quickly and eloquently communicate your way of thinking? This quick summary of “Defining Core” can help you out. Before beginning the important process of defining core processes, understand your company’s goals and have a strategic vision and plan in place. To grasp company goals, leaders should ask themselves these questions:

• Where is the company headed?
• How will we get there?
• What is the science of our business?
• What values shall be practiced?
• How will we measure success?

By addressing the “Where” portion of the goals, leaders can create the company’s strategic vision. When company leaders work to answer the “How” portion of their company’s goals, they are also defining the company’s strategic plan, or mission. Completing these tasks makes it easier for company leaders to step back, evaluate the results, and then set about defining its core competency.

The process of defining “Core” requires awareness of the four types of business functions within a company—primary core, secondary core, primary non-core, and secondary non-core. Primary core functions are the things that differentiate your company in the marketplace, and more importantly, they are the reason your customers come to you. Secondary core functions are those things that bring value to your customer and must be done well, but at the same time are not visible to your customer. Primary non-core functions are those that can affect your relationship with your customer but are not what your business is about. Secondary non-core functions are those processes that are necessary for running it but do not affect your company’s success.

To properly define “Core,” develop a team made up of company leaders who understand the strategic nature of the vision. Breaking the company up into discrete processes is one of the first tasks this group must undertake. These discrete processes will become more defined further down the road and may be consolidated or defined even further, depending on the availability of external service providers. This task helps break down the decision into manageable chunks defined by the knowledge of their existence as legitimate successful businesses outside of the company.

Once this process is complete, the discussion of defining “Core” can begin. There are some definite questions that must be asked in order to understand and evaluate “Core.” These questions are:

• Who are our customers?
• How do the functions we have defined touch the customer? Or do they touch the customer?
• What is it that our customers know us for most?
• What is it that our company does that provides the most value to the customer?
• What is it that we do that may be difficult for our competitors to imitate?
• Would the individuals running these divisions ever run our company? Does or could the business they perform exist out side of our company? Is there an example of one outside of our company?

Answering all of these questions for each of the business processes you have defined will help you understand if they are good targets for outsourcing evaluation. Once you have defined “Core” and its supporting processes, there needs to be consensus around which to evaluate outsourcing.

It must be noted that just the knowledge that a business processes is being evaluated could cause headaches within management. Correct, consistent and timely communications to the right people must be made and overall moral monitored. The basic reasons for performing this evaluation are:

• It is critical in understanding the possible benefits of outsourcing;
• It develops a baseline for objective decision-making;
• It defines the businesses processes, their value, and their cost;
• It helps determine whether to outsource strategically, which is when an organization works with one or more suppliers in order to effect a significant improvement in business performance, or whether to contract, which is where one basically delegates the responsibility to an organization and then lets them get on with it. 

This is an excerpt from the upcoming book, Logistics and Manufacturing Outsourcing: Harness Your Core Competencies from Tompkins Press.