Transfer Pricing Associates

Core business strength and decision making

post Wednesday March 21, 2012


Trek Consulting recently sent out a newsletter discussing divergent thinking in core business strategies. They illustrate an example of a management team defining the business clearly, but with vastly different stakeholder impressions. The stakeholders indicated that the core business that management identified was in fact a sideline businesses to the company’s key success.

Trek Consulting highlights and important point: “it is not a symptom of an out-of-touch team. It's just a symptom of change.” The changes can include a variety of different options, including:

  1. The digital company that had to drop its core offering and double down on the "special projects" that its customers had been bringing to them with a frightening regularity
  2. The service company that realized that it was its sideline projects were the reason it survived the recession
  3. The staffing company that heard from its stakeholders that what they really needed was training for their own people.

Change and innovation have been hot topics since the most recent recession, and businesses know that without the focus on innovation, success may be limited. Businesses must continue learning and continue adapting. This learning coming from many avenues: executives are returning to traditional education programs, learning from other businesses and more, but most importantly, businesses and their management teams must learn from the company’s own customers.

Listening and determining what value customer input has is the most difficult aspect, however. Customer may make bizarre requests, slowly increasing in frequency and scope once they see your acceptance and action upon commentary. When is it time to explore that feedback, and what is it acceptable to maintain the current course? Trek provided key indicators to help solve this problem, and the focus should be on intellectual capital. But what does this mean? What aspects are the most important?

1.     Human Capital: know your people, what they are capable of and willing to pursue

2.     Structural Capital: what skills and knowledge have you perfected in your business? The processes that you have mastered are key to your success as a business

3.     Relationship Capital: what partners and relationships do you currently have in place? Are they in danger with a new direction in your business scope? How can they be involved in a possible new direction?

4.     Strategic Capital: What is your current business model? Does your knowledge go beyond this, or are you currently at an impasse because of your lack of knowledge in another area?

Using these metrics, it should be easier to determine if a possible new business direction or opportunity is a good fit to your current intellectual capital. Does it require minimal additional work? Is it feasible to acquire the missing pieces? How does that affect your current business/relationships/customers?

Keep in mind that a business change doesn’t happen overnight, and it is possible to create a sideline venture while still actively pursuing and managing your current business structure. If you think it could work, execute a test run before jumping in with total resources and manpower behind the effort. Don’t be afraid to risk a small portion of assets to test a new idea – that is how good companies can become great.

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