Wednesday, December 5, 2012

Core vs Context: Three Common Myths and Three Useful Tools

The phrase "core vs context" is part of the common vernacular in the business arena.  However, sometimes, the things we're sure of could use a closer examination.  It's in this spirit of seeking to understand that I re-examined Geoffrey Moore's core vs context model in his book Dealing with Darwin. First, a bit of background.

There are Two Major Distinctions
The 4 quadrants are based on 2 major distinctions:
  1. Mission Critical vs Non-Mission Critical measures whether a process shortfall creates a serious and immediate risk to revenue.  If it does, it's Mission Critical. 
  2. The Core vs Context categorization addresses whether the process creates a differentiation that wins customers.  If it does, it's Core.  If it doesn't, it's Context. Both Core and Context are Mission Critical but Context processes do not provide a strategic differentiation from competitors.

There are Four Quadrants
  1. Invent: Revenues aren't big enough to be mission critical but inventing is core to the company's future new products.
  2. Deploy: When the innovation is ready to be deployed it moves to this mission critical core quadrant.
  3. Context: The focus here is on managing mission critical processes as context at scale.
  4. Offload: Offloading non-mission critical processes frees up resources to move back to Quadrant 3 and therefore resources in 3 to move back to 2 and so on.
Three Common Myths
  1. "Core" means the majority of our revenue comes from the core.  Actually, "Core" means that the process is mission critical and the company expects the highest returns because the initiative gives them distinct competitive advantage. 
  2. If my company is looking at Core vs Context, I'll lose my job.  Ideally, you'll be able to move up the quadrant scale.  If you're currently working in 4, look for opportunities in 3.  You'll know a lot about downstream impacts that will likely be useful.  Similarly, if in Context, look at opportunities in Core. You're understanding of how to manage mission-critical processes at scale will help when deploying a differentiation at scale.  You could also move the other way.
  3. Offloading and Out-tasking are the same thing.  Out-tasking means taking some number of the tasks performed in a role or department today and moving them to an outsource which frees up internal capacity for other things.  Offloading is much larger in scope.  A good example would be the recent divestiture of the Juarez manufacturing operation where the responsibility for manufacturing the product was outsourced.
Three Useful Tools
Geoffrey Moore addresses some of this but not all. When you're working on something whether product, project or process, it's useful to know which quadrant you're working in because that suggests that certain tools will be more useful than others:
  1. When managing either in the Invent or Deploy quadrants, Agile development methods help with the uncertainty that goes along with going from the first time a new product, process or project is introduced to scale. Introducing products into new markets such as Brazil or Russia are useful examples.
  2. When managing in the Context quadrant, Moore covers the 5 levers of driving cost out of the process.  Centralizing processes under one roof and standardizing them is followed by modularizing and optimizing the process. Consolidating all project and program management functions in one place and standardizing the program management lifecycle across all functions would be a potential example.
  3. When managing in the Offload quadrant, the focus is more on de-risking the process by setting clear expectations with outside sources through service level agreements or contractual agreements.  The recent divestiture of the Cisco Scientific Atlanta Juarez manufacturing operation is an example.
If you'd like to know more, Cisco figures prominently in Moore's book, Dealing with Darwin.

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