Pushing out the boundaries of a core business is among the most difficult management challenges. The typical odds of success are low: only one out of four adjacency initiatives prove to be successful.
In Beyond the Core, Chris Zook outlines an expansion strategy based on putting together combinations of adjacency moves into areas away from, but related to, the core business, such as new product lines or new channels of distribution. These sequences of moves carry less risk than diversification, yet they can create enormous competitive advantage, because they stem directly from what the company already knows and does best.
The promise of growth lies in methods that allow you to decide correctly, to tilt the odds in your favor, and to control the cost of failures when they inevitably occur. Small improvements in performance along these dimensions can increase the overall growth rate of a business considerably. If a company in a 3 percent growth market achieved the potential from its adjacency moves 30 percent faster, handled three - not two- adjacency initiatives per year, and had a success rate of 60 percent instead of 30 percent, then the company would nearly double its growth rate to 7.1 percent from 3.9 percent.