BALANCING CORE AND THE CONTEXT

BALANCING CORE AND THE CONTEXT 

Core activities are the unique skills that differentiate an organization from its competitors and persuade customers of its superiority. Context activities are the processes needed to meet the industry standard, without surpassing it. Getting the balance right between the two is essential for keeping focused on the right things—it is surprisingly tricky.

The idea  

Core activities are known as business idea factors, while context activities refer to hygiene factors. For example, a core activity for Microsoft might be its ability to develop new software, whereas context (hygiene) factors include its ability to process orders and dispatch products. Both are vital, but only one (the core) is where the real value of the business lies.

Shareholders typically want to concentrate on core activities, as these tend to raise share prices. Also, it is possible for businesses to become too involved in the hassle of context activities and lose focus on what differentiates them. Catering to context activities is vital for remaining in a market, while focusing on core activities grows business and increases competitive advantage.

Business strategist Geoffrey Moore recommends balancing core and context by outsourcing or automating context activities. In this way, you can ensure context activities are being handled competently, are cost-effective, and are enjoying the economies of scale of a specialist company. Another benefit is the ability to devote increased investment to gaining a competitive edge within your market.

Many companies, including Cisco, Dell, General Motors, IBM, and Kodak, have outsourced their context processes to allow their organizations to cope with both core and context demands. Sabrix, a leading provider of software for managing taxation, outsourced context processes, with company president and CEO Steve Adams stating: “Outsourcing human resources and parts of our fi nancial IT system has allowed us to keep the right people focused on the right things—things that differentiate our company.” Instead of devoting key employees to working in IT and HR infrastructure, Sabrix was able to focus talented employees on reaching new levels in tax research, software development, and customer support: the core activities for Sabrix.

In practice  

• Be clear about what is core and what is context. Recognize that some of these activities might be dynamic, moving between categories. 

• Be prepared to overcome possible resistance to outsourcing initiatives and the rearranging of managerial responsibility. 

• Delegate core activities from top management to middle management, as they will have a better view of market trends. By delegating responsibility to different parties, you can ensure that no level within the organization becomes overwhelmed. 

• Encourage top-level support to outsourcing and managing context activities.