From the President’s Chair

Understanding the core of your business is the key to success


What is core?

The question itself sounds dangerously rhetorical, and the answer is absolutely relative. Not exactly a good combination for what is arguably the most important question in business.

Understanding its etymology inspires, in me at least, a greater appreciation for the significance of its meaning when used in the context of business. Derived from the Latin word, cor, which means “heart,” we typically see “core” used with other terms to describe aspects of an organization’s activities considered central to its operations. Core offering, core competencies, core products, core values, core purpose… You get the picture. These terms and every other variation thereof are used by organizations to communicate, both internally and externally, what is really important for them.

It would seem that the ever-expanding vastness of these business-related “core” terms, which started gaining popularity in the late 1980s, implies a perceived need by the business community to get back to basics — ideologically as well as pragmatically. But the reality is that the idealism that we have attached to this concept of centrality in business is not exactly representative of the original intention or meaning behind core terms. The original core concepts in business were created for far more functional purposes.

By the second half of the 20th century, “conglomeration” had become the model for what was understood to mean a diversified company; a mixed mass or collection of often completely unrelated business models selling completely unrelated products and services in completely unrelated industries. Price and performance of then “current” end-products were the only litmus tests for gauging a company’s competitiveness, or determining whether or not a conglomerate would absorb a new business or build a new business unit into the mass.

But advances in technology were creating rapid-fire changes in the business landscape, eliminating boundaries between new markets, end-users and competitors on a global scale. The Digital Revolution of the 1970s increased the speed of business exponentially making it much more cumbersome for companies to meet changing market demands and maintain competitive advantage. Business owners were forced to rethink their approach, shifting their focus from standard processes and output alone toward what coauthors C.K. Prahalad and Gary Hamel referred to in a 1990 Harvard Business Review article, The Core Competence of the Corporation, as deeper rooted “core competencies” and “core products”.

According to Prahalad and Hamel, core competencies and products are what truly distinguish companies from amongst their competitors, and are what appropriate end-products are ultimately built upon. Companies capable of looking inward (remember: core…) beyond the short-lived competitiveness of end-products, toward their own unique competencies were better prepared to adapt to changing market demands, take advantage of new business opportunities, and maintain their competiveness long term.

Serendipitously, however, in the process of refocusing inward, this new and pragmatic way of looking at business was also giving way to a more thoughtful, more meaningful view as visionary leaders delved deeper into the heart (remember: cor…) of their businesses. Gradually, this new emphasis began to permeate throughout the business community as captured by Jim Collins and Gerry Porras in their 1994 book, Built To Last: Successful Habits of Visionary Companies. Core competencies and core products opened the door to core ideologies, core values and purpose. By the mid 1990s, many business owners were contemplating the reasons for their businesses’ existence beyond profit, discovering what truly visionary companies that came before them already knew: Organizations with a strong sense of what is core for them, and which nurture a culture based on “pragmatic idealism” — one that honors both high ideals and pragmatic self-interest — ultimately and significantly outperform their competitors over the long haul.

Sorry. My intention wasn’t to offer a history lesson on “core” business terms. But understanding how these concepts developed in the context of business is important because core competencies and core ideologies cultivate organically within your organization, influencing every aspect of your business and significantly affecting your success whether you think about them or not. You might as well understand them within your corporate framework and use them to your advantage.

Manny García-Tuñón is president of Lemartec, an international design-build firm headquartered in Miami.

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