A crisis is sometimes needed to force a focus on the core business, which is the sorry case with the Co-Op. The company is about to announce expected losses of c£2billion, according to The Times, here (subscription needed). A sprawling range of businesses has made it hard for the company to stay competitive, with budget and talent spread over everything from pharmacies, to security services, to funeral care, to banking and even 15 farms. In the 1960's the brand was the UK leader in supermarkets, but is now a weak number 5 brand.
Yesterday the company announced that the sale of the farms as they were "non-core", in addition to a possible sell-off of the pharmacies.
The problem with having such a diverse group of businesses was well described by the Co-Op's CEO, Euan Sunderland, as follows:
“You have all these constituencies around the table, 20 of them, and they all have emotional ties to various businesses, it’s very difficult to get them to make big strategic decisions, like for instance selling farms and focusing on core businesses, or one core business."
As Sunderland describes, having too diverse a business fragments investment of both money and talent, and slows you down. In contrast, being focused on a core business where you have competitive advantage helps a company move quickly. And speed and agility is key to success in today's fast moving and fluid environment.
If Sunderland needs some data to back up his push to focus on the core, the research done by Bain and reported in
the Grow the Core book could help. This research showed that the vast majority of companies who created sustainable, profitable growth were focused on one core business where they had a leading position. The challenge for the Co-Op is that a lack of focus on renovating the core means they lost their leading position in supermarkets decades ago. So, even if they do re-focus on the core, they will struggle to get anywhere close to having a leading position.
In conclusion, the Co-Op is a dramatic example of what can go wrong when you fail to focus on the core.
