The best-known evidence for “grow from a strong core, one step at a time” comes from Bain & Company. It’s useful, and it was drawn from winners. Here’s how much weight it can carry.
Chris Zook, then a partner at Bain, built a trilogy on one idea: companies that sustain profitable growth usually have a strong core and expand from it into the next ring out, repeatedly, rather than leaping. Profit from the Core (2001, with James Allen) and Beyond the Core (2004) are still the best-known books on the subject.
Notice that last one. It’s another “3x,” and it has the same weakness as the multi-category customer’s 3x in chapter 7: the companies that found a repeatable formula were probably stronger before they found it.
Bain is a consultancy that sells growth strategy. I can’t find where it has published the data, sample rules or method behind these figures, so they can’t be checked. The figures shift between tellings: 11% or 13%, one in four or one in five. Preston Smith, reviewing Beyond the Core for the Product Development and Management Association, pointed out that the companies in Bain’s database were “most likely Bain clients and probably are not selected randomly,” that the interviews and cases were a convenience sample, and that the book “does not reveal the research design, methodology, data, or actual results of the analyses” Reported.
The deeper problem is survivorship. Much of the method starts with the companies that grew and asks what they did. Beyond the Core drew on profiles of about 100 companies with the best growth records and interviews with 25 of their CEOs Reported. Companies that took the next step and failed, or stayed close and stalled, are much harder to see. And distance is judged after the fact: a move that worked looks close in hindsight, and one that failed looks like a stretch. Phil Rosenzweig called this the halo effect: success colors how we describe the strategy that preceded it Published.
A study of winners tells you what winners did. It can’t tell you what the losers did differently.
One example makes the point. Profit from the Core, published in 2001, used Enron as one of its examples; a 2008 Businessweek review of the book noted that Enron was bankrupt by the end of the year the book came out Reported. By 2004, Bain’s own article listed Enron among “the 25 largest business disasters in the past five years,” 18 of which it said were “rooted in major adjacency moves gone awry” Reported. The same company was a core-strategy example in 2001 and an adjacency disaster in 2004. The story changed because the outcome did.
The direction is still probably right, because it agrees with evidence that doesn’t come from Bain. Brand extension research, in chapter 5, finds that fit between the old product and the new one is the strongest single driver of an extension’s success. Scanner-data research in chapter 11 finds that experience with the parent brand drives trial of the extension. Both say the same thing Zook says, from data anyone can inspect: the closer the next step, the more of your existing trust it can use.
So take the adjacency record as a prior, not a law. Stay close unless you have a specific reason not to, and don’t quote “one in four” as a measured success rate for DTC brands; nobody has measured that. And check the thing Zook put first: that the core is strong. A new category launched to cover a core that’s losing share of wallet is the pattern his books warn about most.
This is one chapter of The Next Category, which is free and readable in full on a single page with no form in front of it.