📖 Business
Core vs Context
Kim draws on Geoffrey Moore's framework to distinguish between Core (activities that create competitive advantage and differentiation) and Context (activities that are necessary but do not differentiate). The critical insight is not just the distinction itself but its dynamic nature: what was once Core can become Context as markets mature, technology commoditizes, and competitive dynamics shift. In The Unicorn Project, Parts Unlimited discovers that some of their most resource-intensive internal systems — custom-built payroll, HR, and supply chain software — were once competitive advantages but have become Context that is now better handled by third-party SaaS solutions. Meanwhile, the digital customer experience capabilities they have neglected are becoming the new Core. The failure to recognize this shift causes organizations to pour resources into maintaining yesterday's advantages while starving tomorrow's.
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How It Works
- Core Activities — Core is what makes you win. It is the capability that customers choose you for, that competitors cannot easily replicate, and that you should invest in relentlessly. For a retailer like Parts Unlimited, Core might be the digital customer experience, the recommendation engine, or the supply chain optimization that drives faster delivery. Core deserves your best people, your biggest investment, and your most innovative thinking.
- Context Activities — Context is everything you must do to operate but that does not differentiate you. Payroll, email, HR systems, basic IT infrastructure, and commodity business processes are Context for most companies. Context should be handled as efficiently as possible — outsourced, automated, or purchased as SaaS — to free resources for Core.
- The Core-to-Context Transition — This is the most dangerous moment. When something that was once Core becomes Context (because competitors have caught up, technology has commoditized, or customer expectations have shifted), organizations resist the transition because they have invested heavily in the capability and it feels like abandoning a strength. But continuing to invest in Context-that-was-once-Core is the definition of wasted resources.
- The Resource Allocation Test — Kim illustrates a simple diagnostic: list your top engineering projects and classify each as Core or Context. If more than 50% of your engineering investment is going to Context, your organization is structurally disadvantaged. The best companies allocate 70%+ of discretionary engineering investment to Core.
- Build vs. Buy Through the Core/Context Lens — Core should generally be built internally because it is your competitive advantage and you need to control its evolution. Context should generally be bought (SaaS, outsourced, open-source) because someone else can operate it more efficiently. The mistake is building Context because "we've always done it ourselves" or buying Core because "it's faster."