The Number

Marc Emmer’s new book asks how companies can address the necessary but often conflicting priorities of maintaining their core business while also developing revenue streams. The chief executive of strategic planning consultancy Optimize Inc. in Valencia notes in the book, titled “Momentum: How Companies Decide What to Do Next,” that according to a study in the Harvard Business Review only 2 percent of U.S. companies balance these dual priorities effectively. “There are two different sets of competencies,” Emmer told the Business Journal. “To grow the core business well, process and discipline are important. Usually, these companies become internally focused. But innovation is the opposite – it’s about exploring and testing. Those companies tend to be externally focused.” Some managers believe they should double down and just do what they do well, but eventually they stop growing. On the other hand, the farther a company moves away from its core competencies, the higher the risk. As an example of smart balance, Emmer points to internet search giant Google Inc. The company invests 70 percent of its budget in its core business, 20 percent in adjacent projects or companies and 10 percent in things completely new or different. “I’m not suggesting all companies follow that 70-20-10 formula, but at least they have a formula,” he said. Emmer has consulted with about a dozen aerospace subcontractors in the San Fernando Valley. For them, innovation means expanding their skills to meet regulatory and technical requirements or risk elimination from the supply chain as large aerospace companies streamline. “You need to be more capable so the large companies you’re selling to value you as a supplier,” he explained. Companies should either hire full-time innovators, or give employees time to implement changes. – Joel Russell