If it ain't broke then it might need fixing
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Your support makes all the difference.Breaking Up may be hard to do, but it's been catching on in corporate circles recently. ICI, British Gas and Hanson have all gone down this route in Britain, while ITT and 3M are in the vanguard in the US.
But, if the authors of a new book are to believed, these could just be the pioneers. "The future is clear. The traditional multi-business company is a dinosaur," write David Sadtler, Andrew Campbell and Richard Koch in Break Up! (Capstone, pounds 18.99). In its place will appear two types of organisation: the single business, which most multi-business companies (MBCs) started out as, and the focused business company (FBC).
The former is familiar and includes the likes of Intel and McDonald's. The latter is less familiar and differs in that the focus is not on a single business but on a set of corporate skills. Of course, many MBCs would claim that they fit this criterion. But the key is whether that set of corporate skills or resources adds value to each of the units within the organisation. Procter & Gamble and Disney are FBCs, they argue. And 3M, since it spun off its tapes business into Imation last year, has become one. But simply hiving off parts of the organisation does not make an FBC, say Mr Sadtler and Mr Campbell of the Ashridge Strategic Management Centre and their co-author, Mr Koch, who is an entrepreneur and consultant. "Bad break-ups create more MBCs or leave behind a rump that is still an MBC," they add.
The successful break-up needs to counter two causes of value destruction. The first is the corporate centre, described by the authors as the head office and/or other intermediaries between providers of funds and the operating companies. The second is the frictions that can come from bringing together incompatible businesses.
Although the authors say they are not suggesting that managers are under- performing, they claim a trillion dollars of value is locked up in over- diversified, unfocused groups. Break-ups will not just release that value but transform the capitalist system, they say.
Not surprisingly, given the stakes, they admit the process can be "traumatic". Among the tips for success are: be ready for resistance, move quickly, keep communicating and expect it to be a huge task.
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