Why `focus' has become the business mantra of the age
Friday 12 September 1997
Though we have recently seen the arch-conglomerate Hanson split itself into four, ICI spin off its pharmaceuticals interests into Zeneca and Williams concentrate on fire and security products, it is tempting to see this as another turn of the management fad cycle. After all, we have seen focus, or "sticking to the knitting", as it was once known, pushed before, only for companies to opt for diversification once more in the interests of balancing their exposure to sectors or countries.
This time, though, say the break-up proponents, it is different. This is partly a response to changes, in Britain at least, to the accounting regimen. The Accounting Standards Board under Sir David Tweedie has pretty much outlawed the "kitchen sink" provisions and extraordinary items that acquisitive companies used to obscure the true costs of their spending sprees.
But much more important is the move towards globalisation that has made the world a much more complex place in business terms. Where previously, the arch predators were able - in the management jargon - to make a "core competence" out of running any kind of company, it is now almost impossible for them to do that with any kind of conviction. It is for this reason, suggests David Sadtler, a consultant and co-author of the recent book Break-Up!, that Greg Hutchings' Tomkins is just about the last hold-out of old-style conglomerates.
With nimble companies emerging all the time to exploit highly profitable niches, few widely diversified companies can give the attention required for effective competition to all their various segments. Instead, they need to decide on what distinguishes them from their rivals and concentrate on that to the exclusion of all else.
Because investors recognise this, conglomerates find themselves unable to gain the institutional backing to do the deals on which they depend, and can generally only win approval if they decide to go in for share buy-backs.
However, these same people must have been disappointed by the amount of money released to them via the various spin-offs and demergers. Managers and advisers have echoed the claims in Break-Up! about the value locked up in these companies, often through expensive headquarters operations, only for many of the newly independent entities to produce poor returns. Unless, of course, like the former Hanson constituent, Energy Group, they are quickly pounced on by another predator.
And that is the final factor that needs to be borne in mind before the end of the conglomerate is celebrated. Its demise does not mean that the era of the large company is over.
Rather, as the planned mergers of Guinness and Grand Metropolitan and of BT and MCI demonstrate, large companies are likely to become even larger. It is just that where they were previously spread across various businesses they will now be focused on one industry and seeking to dominate it through achieving as much market share as they are allowed. And they will seek to ensure they keep their options open - not through outright purchases but through developing complex systems of partnerships and strategic alliances.
- 1 Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
- 2 Pictures show young Palestinian girl biting Israeli soldier trying to detain boy during West Bank protests
- 3 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 4 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Watch the Supermoon live: How to see the brightest Moon of the year tonight
Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Stock up on canned food for stock market crash, warns former Gordon Brown adviser
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...