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Hello Forbes Careers readers,
Do you call something a trend when it’s been going on for decades? That’s the question at hand with the news that at least three major old-line companies—General Electric, Johnson & Johnson and Toshiba—are planning to break themselves up. On Tuesday, General Electric announced it would be splitting itself into three companies over the next couple of years, eliminating the iconic GE of the past that offered everything from light bulbs and jet engines to mortgage loans and TV shows. Johnson & Johnson and Toshiba were next, with the diversified healthcare company saying it would shed its famous consumer business while the electronics maker announced it would be breaking into three companies focused on infrastructure, semiconductors and devices. The news followed IBM’s news just a week prior that it had completed the separation of its managed infrastructure services business, with the spinoff now trading as its own company, Kyndryl.
But they are moves that are a long time coming. “GE’s kind of the last one at the party, so to speak,” John Joseph, a professor of strategy at the University of California, Irvine’s business school, told me in an interview last week. Conglomerates, which came to power in the 1960s and ’70s, have been breaking up for decades. “It’s the end of a chapter rather than the start of one.” He was hardly the only one to suggest conglomerates were dead. Yet two Forbes contributors argue the conglomerate model isn't over—it's just taking different forms. Howard Yu, a professor of strategy and innovation at IMD Switzerland, published a smart piece describing how companies like Amazon and Microsoft are part of a third wave of conglomerates that are held together not by offering a discount to investors, or supposed management wizardry, but by “digital glue” and “their prowess in managing data flow.” He writes that “from this angle, the story of GE, J&J, and Toshiba is simple to understand. Their disparate businesses have no relevance to each other because their data remain siloed. They have failed to imagine how to unleash their knowledge across different divisions.” Christian Stadler, a professor of strategic management at Warwick Business School, makes a similar argument, comparing IBM’s move to shed businesses and Microsoft’s increasingly diversified positions. “In the platform era, the opportunities to leverage customer relationships will grow even further,” he writes. “Amazon is perhaps the most effective firm in this regard. In the words of Jeff Bezos: ‘When we win a Golden Globe, it helps us sell more shoes.’ ” Whatever the strategy, these newly distinct companies have their work cut out for them. Contributor George Bradt weighed in with what each of these spinoffs must do to create their own cultures. Shame on these new firms, he wrote, if they don’t “take the opportunity to accelerate through points of inflection by resetting strategy, organization and operations.” Culture, Bradt writes, “is the only sustainable competitive advantage.” Cheers, Jena
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