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Because the concept that a company has to have everything align with a "core business" is a relatively new, and incredibly stupid concept. The business of busin
by burnte 11y ago
Because the concept that a company has to have everything align with a "core business" is a relatively new, and incredibly stupid concept. The business of business is making money, not being in a specific industry. Nokia has made paper, rubber products, wires, capacitors, robots, computers, phones and networking equipment. Samsung has an even more broad array of products, as do most Korean, Japanese, and Chinese conglomerates. The idea of a "core business" is a relatively recent invention of western business which mistakenly argued that a company could only do one thing well as though a company and a person were the same thing. Dow, GE, P&G, Johnson Family Enterprises, and Berkshire Hathaway would all disagree.
Jeff Bezos sees Amazon as the GE for the next 100 years. He has a long view that left American corporate culture in the late 1970s. Japanese corporate culture takes the long view, they have business plans that look out across decades, rather than quarters. Bezos is making amazon a very wide company, because it's harder to fail as a wide company than it is a deep company. Now, in some ways Amazon IS a deep company, with Amazon products delivered through their supply chain, marketed by their website running on their platform, and a rich media ecosystem on Amazon consumer devices. However it will survive damage to one of those sectors because of the breadth of the company.
The idea of cor businesses and splitting up companies that do "to much" is rooted in the quarterly corporate culture, which sacrifices the future of the company in exchange fore shareholder (and executive) rewards today. Business stagnant? Split it up into aligned companies for a quick stock boost. Did you actually create anything new or useful, or change the way the businesses operate? No, but it looks good on paper.
- eldavido 11y agoAgree that American business culture is too short-sighted. The question is size is far from decided, though. Though these Japanese firms may survive long-term, they often aren't good stewards of shareholder capital as measured by return on equity (ROE) and other financial metrics. But it does seem that conglomerates are making a comeback, with Alphabet, Amazon, and the perennial favorite Berkshire, whose own CEO has said their size is starting to present problems. Definitely an interesting question.
- burnte 11y agoI completely agree that the Japanese might not be the best model, but as usual, I feel the truth lies in a third path. Not quarterly, not 50 years, but maybe look for a path for the company to survive the next 10-20 years, and always be willing to change. "Plans are worthless, planning is priceless."