UK: EDITORIAL - NOBODY EVER SHRANK TO GREATNESS.

UK: EDITORIAL - NOBODY EVER SHRANK TO GREATNESS. - The head of a UK clearing bank was recently heard to remark that he would be surprised if some strategic consultants made any money out of strategic consultancy. Rather, he suggested, this was the platfo

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Last Updated: 31 Aug 2010

The head of a UK clearing bank was recently heard to remark that he would be surprised if some strategic consultants made any money out of strategic consultancy. Rather, he suggested, this was the platform from which they advised clients to outsource activities - to the consultants' own specialist divisions, of course. Behind the jocular comment lies an increasingly valid criticism of the current enthusiasm for focus.

The arguments in favour of greater focus are compelling because they seem so sensible. Don't venture beyond the immediate area of your expertise.

Don't undertake anything which anyone else can do for you, certainly not if they can do it cheaper. Allocating assets across industrial sectors is the role of investors not managers. And what about the destruction of shareholder value brought about by Britain's better known conglomerates over the last few years, as soon as other companies' financial management systems - and the accountancy bodies - had caught up with them?

But sticking exclusively to what you know strikes at the core of what companies are for: which is bringing together skills, knowledge and capital to add value wherever possible. If complexity is badly managed, it will undoubtedly destroy value; but companies which always seek to reduce complexity wherever possible are, by definition, blinding themselves to opportunities.

As Simon Caulkin points out in 'Focus is for Wimps (p44), nobody ever shrank to greatness. Hollowed-out, highly-focused businesses will increasingly lack the breadth of vision (and of hearing) that every first-class enterprise should possess. No one today would want to emulate Henry Ford's attempt at total vertical integration, involving ownership of mines in order to produce the steel that went into his cars (see Business Legends, p86).

But the 'animal spirit' which Keynes identified as a key driver of growth will seldom be found where focus is the guiding light.

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