1973 Volvo acquired JOFA. JOFA was a company making sports equipment and famous for its ice hockey helmets. 1983 Volvo acquired Beijer invest, which held companies like Abba fishery food. Volvo sold those business and then focus (again) on e.g. vehicles, engines and construction equipment. Later Volvo have also been divided into one company for cars and one for the other parts, but that is maybe a different story.
I find it interesting to compare company models. Here I look into two models: focus and narrow business with a common core and considering synergies, in comparison to conglomerates which diversify business where the business areas may not have anything in common.
Volvo has left the conglomerate model I wrote about above into a much more focused business.
I recently read the leadership book The Virgin Way by Richard Branson. Well worth to read for anyone interested in leadership.
Virgin is still in the conglomerate company model. Although there are some synergies, Virgin business is not hold together by a common business core.
Virgin, as my understanding, has a common culture and way to approach business in common rather than a common core product or technology.
With a more focused company model it is easier for the board to take decisions, for owners to understand the company. Conglomerates likely requires multiple boards and to delegate of more strategic decisions.
This article is about innovation climate in relation to company model.
For very many, if not for all commercial companies, innovations in one way or another are needed for company survival. Magnus Mackaldener has written the good article When you don't recognize the company you once chose about innovations.
As a human being you get all sort of ideas and innovations, and you get them not at least at work. Many of them will surely not work or make business sense, and for many of them you will not know until you have given them a try. It can surely be beneficial if this review or trial can be done within the company rather than the creator has to do it outside the company.
My thesis is that a too narrow and focused company model can limit innovation and business opportunities for the company. If the company is too concerned to consider if the new idea is within the company strategy or not, I believe it can also limit the innovations which actually are within the strategy. In this perspective, I believe a conglomerate company model can have an advantage to foster innovations.
4 May 2017
This article is also published on LinkedIn.
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