The latest news of the split-up of the American conglomerate General Electric made waves: in the future, the three sectors of health, aviation and energy will be listed as independent units on the stock exchange.
GE, of all people, which was previously considered a prime example of the general store type, is now following the path that its eternal rival Siemens has long been following after difficult years.
Also from Philips there is now little more than a medical technology company.
After Toshiba announced almost at the same time that the sum of its individual parts should be worth more in the future than the whole of today, the verdict seems to have been made: In the modern business world, specialization and speed count.
There doesn't seem to be any space left for large tankers whose divisions have little or nothing to do with one another.
100,000 jobs at GE cut
Not so long ago, the view of things was very different. At the beginning of the millennium, Jack Welch stepped down after two decades at the helm of General Electric. There he had earned a phenomenal reputation and the nickname "Jack the knife" because he had cut around 100,000 jobs in sectors in which GE was not among the best in the world. Thanks to this tough selection, sales had increased more than thirty-fold during his aegis from 13 to 416 billion dollars. Which became (temporarily) a legend.
Those who met the strict criteria found their place in the GE family.
From TV stations to household appliances and industrial systems, Welch handed over a multitude of things to his successor.
Synergies between the areas were not required - on the contrary.
Which deliberately countered industrial production, which is largely exposed to fluctuations in the global economy, with much more stable services, for example through its own finance division.
This in-house balancing of risks is still the most important argument of the conglomerate proponents to this day.
From Grundig to travel agencies
Players based on this model are still on the market, such as the Turkish Koc Group, which manages a huge range of white household goods (Beko), entertainment electronics (Grundig), car production, food, financial services and travel agencies. Many giants still exist in Asia as well.
Are these corporations inevitably condemned to split up in order to compete?
Not if you look at the question from the point of view of economic efficiency, say experts like Thomas Hutzschenreuter.
The business administration professor has analyzed around 55,000 investments and divestments based on this question.
His result: It is not possible to make a general statement about whether a conglomerate or a specialized company is more successful.
Rather, it depends on the management's ability to deal with the given structure.
Be faster than the activists
At the moment, the drivers for the split are mainly coming from two directions. On the one hand, huge upheavals are taking place at a rapid pace in many branches of industry. In order to be able to compete in this race against start-ups and specialists, corporations also need more focus and short decision-making paths. The division of Daimler AG into Mercedes cars and Daimler trucks is driven by this knowledge, although here synergies, for example in autonomous driving, would be realistic.
In addition, there has been pressure from the capital market for some time. Former Siemens boss Joe Kaeser had openly admitted that he would rather split up his company himself than let activist investors impose the process on him. Greetings from Thyssenkrupp. As long as the investment crisis is high in the current interest rate environment, little is likely to change in this constellation.
In the medium term, however, it is quite possible that the trend will reverse again and that the advantages of conglomerates will come to bear more in certain constellations.
Interestingly enough, current examples of successful mixed combinations can be found in Silicon Valley, of all places.
The diversity among the umbrella companies of Amazon or Google is enormous.
The unique profitability of these companies allows them a certain amount of freedom.
But it wouldn't be the first time America's tech giants have set a new direction.