ABSTRACT
Fashions and fads plague management thinking, and to some lesser extent – hopefully – management practice. It is in fact a significant challenge to members of corporate boards and top management to avoid being overly fascinated by fashions and fads. These may very well build on some sound ideas but are then typically oversold by a host of preachers among famedriven scholars, money-driven consultants and stock-traders and noveltydriven managers (often at higher levels!) and media, all jockeying for advantages. Diversification, with its converse specialization, is one particular example of a strategic issue being heavily subjected to fashionable thinking. An average corporation’s list of product offerings has been lengthened and shortened like women’s skirts over the years, at least in the Western industrialized world. In the 1960s and 1970s conglomerate diversification US-style came into vogue, based on ideas of attaining attractive growth and risk dispersion through applying various management skills across a portfolio of businesses, acquired or home-grown, related or unrelated, financed externally or internally via a corporate capital market. For this strategy, it was perfectly proper to use the by now fairly well-known divisionalized organization structure, pioneered by General Motors and Du Pont already in the 1920s, as well as recent advantages in management accounting. As it gradually became clear that the promises held out were not materializing and conglomerate profits soured under over-taxed management, ‘survival of the fattest’ became an issue and the fashion pendulum started to swing to the other extreme. In the 1980s and 1990s, specialization became fashionable (in the West), dressed in terms like ‘back to basics’, ‘stick to the knitting’, ‘focus on core business’, ‘be lean and mean’, ‘slim the organization’, downsizing, outsourcing, demerging etc. Stock prices came increasingly to reinforce this management fashion (and discount conglomerates) as the financial markets and ownership concerns developed and occupied an increasingly large share of minds among corporate boards and top management.
