Diversification: best practices of the leading companies

Abstract

Purpose

This article aims to take a fresh look at diversification – a growth strategy often disparaged by managers and commentators alike, yet one that is followed successfully by some major organizations.

Design/methodology/approach

Data were gathered from a number of successful diversifiers, such as GE, to determine the practices they follow and how these might be applied by other organizations.

Findings

Successful diversifiers have seven features, which all CEOs, boards and executive teams can learn from. They select capable division managers; secure competitive advantage at division and business‐unit levels; establish a supportive corporate center for their divisions; install appropriate performance measures; set effective incentives for managers; align the corporate culture to strategic direction; pay the right price in acquisitions; spend time and resources integrating acquisitions with the existing organization.

Originality/value

The value of these findings is that organizations in all sectors – business, government and not‐for‐profit – can benefit greatly by emulating the practices of successful diversifiers and thus boost their own performance.

Citation

Kenny, G. (2012), "Diversification: best practices of the leading companies", Journal of Business Strategy, Vol. 33 No. 1, pp. 12-20. https://doi.org/10.1108/02756661211193776