Based on the summary provided from the article Why Multibusiness Strategies Fail and How to Make Them Succeed by Bharat N. Anand and David J. Collis, the following points can be extracted as to why multibusiness strategies often fail and how they can be made to succeed:
Why Multibusiness Strategies Fail:
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Incorrect Focus: Leaders of multibusiness enterprises tend to concentrate excessively on the composition of their business portfolios rather than on enhancing the individual businesses within them.
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Lack of Value Addition: Many diversified companies do not effectively add value to their businesses, resulting in their market capitalization being less than the combined value of their separate businesses.
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Inappropriate Structures and Processes: There is often a mismatch between the structure and management processes of the corporation and the kind of value it aims to create across its business portfolio.
How to Make Multibusiness Strategies Succeed:
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Understand the Continuum of Value Addition: Strategies for adding value to a corporation’s businesses exist on a spectrum ranging from completely unrelated businesses to those with many similarities.
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Choose the Right Position on the Spectrum: Leaders must determine where their enterprise falls on this continuum and tailor their portfolio selection, organizational structure, and management processes accordingly.
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Align Structure and Management with Value Creation: Successful multibusiness firms align their corporate structure and management processes with their chosen sources of value creation. This involves understanding the trade-offs inherent in each position on the continuum and making strategic choices that reflect those understandings.
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Portfolio Management Focus: Instead of merely focusing on what businesses to own, there should be an emphasis on how to manage these businesses effectively to enhance their individual and collective value.
The article suggests that the key to successful multibusiness strategies lies in aligning the strategic vision with the practical execution, ensuring that the structure and management processes are suited to the kind of value the corporation seeks to create. This alignment can help multibusiness enterprises to not only avoid failure but also to thrive in a complex and competitive business environment.
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