Disruption is certainly a challenge for today’s conglomerates. But it has also proven to be a massive opportunity.
Yes: as multinationals with interests in multiple sectors and markets, conglomerates are suffering from the same headwinds faced by manufacturers around the world. Those with interests in energy have been hit by turbulent energy prices; those with interests in mining and mining equipment have been hit by the crash in commodity prices; and those operating in regulated sectors have faced a massive increase in regulatory requirements.
What has delivered the most success to conglomerates in the midst of disruption has been a stronger ability to define and focus on a specific ‘field of play’ – achieving a better understanding of the relationship between the products they offer and the geographies they are focusing on. As a result, we are seeing conglomerates become much more specialized in certain areas and shedding markets, products and segments that may not meet their long-term growth and profit targets.
The reality is that conglomerates have long led the sector in creating new business models and specializations; the shift from products to services was largely driven by conglomerates such as GE, Philips and others. As these leaders continue to evolve – GE into ‘digital industry’ and Philips into healthcare – they will form significant new opportunities for suppliers and deep competition for traditional manufacturers.
Looking ahead, expect to see conglomerates place more focus on shaping their portfolio of products and – where possible – incorporating new technologies that make their products more efficient, more reliable and more valuable to users.
Q: What is the greatest threat to growth for conglomerates today?
Ken: Regulation and geopolitical issues.
Q: What are conglomerates doing differently do drive growth?
Ken: Understanding their field of play.