Not either-or

Just how adaptable are business boundaries? So asked AMU's Managerium 2006.

When Jack Welch, as chief of the world's most closely watched diversified business, came up with his "boundaryless" idea, he sought the dissolution of rigid internal separations that kept GE's diverse minds from coming together to generate fresh value for the customer.

At Managerium 2006, a symposium organised by AMU's department of business administration, the theme of "Managing the Boundaries of the Firm" sought to look beyond the firm's existing structural limits: at other markets and opportunities.

In his inaugural address, P Chidambaram said that opportunities could best be taken if businesses and economic agents did not get fixated on any particular growth model. This, broadly, set the tone.

In the panel discussion to follow, the question of "focus versus diversification" assumed central importance, with Reliance and ITC held up as fine examples of diversified successes. If businesses diversify only at the risk of suffering a "diversification discount", went the refrain, it's in no evidence here.

But what about focus? No loss need be feared on this account either, since this is not necessarily something to do with a specific product or market. "This isn't an issue of either-or," said S K Roongta of SAIL, "There are theories that suggest that diversification can be a value maximisation strategy, and there is an optimal level that can be pursued" "" if the new market can be traced along the locus of the company's "core competence" (a notion that its proponent C K Prahalad now extends to include learnings gained directly from the customer as well).

Reliance, for example, is terrific at executing vast projects at low capital cost, be it a refinery or a telecom network, while ITC is good at farm-level supply chain management, be it tobacco or wheat flour for biscuits. They can both boast of a "common thread".

Often, the firm's limitations are products of its own perceptions, said P K Jain of GAIL, who spoke of how a gas pipeline organisation has transformed itself into a company looking far over the horizon (at retail gas markets in Egypt and China, for example) in its quest to use all its resources to deliver value.

Not that everyone was gung-ho on diversification. "Core competence and diversification go hand in hand," agreed Alok Agarwal of Polar Industries, but cautioned delegates against venturing too far "" into fields of poor understanding. Polar, a ceiling fan firm, ventured bravely forth into software, and found that the only "edge" it had were those on the blades whirring overhead. Strategy, therefore, must be crafted with care.

If there was a common underlying theme to the day's proceedings, it was the effort to synchronise perspectives to gain depth of field.