Here is a summary provoked by responses and comments about my article Korruption …
Growth
Although I am sceptical whether growth is all-important, I accept, that a great company should grow, at least as long as there is general economic growth, (not to mention keeping pace with inflation). But I do not see that all parts of it must or can always grow. I think that a part can shrink into a niche, stay there perhaps for a decade (!), and then regain its importance. Or growth may stagnate for a couple of years for instance in the process of healthy consolidation. It is sufficient when the sum of the parts has solid growth.
Know-how and Image (Name)
Particularly for technology firms, know-how and expertise together with the “name” (the company reputation) are the main assets and the preconditions for long-term steady development. By long-term, I mean perhaps a century, (Siemens has been around considerably longer). It is a great help if the firm is financially very stable, as it can then develop its know-how, name and reputation with patience and wisdom.
Rules for Success in a Multi-Culture
To succeed long-term, a company should, (and perhaps must), operate in many business areas. The only rule must be (and I call that “German” enterprise culture), that all divisions must generally operate profitably, and contribute to the reputation e.g. through delivering good quality. The diversity guarantees lasting prosperous life, even if individual divisions after hard rationalising become relatively unimportant in the world, or can only continue in niches.
Problems of a Mono-Culture
I do not see it as a sensible enterprise strategy to aim to build one or more divisions that are strictly required to become number 1 or 2 in the world for their area. That means that management tries quickly to reach the special status, which exceptional firms like Intel and Coca-Cola have attained, with a lot of luck, in historically unique circumstances. I do not think much of the chances of such a strategy. Such unusual success stories cannot be planned and guaranteed even by the best managers. And even if it does happen, it may not be sustainable if the marketing structure is artificially produced, rather than developing over decades.
The Mistakes of German Firms
More than 50 years of growth and prosperity in central Europe and particularly in Germany have caused negative developments in people and firms. Greed, senility and inflexibility are among the damaging results. These internal company problems are tackled using inadequate and unbalanced methods such as early retirement. Fundamental changes are half-heartedly applied or are stifled at birth by adverse circumstances. Changes in enterprise culture and structure in a big firm usually succeed to a fully unsatisfactory extent.
The causes of failure are not sought internally. Failure is blamed on the nasty environment (globalising …), which is combated with “strategic” measures and with the shallow dogmas (e.g. shareholder value) that I have criticised. The elimination, separation, or destruction of shrinking or unprofitable divisions and concentration on a few themes, (aiming for global market leadership), is the presumed wonder medicine.
It would have been better to rescue each division as well as possible, maintaining vital know-how, even where shrinking and reduction of market share were necessary. Some day then they could perhaps emerge again from the niches.
Now one is surprised to find that the remaining divisions have the same problems as the ones that have been scrapped. But the know-how of the ones that have gone is lost for ever. A technology company has been turned into a (technology-?) holding-company, which can then employ at most 10.000 people instead of 100.000 or more. Perhaps this is even profitable, but it remains questionable whether that is in the best interest of those involved as well as the people of Germany and Europe. But who bothers about that?
RMD
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