Too Big to Succeed? Carve it up.

By Shlomo  Maital


  Over the years, in working with big companies, I’ve learned how difficult (impossible?) it is for huge organizations to sustain creativity and innovation. In a recent magazine column, I wrote about Intel, and how a young rather junior Israeli engineer kept Intel from abandoning its CISC technology, leading to the highly successful Pentium.  This occurred only because Andy Grove, then CEO, was willing to listen to those below him.  Many CEO’s of huge MNC’s simply are not able or willing.  Creative people get lost in the swamp of organizational bureaucracies.

   A new fashion is developing to grapple with this problem.  Split huge companies, elephants, into smaller pieces, rabbits.  Like on Thanksgiving (always the 4th Thursday in November – Nov. 27, this year, in America),  big companies are being carved up like turkeys, in the hope the pieces will be tastier than the whole bird.

    eBay is divesting PayPal.   Now, HP is splitting into two. HP stock soared on the news. Shareholders are delighted.  It’s an act of creation – making something out of nothng.

    I am very doubtful.   Many industries have seen a wave of ‘consolidation’ – mergers.  A merger is when two sick companies merge, to create one really BIG sick or sicker company.  This is what happened in the airline industry.

   Now this is being reversed.  Reverse mergers.  Very very profitable for Wall St. investment banks that shepherd the process, for a huge fee.   HP is a company that lost its way, under very poor management, until Meg Whitman.   But it will not solve its problems by splitting them into small pieces.  You cannot make a company healthy by combining it with another;  nor can you make a company healthy by carving it up like a turkey.   The pieces are still turkey.

   Long ago, management educators taught that ‘structure is not strategy’.  The way you structure the pieces of a company is NOT a strategy.  Companies that seek innovation by restructuring rarely succeed.   Because the DNA, the company culture, remains. 

  Let’s wish HP success.  But I’m very skeptical.