Archivio per mese: Gennaio, 2017

Overcoming the divestment trauma*

Reading time: 5 minutes

16 Gen
16/01/2017
Foto del profilo di Markus Venzin

by Markus Venzin

SDA Professor of Strategic and Entrepreneurial Management

Why do so many firms have unfocused business portfolios? Too often, firms pay more attention to adding new businesses to accelerate growth than to divesting existing activities that do not provide the desired results. It is (apparently) easier to add another product category than to gain market share in an existing category. Many managers find it hard to turn down creative ideas, so they let colleagues continue to develop them. At some point – without a deliberate, informed decision – the ideas become too big to stop. On the contrary, it seems to be impossible to build a reputation, a career by identifying and executing divestments.

Companies often have low awareness about the strategic importance of divestitures, often considered a last resort. They also miss the psychological and behavioural dynamics behind these moves. Therefore, the majority of divestitures are reactive at best, tardy at worst, and thus, value-destroyers. Of course, it may be helpful to create a position within a firm based on the identification and execution of divestment opportunities.

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