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Who Wants to Be an Emperor?

Who Wants to Be an Emperor?

The defining feature of an entrepreneur is his interest in business – not in a particular business but in business itself.

So the entrepreneur’s career will usually involve him in a number of different businesses. These different businesses are usually run consecutively, one after the other, but sometimes they are run concurrently, at the same time.

At the back of the entrepreneur’s mind is usually the fantasy of him being Chairman of his own Group of Companies, his own private conglomerate.

The irony is that he may be dreaming of being a conglomerate at the very time when conglomerates themselves are going through a period of introspection about their own existence.

The 1980s was the Golden Age of the Conglomerate. They were the glory days of corporate pirates, dawn raids, and white knights. The likes of Hanson Trust, originally a building materials supplier, were prepared to buy any sort of business, without really caring what sort of business it was, because they had little or no interest in running it. The plan was to restructure it – which often meant breaking it up for spare parts – and selling it on at a profit.

It was the buying and selling of businesses that mattered, not what the businesses in question bought and sold.

The 1990s were supposed to have brought in a less Darwinian approach in conglomerates, with the hostile takeover giving way to the strategic merger. There was much thoughtful talk about taking the longer term view and seeking to serve the organisation’s core business.

The poster boy for the new approach was AOL Time Warner. The theory behind the merger was faultless: the powerful media and entertainment giant would have a dynamic new organisation with which to sell its product on the growing internet market.

It is probably because such great things were expected of the deal that the reaction against it has been excessive. It has not been a complete failure, as some disappointed commentators suggest. There have been practical benefits, but they were nothing like as spectacular as those promised at the time of the merger.

Here is what both parties should have known – because enough people were saying it at the time: internet companies are ephemeral. They rise and fall with amazing speed. Their success or failure depends on enterprise, on encouraging creativity, on reacting quickly – qualities often found in rising new businesses, but not in the bureaucracies of conglomerates.

Although AOL was technically the senior partner in the merger, it has failed to live up to its potential and its name has been quietly dropped from the corporate letterhead.

The better approach would have been to establish a strategic partnership so that AOL remained independent to market Time Warner’s product without the costs of merger.

That the predicted de-merger has not occurred has been due to the commendable efforts of Richard Parsons, the Chairman since the merger and one of its architects, to make an unsatisfactory situation work. As he begins to take a back seat, allegedly with an eye on the Mayoralty of New York, it will be interesting to see how much of his work will survive without him.





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Guy Kingston
(Visit Guy's Website) Guy Kingston produces and presents the Mind Your Own Business podcast, offering free business advice to entrepreneurs and business owners. As well as audio podcasts there are more articles like this, compelling videos and a must-read blog. All at http://www.myobpod.com or you can network and join in discussions on the MYOB Facebook group (http://www.facebook.com/group.php? gid=12117784275). Articles posted by Empica (http://www.empica.com)

Guy Kingston is a Gold author on EvanCarmichael.com
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