Parenting Style

The parenting style of ABB, GE, GE where they have little technical overlap can still generate competitive advantage. Fills in the caps of Core Competences see Resource Based View by ctrating value by unserstanding the businesses, By improving the business, Accurately assessing fit. Example BTR focused managers on tight financial controls, does not believe in large centralized admin (one company had 6 working at HQ) ICI focussed on planning. If relatedness is important the bigger HQ admin is needed

Not only does the Parent need to add value but add more value than any potential parent

• 1. Stand alone influence - each SBU is seen as an independent profit center, monitored using peformance indictators - appointment of strong mangers
• 2. Linkages influence - value if created through synergies
• 3. Central functions and services - administrative services offered
• 4. Corporate development - Portfolio Management

Destroying Value

HQ will inevitably destroy value - Administration costs but the costs should be outweighed by additional value. If not, then they should consider demerging

Synergies

Lateral synergies has been overplayed. At best they net out - can be achieved thru Benchmarking , JV's alliances - Therefore just focus on improving the performance at the individual business

Value Creation

Focus should be on identifying a few major opportunities and developing a few key competences to add value Hedley says Central influence should be limited

Paradoxes of Parenting Advantage

• Control v Empowerment
• Portfolio v Core competence
• Corporate Culture - SBU culture

Types of Parenting Style

• Financial - BTR - Tight finacial objectives but otherwise autonomous Portfolio
• Strategic Control - Co-ordinates and reviews strategies - Linkages - GE
• Strategic Planning - Competences shared between the group - Tight control - ICI

References

The question of Parenting Advantage HBR 2000 Campbell, Goold, Alexander