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Management article
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Reference no. 95207
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1995
Length: 10 pages

Abstract

Britain''s Imperial Chemical Industries (ICI), founded in 1926, was for decades the dominant producer in its home market. As early as the 1940s, the board wondered whether a company so big and diverse was manageable, but ICI kept growing. During the 1980s, the company sought new sources of growth to offset sluggish sales of older products. The result was increased complexity of an already hard-to-manage portfolio. The stock price failed to reflect the value of many of ICI''s businesses, and a takeover threatened the company in 1991. A company task force, aided by outsiders, discovered that ICI''s businesses could be divided into two clusters. Each group needed its own style of corporate parenting, and ICI could not parent both of them effectively. In 1992, ICI spun off its pharmaceuticals, agrochemicals, and specialty chemicals into a second company called Zeneca. So far, the demerger has been a financial success. ICI''s story shows how parenting skills that are developed in one phase of an industry''s evolution may become less relevant in the next. The challenge for managers of multibusiness companies is to recognize the shift--and act on it before a crisis.

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Abstract

Britain''s Imperial Chemical Industries (ICI), founded in 1926, was for decades the dominant producer in its home market. As early as the 1940s, the board wondered whether a company so big and diverse was manageable, but ICI kept growing. During the 1980s, the company sought new sources of growth to offset sluggish sales of older products. The result was increased complexity of an already hard-to-manage portfolio. The stock price failed to reflect the value of many of ICI''s businesses, and a takeover threatened the company in 1991. A company task force, aided by outsiders, discovered that ICI''s businesses could be divided into two clusters. Each group needed its own style of corporate parenting, and ICI could not parent both of them effectively. In 1992, ICI spun off its pharmaceuticals, agrochemicals, and specialty chemicals into a second company called Zeneca. So far, the demerger has been a financial success. ICI''s story shows how parenting skills that are developed in one phase of an industry''s evolution may become less relevant in the next. The challenge for managers of multibusiness companies is to recognize the shift--and act on it before a crisis.

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