NEW YORK, NY – The fall of traditional conglomerates has been on full display over the last few years as Johnson & Johnson, GE, and Toshiba were all disassembling themselves. Companies over a hundred years old are suddenly finding that their current organizational structure is unfashionable to investors who wanted them to operate as independent entities. But despite the struggles of these companies, giant conglomerates are not falling out of fashion. In the ever-evolving landscape of the business world, the advancement of technology has led to the emergence of a new wave: internet-enabled conglomerates. These companies offer a wide variety of internet-supported products and services, including retail, entertainment services, cloud computing services, gaming, and more. This has brought forth a fresh paradigm for business diversification and the rise of a modern era of conglomerates. New research from Columbia Business School Professor Kathryn Harrigan sheds light on the unique characteristics and strategies employed by internet-enabled conglomerates that challenge conventional notions of conglomerate business diversification and growth.
The study, The Rise of the New Conglomerates, explains how internet-enabled conglomerates like Amazon and Alibaba use technology and customer data to coordinate diverse business activities and expand into new industries. These modern conglomerates operate in unrelated lines of business from a supply side, but strategically coordinate on the demand side to deliver products and services to a shared core of customers, making them more resilient to economic downturns and responsive to customer needs. Professor Kathryn Harrigan, the Henry R. Kravis Professor of Business Leadership, analyzed the top 100 conglomerates with the highest revenue from internet-enabled activities in 2020, using data from Investopedia, Motley Fool, Wikipedia, and Crunchbase. Using this data, she analyzed the proportion of their revenue generated from Internet-related activities using industry classification codes and information disclosed in their financial reports. Each company’s diversification was also analyzed to determine each conglomerate’s core business activities in relation to its other lines of business. Professor Harrigan found that by using customer data, these conglomerates identify shared customers across seemingly unrelated businesses and provide differentiated products. This customer-centric approach sets modern conglomerates apart from their predecessors and shows how the internet has reshaped business growth strategies.
The findings challenge traditional conglomerate growth approaches and offer insights into the future of diversification across industries. This research opens up new avenues for further exploration, with implications for industries beyond conglomerates by uncovering insights into the future of unrelated diversification and its impact on various sectors.
To learn more about the cutting-edge research being conducted at Columbia Business School, please visit business.columbia.edu.
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