Marcus Alexander

Corporate strategy and parenting theory

Abstract In November 1987, the Ashridge Strategic Management Centre was established, with the mission of carrying out research focused on corporate-level strategy and the management of multi-business companies. In November 1997, we ran a major conference to review what we had learned during the last decade. Since Brief Case has reported piecemeal on a variety of the research initiatives that we have carried out during this time, we felt that it would be appropriate to publish the background paper that we prepared for the conference, which gives a brief overview of the main propositions that we believe we have established. We would very much welcome comments on these propositions: Which do you agree or disagree with? Which are most or least important? What areas merit further research and investigation?

The Value of the Parent Company

Diversified companies consist of a number of businesses under the joint ownership of a single parent company. For this arrangement to make economic sense, the parent company needs to create value from its ownership of the businesses. Unfortunately, many parents destroy rather than create value. Value destruction is common because it is only under limited conditions that value will be created, and these conditions are often absent. Successful diversified companies have unique qualities that enable them to create a great deal of value. They also have a parenting advantage: they can create more value from owning their businesses than could be created by rival parents. Using the criterion of parenting advantage as a goal for corporate strategy thinking makes it possible for corporate parents to avoid situations where they are likely to destroy value and to decide which skills need to be built to support new corporate strategies.

Getting to grips with the virtual organization

Abstract Much of the interest and frustration connected with the virtual organization is fuelled by the same underlying cause: lack of clarity as to what exactly makes an organization “virtual”. Managers and commentators seem to use the term to describe two rather different phenomena. In both cases virtual implies that things are not quite what they seem, but in different respects. One concerns lack of physical proximity, the other concerns lack of ownership. Despite this difference, the two types of virtual organization are indeed linked in one important way: they both concern the innovative management of organizational boundaries.

Managing the boundaries of the organization

Abstract Brief Case is a portfolio of commentary, opinion, research and experience. The editors welcome contributions, comments and ideas from readers. These should be sent to Andrew Campbell, Marcus Alexander and Michael Goold at Ashridge Strategic Management Centre, 17 Portland Place, London W1N 3AF.

Brief case: Disintermediation—Redefining the role of corporate headquarters

‘Disintermediation’ was a popular piece ofjargon in the financial services sector of the eighties. Like ‘downsizing’, or the even more euphemistic ‘rightsizing , ’ it was a non-threatening word dealing with a threatening topic: decline in business opportunity for banks and a requirement to rethink related cost bases. It described the process whereby principals to a transaction (often large corporations) decided that they no longer needed an intermediator (often banks) between themselves and the markets or other principals. This was because the company could carry out the role previously played by the bank more effectively or at a lower cost by itself. By cutting out the middle man and dealing directly, the system as a whole was considered to gain value.