Transforming the business portfolio

Abstract

Purpose – The major purpose of this paper is to investigate antecedents, outcomes and processes of business portfolio transformations, including diversifying, refocusing and repositioning portfolio restructurings. Design/methodology/approach – The paper conducts a longitudinal study on the process of business portfolio transformations among the largest 100 European and 100 North American firms during the period of 1998-2010. A newly developed metric is applied that allows a business portfolio transformation to be identified and quantified and process-related research to be conducted. Findings – The study confirms and expands prior literature that postulates that poor performance and over-diversification are key motivations for portfolio restructuring. However, the majority of transformations were not successful, with firm performance further deteriorating in the course of the transformation. The analysis of the transformation process itself reveals that the average transformation took 2.6 years and changed the portfolio composition by 42 per cent. Most transformations are conducted rather continuously over the transformation period and rely heavily on divestitures and acquisitions. Practical implications – Managers should not to be too optimistic when they consider a major business portfolio restructuring. In particular, diversifying or repositioning transformations have a low success rate, while refocusing transformations are most successful on average. The study of the process of portfolio transformations offers some advice to increase the odds of a successful restructuring. Originality/value – This longitudinal analysis represents the first study of the process of portfolio transformation by applying a newly developed transformation metric. By uncovering the process characteristics of portfolio transformations among the largest European and North American firms, it provides insights on the occurrence, typical magnitude, duration and order of acquisitions and divestitures of large portfolio transformations.

Simulating the Evolution Mechanism of Inner Innovation in Large-Scale Construction Enterprise with an Improved NK Model

“…The change in the inner innovation system has two types of methods: one is a local adjustment to adapt to industrial change and satisfy the development demands of enterprise [68] and the other conducts intense organizational reform or reforms behavior to pursue higher performance and satisfy the future development of the enterprise [69]. In the developed NK model of enterprise inner innovation in LSCE, a change in the inner innovation results to change in one of the factors of the inner innovation system and form a new vector to obtain new performance in the fitness landscape.…”