Managing for Shareholder Value – Who Are We Kidding?

Do we have a ‘new theory’ of business success here? Read this article

https://www.linkedin.com/today/post/article/20121002122016-110300724-managing-for-shareholder-value-who-are-we-kidding

Every now then we look at past and come with something ‘new’ and we almost jump at relieved that we have a better understanding! Here is my take on the article:

According to Geoff, the critical factor is ‘uncorrelated earning streams’. This is like saying uncorrelated or diverse businesses, well almost. That would turn the conventional wisdom on it’s head: companies focused on core businesses are good for investors. This is also borne out by the very examples that Geoff gives -Apple and Amazon. Whatever you may call them selling phones, songs, and storage(cloud) are different businesses. Ditto for selling books (and whatever), book readers, and cloud services -these are different businesses, however ‘connected’ they may be. During a particular period IBM too did the same thing successfully, refusing to divest hardware or software. And if these businesses are connected tightly would they remain uncorrelated? I think ‘uncorrelated revenue streams’ is just another way of describing diversified (unfashionable tag these days) businesses. Whatever you call this, the reason why most companies fail is the same -it requires different  expertise and decision making criteria to start and grow such ‘revenue streams’. Perhaps, this new tag will allow investors and leaders to examine businesses more objectively.

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