Jim Collins: And I've often thought, well what do you think the purpose of GE is? And this is a joke, they wouldn't say this, is to develop CEOs for the world. But, to some extent that's like their ultimate product, developing great executives. And until... that's an example of a company that's not just a conglomerate. What held it together was the background processes within the operating systems. Think of it as if the GE system is like DOS and all the businesses were applications for it, they all had to be compatible with the operating system and that's how GE worked.
Now, GE's kind of an anomaly in the range of business that it's in.
Let's look at another one, like Johnson & Johnson. They've got a very interesting thing, because, of course across all their businesses, the dynamics of pharmaceuticals is really different than the dynamics of baby powder and Tylenol, which is very different than the dynamics of sutures or artificial knees or anything like these sorts of things -- medical devices for example -- and yet the whole thing works. So, there's a conglomerate around a theme and there's a system. You've got the J&J credo and a whole series of management processes, the entrepreneurial business units, and all those things that come together, but it's all within a healthcare theme.
Procter & Gamble is around a consumer packaged goods theme.
If you take 3M though, 3M was much wider than that, because its theme was the deployment of innovation. They went into businesses that were often seen to be boring -- ,sandpaper, whatever,-- and yet they would bring in an innovation component to it, around such things as adhesives, or a variety of other things. But, their theme was, their unifying theme was innovation. So, you could do it either way.
Was 3M a conglomerate? No, it's an innovation machine. Is GE a conglomerate? No, it's a management development machine. That happens a lot to businesses and now.
If you ask me, which would I prefer, a diversified business around a theme, consumer products like, P&G, J&J Healthcare, or the just discussed ones? You know, they both have worked. I like the idea of the theme, but it's clear that you can do it without it. The problem is, very few have. When really GE is much more of an anomaly, historically.
