The Management Philosophy Behind Corporate Splits
If you followed corporate news closely near the end of 2021, you may have noticed a trend. Corporate giants Johnson & Johnson, General Electric, and Toshiba all announced they would split up their companies in late 2021, with intentions to break up their businesses into smaller units with more independence. (See Read more section at the end of this article to explore recent news about this topic.) This trend reflects a shift in these conglomerates' past views of "bigger is better" when it comes to structuring a company for growth.
While each company’s reason for splitting up is different, the goal for each is to become more agile, responsive, and alert to changes in their markets by organizing each business unit in a more focused way.
But business owners and operators don’t necessarily need to be part of headline-making, blue-chip mega-conglomerates to appreciate the management philosophy behind a corporate split. Smaller businesses, including vertical market software companies, can benefit from this management strategy too—and may even have an easier time adopting this approach.
Companies can gain from splits through increased abilities to:
- Separate business lines to focus on their different customer or market segments
- Revamp operations to allow for reallocation of resources, financing, or personnel to align with a specific business goal
- Create more opportunities for growth and leadership, including for functional leaders
- Strategically unlock value and maximize profitability in parts of the business that may have been previously given less attention
Corporate Splits at Volaris
Within Volaris Group, we have split some businesses strategically so that they can focus on better serving customer groups or market segments. With our history of success and deep knowledge of how to manage software businesses, we carefully consider the unique situation of each business and customize an approach that works.
One successful example to highlight is AGRIS, which was acquired from John Deere
and split into three distinct businesses: Greenstone, Solentra, and Proceres. Each was branded as its own separate entity within the Cultura portfolio. A core driver of the split was to create separate approaches to serving large customers versus mid-sized or smaller clients.
“The way you deliver a product to really large enterprises is much different than the way you deliver it to the mid-market,” said Rich Reynertson, who worked on the AGRIS split and is now the Chief Operating Officer of Cultura Technologies
, which operates the Agri-Food portfolio
Proceres, one of the business units split out from AGRIS, consisted of a small team that produced high profits. The split helped the team maintain its lean, entrepreneurial culture.
were the two other units that were split out from AGRIS. In both cases, they were competing with fast-moving startups. The split helped both businesses simplify some processes and renewed the teams' focus and enthusiasm about developing a product that best met the needs of customers.
Splitting the AGRIS business into three smaller teams created three times as many functional leaders, and it gave more employees a chance to shine, step up to business challenges, and make unique contributions.
After the AGRIS split, many of the businesses’ functional leaders were given new opportunities, such as the sales and marketing managers, product managers, customer service managers, or head of commercial operations for the larger businesses.
Read more: Corporate splits in 2021
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