CEO Today Magazine December 2018 Edition

www.ceotodaymagazine.com 22 special feature Business growth comes in many different forms. When we think of growth, we most logically think of adding things on – building a business through organic growth, acquisition or merger. But in fact, divestment is also a legitimate, in many cases necessary, and much-pursued route to growth. Practised well, it can be extremely fruitful, but getting it right isn’t easy and there are many potential pitfalls. A business that’s serious about getting divestment right has to take a strategic, well-judged approach. Understand where the value lies One of the most important aspects of getting a divestment strategy right is to understand where the business value in your business. Those boards which focus solely on current bottom line performance without understanding the key levers that drive it may be doing the business a disservice in the longer term. Every board would do well to take a more balanced look at assets and performance. Are any current assets or business units worth more to someone else than they are contributing to your overall value? If such assets exist, they might be good candidates for sale. Similarly, underperforming assets can be identified and analysed, for example for investment for growth, or for sale. Holding on to a part of the business might be stifling its development – and might harm not only that part of the business but the wider organisation as well. Consider, for example, a business that has a unique and very desirable technological capability that has been developed in part through the efforts of an internal consulting team and which is now no longer crucial to the core offering. It could have wider uses that would generate new revenue streams. Would it make sense to spin the consulting arm out as a separate business, using their knowledge to sell access to the technology? Would losing what is effectively a cost centre and gaining licensees to your processes be beneficial? The portfolio approach Central to understanding the role of assets within the business, and to making decisions about divestment, is viewing the business as a portfolio of assets each of which (ideally) generate revenue, profit and a return for shareholders. The largest companies typically view themselves in this way, rather than as organisations which primarily exist to make, trade or sell something. By Carlos Keener, Founding Partner of BTD Consulting Divestment as a Strategy for Organisational Growth