The Year of the Spinoff

This week, HP announced that it is splitting up into two separate businesses. eBay already announced it was going to spin-off its PayPal division. Siemens is separating out its’ healthcare business. And there are a few other organizations that are spinning off or have already spun off divisions. Is this the new trend? Does this mean the days of the large, diversified organization are gone?

Newer companies like Google and Facebook are seemingly the new diversified conglomerates, because they are pursuing many different businesses. So the days of the large, global, diversified organization are not yet dead. Just ask GE or Philips.

But how do you know when big is too big? When is the right time to spin-off or separate different businesses? Here are some guides:

  • When the business offerings to customers are no longer complementary.
  • When there is minimal information and knowledge that can be shared across divisions.
  • When the different divisions are growing at very different rates.
  • When the opportunity for growth is very different for each division.
  • When a division can clearly be more profitable on its’ own and it won’t hinder the overall performance of the overall organization (too much).

This will be an interesting trend to watch as the economy continues to move at a rabid pace.