Amazon started off as a retailer of books. It later expanded its business to include consumer durables such as electronic items, computers, jewelry, DVDs, etc. Further as it started growing, it started providing its store-fronts and fulfillment systems as a service for third party vendors and retailers. In fact at one time Toys-R-Us was using Amazon as its online white label storefront. Later it started providing digital music downloads and eBooks readable through Kindle dramatically changing the distribution model for books. In the process it has greatly reduced if not eliminated the overheads associated with printing, storage and physical distribution of books. As an extension to this line of business Amazon now also supports private publishing, eliminating middlemen and competing directly with mainstream publishers. In a completely unrelated diversification, they have ventured into infrastructure, hosting and storage services through Amazon web services and cloud.

Amazon was able to establish itself as a leader with the first mover advantage in the online retailing business. However the same doesn't seem to be true in the infrastructure hosting and cloud computing environment. With storage costs diminishing and with increasing adoption of cloud computing and a myriad of competitors offering cloud computing services, will Amazon's strategy of unrelated diversification play off? Or in other words has Amazon's DNA undergone a radical shift from retailing? In the process has it diluted its core competency in online distribution by getting into unrelated businesses from publishing to storage?

GE has several unrelated businesses in various verticals from design, engineering, construction, manufacturing, distribution, healthcare, media, broadcasting and financial services etc. At some time each of these were leaders in their segment, but now they face intense competition in several segments. A case in point is GE Money. Apart from organic growth, GE has grown through acquisitions and diversifications as well. Siemens, UTC, SPX, Altria, Tatas, Siemens, ABB etc., are global companies somewhat similar to GE in their operational model. For example Tatas took advantage of the easy credit acquire companies abroad. They also made forays into unrelated businesses like low cost housing. Interestingly in the mid-eighties Tatas actually had hived off and divested non-core businesses and set off on a consolidation strategy, concentrating on steel, infrastructure, cement and commercial vehicles. However since then they have expanded may LOBs, and have successfully introduced newer ones such as Tata Housing, and acquired Ritz Hotel in Boston, Corus Steel, Tetley Tea, Land Rover and Jaguar, and acquired and resold Glaceau Vitamin fortified water brand to Coke. However many of these acquisitions were financed through costly debt and the same is now hanging over their head like a Damocles sword, given the credit meltdown. Though forward and backward integrations and related and unrelated diversification are great strategies in a growing economy (market), would the same be true in a marketplace that is saturated for a product or service? At what point in its lifecycle should a company resist the urge to diversify and stick to its knitting? Drug companies, with shrinking pipelines and competition from low cost generics are actually facing this dilemma, and some are in the process of reinventing themselves as Biotech companies through mergers and acquisitions.

Likewise there are other successful companies such as IBM, Oracle and Cisco which have reinvented themselves by changing strategies through acquisitions and new product developments; there are some not-too-successful examples as well such as SUN and General Motors. Though bankrupt now, GM apart from manufacturing and selling cars and trucks and financing through GMAC, also provides geo-location and satellite navigation services through GM Onstar services. Though Onstar may help sell more cars, the business and technology is completely unrelated to GMs core operations in the car business. Likewise SUN though a leader in IT infrastructure services at one time with several innovations to its credit including the radical Java platform was struggling to hold itself against competition due to several unrelated products in its portfolio. It would have disintegrated slowly if it was not acquired by Oracle.

On the other hand, companies such as Exxon-Mobil, Rio-Tinto and Arcelor-Mittal and Coca-Cola have stuck to their core, and build capacities around their competence with global acquisitions and through backward integrations and upstream diversification.

Business strategists such as C.K Prahalad and Gary Hamel etc., have been advocating businesses to focus on their core competencies and hive off non core business operations. In fact the same argument has been extended for businesses to focus on their core operational processes and outsource non-core or supporting processes such as Payroll, Accounts, IT Support Services etc., to third party service providers. The current trends in management thought are to grow and evolve companies into learning organizations with creativity and innovation as core competencies to sustain competitive advantage in the fiercely competitive global marketplace.

As I had mentioned in one of my earlier posts, what makes some companies thrive and grow by reinventing themselves regardless of organic growth or through acquisitions, and others to wilt away into oblivion like a withered leaf? What are the various factors that determine the life-span and lifecycle for companies? Are the lifelines of companies an outcome of the leaders' vision that set a path and direction or are they an outcome of DNA mutations such as changes forced upon them by the marketplace? What will be the nature of enterprises of tomorrow? Would the leading business of tomorrow be larger diversified conglomerates or would these be smaller businesses operating in a niche?