Rockwell – in play in the USA?
All organisations go through five phases of growth. Each phase needs different management structures and strategies, and ends with a crisis that demands change. The subject has been well documented in the Harvard Business Review and elsewhere.
Here are the characteristics of the five growth phases:
1. Entrepreneurial: $1m company, start-up phase, 10–20 people. Informal communications, hard work with low pay. Usually ends with a leadership crisis.
2. Direction: $10–50m, 100–300 people. Good organisation with well-defined functional responsibilities. Usually ends with an autonomy crisis and acquisition by a larger company.
3. Delegation and functional management: $100–$300m, 1000–3000 employees, decentralised organisation. Usually ends with a control crisis.
4. Coordination and monitoring: $1bn+, global span, 5000-10 000 employees. Usually ends with an organisation crisis.
5. Collaboration and global organisation: $10bn+, 25 000 employees. Usually ends by stalled-growth crisis, and lack of visionary leadership.
Here is my point about Rockwell Automation. The company now has revenues of $5bn, with about 20 000 employees, and is run by CEO Keith Nosbusch, an engineer. With a strong, but declining N. American market share in PLCs and related products (widespread low-cost competition) and inability to generate organic growth in other geographies and markets, Rockwell is stuck.
At $5bn, 10% growth represents $0,5bn, which is tough to generate organically, and almost impossible to implement with multiple $50-100m (phase-3) acquisitions. One small profit-slip at any one of the acquisitions will throw Rockwell off balance and cause their shares to slide, making them even more vulnerable to takeover.
Just as many mid-level acquirers know the vulnerabilities of Phase-2 and Phase-3 companies, company strategists in large organisations like GE and ABB recognise the growth barriers for Phase-5 companies like Rockwell. This makes Rockwell a specific target.
Rockwell MUST pull-off a phase-4 ($1bn+) acquisition to sustain growth. But, beyond just cash (only about $500m available), they just do not have the vision and management depth to buy anything bigger than about $100m. And so they are busy with band-aid strategies – alliances and partnerships with Dassault, Endress+Hauser and others. Market leaders like CISCO and Microsoft play with Rockwell as an automation toe-in-the-water. Beyond just press-releases, these alliances will not generate any serious revenue growth.
If management does not show the moxy and chutzpah to take the company beyond Phase-5, then, sooner or later, Rockwell will be vulnerable to takeover. With a potential cash-stash of $10-15bn, is ABB waiting in the wings?
Futures forecasts 2008
These days, one of my primary avocations is future studies. I am a professional member of the World Future Society and the Association of Professional Futurists. Each year since 1985, the editors of The Futurist have selected the most thought-provoking ideas and forecasts appearing in the magazine. Here are the editors' top 10 forecasts from Outlook 2008:
1. The world will have a billion millionaires by 2025. Globalisation and technological innovation are driving increased prosperity.
2. Wired-clothing: technologies and tastes will revolutionise the fashion business.
3. The threat of another cold war with China, Russia, or both could replace terrorism as the chief US foreign-policy concern.
4. Counterfeiting of currency will proliferate, driving the move toward a cashless society.
5. The earth is on the verge of a significant extinction event, a biodiversity collapse 100 to 1000 times greater than any previous extinction since the dawn of humanity.
6. Water will be in the twenty-first century what oil was in the twentieth century.
7. World population by 2050 may grow larger than previously expected, due in part to healthier, longer-living people.
8. The number of Africans imperilled by floods will grow 70-fold by 2080.
9. Rising prices for natural resources could lead to a full-scale rush to develop the Arctic.
10. More decisions will be made by nonhuman entities. Electronically enabled teams of networks, robots with artificial intelligence, and other non-carbon life-forms will make financial, health, educational, and even political decisions for us.
Note: The Outlook 2008 report was released as part of the November-December 2007 issue of The Futurist magazine.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
For more information contact www.jimpinto.com
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