Growth strategy: Identifying your parenting advantages

What is parenting advantage?

Any company who has majority of the stake in its subsidiary ( 51% and above) is known as corporate
parent. Multibusiness companies create value by influencing—or parenting—the businesses they
own. The best parent companies create more value than any of their rivals would if they owned the
same businesses. Those companies have what we call parenting advantage.

For eg- Facebook which is a parent company, has Whatsapp, Instagram as a child (Holding or
subsidiary) company.

About the article

Introduction

The article speaks about eight forms of parenting advantages that leading diversified businesses
exhibit which are derived from their operational strategies, the way they approach the portfolio
management and the way they draw industry boundaries.

The basic idea of parenting advantage is that the parent company will add more value towards
business and organization often consider this as a growth strategy.

Research suggests that about one in five big companies is likely to be suffering a stall-out in its main
growth engine, meaning that over five years it has suffered declines of more than 25% in revenue
and more than 50% in profit, shedding at least $10 billion of its own market capitalization. Such
declines tend to result in corporate collapse or acquisition.

Hilti’s parenting advantage

This example talks about the parenting advantages of Hilti which helped them in gaining efficiency
and thus the company evolved from a small family company to a global player by selling 5.3 billion
units of hammer drills.

Company was famous for its electro-pneumatic hammer drills and refrained from engaging
distributors instead focused on direct salesforce. This helped them in gaining customer leadership
which helped in innovating products and services.

Hilti later, got into internet of things, allowing customers to digitalize their equipment.

Six other parenting advantages

Two forms of parenting advantage that dwell into portfolio management

 The persistent owner- This looks at long term value. Their mission is not just about profits
but to create a dominating position in the market. For eg- Henkel, the German industrial and
consumer group
 Active buyer and seller- They expand their portfolio and identify new areas of profitability.
For eg- Reliance industries who started from a being a textile company to media, telecom
and energy. Jio is the classic example.
 Global scale leader- these companies have huge corpus and required skills and expertise to
expand their profit tools and be a global leader. For eg- Google
 Multilocal champion- they leverage their business and create synergies. For eg- Tata group
uses tata steel and tcs in using the raw material and the technology for its cars.
 For multilocal champion, this article has mentioned the example of Barry Callebaut who is
the swiss cocoa processor and chocolate maker.
 Serial disruptor- Companies which come up with innovative new business ideas before any
other companies. They disrupt the industry with innovation. For eg- Tesla, Netflix and adobe
 Platform Builder- These look for building a platform for businesses like for eg- Salesforce,
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