MIT Sloan Management Review Article on Choosing Scope Over Focus

Since the 1980s, Western business strategists have preached focus. To capture economies of scale, move quickly down the learning curve, and develop core competencies, it’s best to operate in only one industry, or perhaps a few adjacent industries. Diversifying into unrelated industries is dangerous, the thinking goes, because it leads to complexity and unmanageable size without yielding economies of scope and other operational synergies. Indeed, Wall Street has frequently penalized multi-industry companies with a “conglomerate discount.”

Those dynamics, however, will soon go into reverse. New digital technologies are changing the rules of competition by expanding the boundaries of what a company can handle and introducing new sources of advantage. Big data analytics, cloud-based mobility, 3-D printing, and machine learning are combining to make complexity manageable and generate economies of scope.

About the Author

Richard A. D’Aveni is the Bakala Professor of Strategy at the Tuck School of Business at Dartmouth College, in Hanover, New Hampshire. He is the author of a number of books on strategy, including Hypercompetition (Free Press, 1994).

Learn more about MIT SMR.