Operating a business is often understood as a growth oriented exercise. While few would dispute that statement, a simplistic understanding of the term ‘growth’ can sometimes blind us to the fact that divesting can often create just as much value as acquisition. In my varied experiences as an entrepreneur, I have been guided by the principle of focusing efforts to realize goals. In the context of the journey I have undertaken so far, the creative potential inherent in divesting has been one of the many lessons I have learned along the way.
Any experienced gardener knows the value of pruning. It may be done to guide the direction of growth, unblock the sunlight for an adjacent plant, restrict pest infestation or simply to allow some fruits the chance to grow preferentially – in order to induce size. On the surface of it, doing so might seem contrary to the primary goal but the multiple benefits of the practice are obvious with even a little introspection. In fact many such practices eventually result in an increase in produce. Divestiture can be similarly useful as a strategy – empowering core strengths, reducing operating costs or allowing a business to reinvent itself.
Business executives spend most of their lives obsessing over growth, expansion and increasing numerical values. Commonsense intuition too biases us to think that getting bigger equates success. In my own journey, however, divesting or selling a business that my team had invested many years of toil in building, has played just as defining a role as expansion.
Reinvention through Divestiture
Four short years after I graduated as an electrical engineer, I decided to pursue my entrepreneurial dreams. The result of this aspiration was the 1986 launch of Sievert, a non destructive testing company that served the oil and natural gas industry. Many years of single minded focus and numerous milestones later, we were a company that employed 4000 people and were active in Qatar, Abu Dhabi, Iran, Iraq, Saudi Arabia, Cyprus, Sudan, Singapore and Malaysia – while continuing to hold on to our position as a pioneer and market-leader in India. Eventually we were acquired by international inspection giant Bureau Veritas in 2012-13 – a landmark deal that was a culmination of our breakthrough performance, impeccable credentials and multinational presence.
As the reader can imagine, selling the business we had built from scratch – through our hard work and commitment – was not an easy decision for me or the managerial team that had taken the journey along with me. At the time, I came across an article about the legendary Jack Welch’s leadership at General Electric. I noticed that while everyone talks about the huge strides GE made in value in the two or so decades that it was led by Mr. Welch, the period also saw him divest around 20% of the holdings and operations he had inherited as a leader. What’s more, quite a large number of these units – the majority, in fact – had been turning a profit. This was a simple but profound lesson for me to learn.
As entrepreneurs, we tend to become very heavily invested in the enterprises we lead. This, in fact, is absolutely necessary to do the job properly. However, eventually I was able to see that my core calling was the pursuit of building value for myself and those around me, not the particular business I had used as a vehicle for that calling. The Bureau Veritas (BV) acquisition actually allowed me and my team to set our sights further afield and eventually launch the varied and dynamic Gemini Group. Reinvention is a deeply invigorating experience and I am thankful that we made the decision to divest from Sievert, as it had now become more valuable to BV, than to our own entrepreneurial vision.
Refocusing on core principles and renewing dynamism
Skills, time and capital are all finite quantities. It is in our best interest to focus their creative potential rather than spread it too thin. Economies, aspirations, opportunities and vision are all healthiest when they are dynamic. One cannot navigate the ocean by making it still. On the contrary, for the longest part of our history, we sailed across vast bodies of constantly shifting water by harnessing the equally active winds that blew above them. In a constantly shifting and reshaped world, it shouldn’t be a surprise that reinventing ourselves, refocusing our efforts and reconsidering our direction is the most opportunity aware way to live.
Divestiture is, essentially, reinvention of ourselves. It is a redrawing of borders. Allowing the most relevant and contemporary version of the business to express itself. Just as with people, this can be an incredibly empowering and cathartic experience.
Less is more
From sculpture to woodworking and several other instances of artisanship, people have created more beauty, greater functionality and added value through taking layers away from the materials they have to work with. Most great accomplishments too are made by focusing on a single pursuit, at the expense of a larger engagement with life and the world. Businesses do not exist in isolation, they operate from these basic principles as well.
As entrepreneurs and leaders, we are responsible to all the stakeholders that come together to bring an enterprise to life – staff, partners, collaborators and customers, to name a few. The renewing of our vision has a transformative effect on many and much around us. Addressing this responsibility fully requires us to have the widest possible vision – especially strategically. Divestiture, as a means to transform, is probably one of the most powerful agents of change in an entrepreneur’s toolbox.
