How to restructure a company for the 1990s.

Author:Priestner, E.B.

Westinghouse, once one of the world's major consumer products companies, has entered 70 new kinds of businesses in the last three years. Here's why-and how.

Like most major North American companies, Westinghouse has learned some hard lessons in the last 10 to 15 years. To keep up with competition, we learned how to improve productivity, how to shorten our cycle times. But we also learned that productivity improvements are not enough to keep us competitive, and so we refocused our emphasis on quality and customer satisfaction. And we learned we had to give our employees better skills and more responsibility for on-the-job decisions.

We also came to understand that the company could no longer afford some of its traditional businesses, and we embarked on a series of acquisitions, divestitures, and strategic partnerships that has put the worldwide Westinghouse organization into 70 new kinds of businesses in the last three years. Of course, we had to let go of our older, low-margin businesses, some of which were the basic technologies developed by George Westinghouse at the turn of the century.

The result of the reshaping of Westinghouse has been positive. Worldwide sales increased from $8.5 billion to $12.8 billion during the 1980s, and our sales in Canada climbed to nearly $1 billion, double what they were 10 years ago. And, as we went through this process in the 1980s, Westinghouse led the Dow Jones Industrials in total return to shareholders.

Three basic themes-portfolio renewal, total quality, and people-have dominated Westinghouse's response to the changing marketplace. Any company that wants to compete successfully on the world stage has to deal with these three elements.

Portfolio renewal:

Portfolio renewal is many things:

* It is concentrating resources on the things the company does well.

* It is parting with some traditional businesses with which the company and its employees have strong emotional links.

* It is selecting new businesses in the context of all the variables of the global scene.

* And often it is entering into joint ventures and other sorts of partnerships to make the best use of resources.

Westinghouse comes to its portfolio decisions through the rigorous application of a computer analysis program we call VABASTRAM, short for value-based strategic management.

VABASTRAM, based on methods that investment analysts use to value the intrinsic worth of stocks of companies on the stock market, provides us with a method of comparing the relative values of strategic alternatives.

For each acquisition or divestiture we consider, we develop a number of alternative strategic plans. We consider, for example, if we should integrate the company we are acquiring into Westinghouse or run it separately, or if we should sell some of the business we are acquiring or hold it all. Using projected cash...

To continue reading