That recurring pain point in your business? The division that doesn’t quite fit in? Or the one that regularly feels like it’s consuming more than its share of oxygen?
Maybe trying to fix it isn’t the way to go anymore.
A growing number of executives, consultants and advisors are doubling down on simplicity and streamlining by selling, spinning out or closing down business lines. On Wall Street, notable recent examples include General Electric and Honeywell International dividing themselves into three companies, moves that have been richly rewarded by investors focused on focus. And private-equity firms are regular buyers of parts of conglomerates whose leadership teams have decided that simpler is better.
Ashley Hetrick, a principal at BDO USA and leader of the firm’s sourcing and supply-chain segment, says the pressure to slim down has grown more acute in recent years because of the various upheavals of this decade — from the pandemic to inflation to tariffs and now war in the Middle East — and the supply-chain pains each has caused.
“There’s been a lot of firefighting in the supply chain in recent years,” Hetrick said. “A lot of activity but very little outcome.”
Today, Hetrick said, many firms have started to redesign their supply chains as if they’re new. To do so, leaders are taking very hard looks at their product lineups and their plant locations. They’re going beyond the process-focused “tariff engineering” approaches Arthur D. Little Principal Phillip Deutschler recently described in IndustryWeek and relentlessly pushing for clarity.
“For years, the priority for many companies was top-line growth by diversification,” Hetrick said. “Now, complexity is the enemy of financial returns.”
Effectively reducing complexity requires two things beyond the courage to probe honestly and deeply and potentially make some difficult choices. Firstly, Hetrick said, sound decisions need good data sets that build confidence in just how and where a business is generating its profits — or is seeing them leak out. And secondly, these strategic moves need stronger, more stable and mutually dependent partnerships with suppliers — something we wrote about in January.
Big gains can come from small course corrections. Many firms, Hetrick said, can grow their margins without sacrificing a lot of revenue. Leaders of a California company she worked with made the call to get out of a business line that accounted for 2% of their sales after analyzing the complexity it added to their operations. Dropping that work led to a 13% drop in operating costs as peculiar packaging needs, logistics tweaks such as splitting pallets and the extra labor spending on those tasks fell away.
Driving culture and building on recent work
Speaking this month at various conferences hosted by investment banks, leaders of several public companies spoke of their takes on slimming strategies. Bill Brown, chairman and CEO of 3M, has since coming on board two years ago talked about divesting businesses that are more commodity-like and not as focused on the product innovation that the holding company has long been known for. At a JPMorgan gathering, he noted that 3M has sold a few percentage points of revenue so far and could grow that figure to 10% over time.
“This structurally shifting the portfolio of the company is going to be an important driver over time for how do you sustainably grow and how do you get into higher-margin potential type of categories,” Brown said.
Scott Strazik put it more emphatically. The president and CEO of GE Vernova — one of the three companies that used to make up General Electric — said one of his main priorities as a leader is “to not create new balls for our teams to juggle.” That means investing in GE Vernova’s core businesses, which market gas turbines and related services, electrification equipment and wind energy installations. And it means shedding units such as the $200 million Proficy manufacturing software segment.
“That’s a very important part of the culture of the company we’re driving,” Strazik told the Bank of America Global Industrials Conference on March 18. “We don’t need hobbies. We’re here to basically invest in businesses at scale that can be accretive.”
When it comes to dropping “hobbies,” Hetrick points out that businesses ran through much of the needed work in dealing with the 2025 tariff wave. The Trump administration’s moves forced leadership teams to really dig into their operations and set tighter standards and timelines for which parts of their strategy were worth committing to and what needed to be reconsidered.
With supply-chain strains looking ever more likely to become permanent features in business—see the Iran war, the effects of which will roll into the chemicals and materials markets as well as energy prices, as the latest example—it’s time to double down on that disciplined, analytical approach.
“Take out the emotions,” Hetrick said. “Stick to strategy, not firefighting.”
About the Author
Geert De Lombaerde
Contributor
A native of Belgium, Geert De Lombaerde joined EndeavorB2B in September 2021 to cover public companies, markets, and economic trends primarily for IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World, and Healthcare Innovation. His work focuses on strategy, leadership, capital spending, and mergers and acquisitions, and he also works with Endeavor Business Intelligence on surveys and data projects.
Geert has been in business journalism since the mid-1990s. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati, initially covering retail and the courts before shifting to banking, insurance, and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in 2008. He led a team that helped grow the Post's online traffic by an average of more than 15% annually before joining Endeavor.
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