When Are You Too Diversified?

My Generation

Lessons from a corporation's downfall.

Published on: May 12, 2011

I've been reading from A Corporate Tragedy, a 1985 book by Barbara Marsh that examines the business decisions that led to the rise and fall of the International Harvester Company. I don't believe it was a bestseller by any means – I found it on my bookshelf, an inheritance from a previous editor who appears to have received it from the publisher – but it holds some fascinating tidbits of business acumen, including accounts from senior executives and the decisions they made over the years. Couple those with a thorough examination of how agriculture was changing during the 1950s, '60s and '70s, and you have a fairly attractive read. If you're into that kind of thing.

And as we find ourselves on the back end of a period in production agriculture where diversification has been heralded as our salvation, I found the following passage particularly compelling. I'm not saying farmers shouldn't diversify, but clearly there are merits to doing what you know and becoming the best you can possibly be at it. This passage came out of a section comparing the growth of dealer networks at Harvester and at John Deere.

At the same time, Harvester's preoccupation with the growth of its truck and refrigeration businesses hurt its image in farm machinery as the company forced its farm equipment salesmen to peddle its other lines as well. Conversely, Deere's salesmen stuck with their old specialty, farm equipment. One former Deere salesman recalls: "I felt very comfortable working for Deere. I drove a company car out on the territory. My local counterpart at Harvester got told, 'you will drive a Harvester pickup truck and in the back of the pickup you will carry a refrigerator so that you can talk to all of your dealers about the fact that we're in the refrigerator business.' He resented that: it was kind of demeaning." The upshot was: Harvester failed to win the hearts of its dealers like Deere did.

 Diversification? In the right market at the right time? Priceless. But diversification without mastery? Maybe less so.

Note: Check out Willie Vogt's blog about the IH refrigerator he stumbled upon in Iowa. How far we've come...

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  1. H. Spangler says:

    Keith, that is so true. Great example. Not great for community banks. But you know what I mean.

  2. K. Bradbury says:

    This can be paralleled with banking over the last 10 years. The, too big to fail, banks have been peddling a product they did not own, did not understand and did nothing to serve the banking needs of their customers. In the end (and I do mean the end, in many cases) their diversification caused them to fail and the customers picked up the tab. The American farmer continues to prop up the economy and the community Banks continue to prop up the FDIC. Each by doing what they do best.