Noriyuki Inoue’s radical air-conditioning reform: halting diversification (1994)

Narrow and bet, rather than broaden

The heart of this decision is that it was not a contraction forced by crisis, but a deliberate narrowing of the company’s scope in the midst of stagnation. Diversification is, by nature, a stance that thins out dependence on any single business and spreads risk. To fold it up on purpose and gather resources into the one business of air conditioning can be read as choosing the sharpness of concentration over the reassurance of dispersion. That the new president — described just after taking office as someone who “disliked mere extensions of the past” — first laid his hand on his own company’s very path of expansion tells you the character of this reform.

That said, concentration pays big when it lands, but it is also a bet that narrows one’s escape routes when it misses. What made Noriyuki Inoue’s bet hold, it is said, was less an elaborate strategy than the power to carry a decided policy through on the ground, and a readiness to redeploy people rather than cut them. How to gather people and capital into the one business you can win, rather than chasing scale — the 1994 choice put that question at the centre of management, and in that sense it was a starting point that runs on into the later decisions on overseas expansion and global standard-setting.