in 1921 whereby the two insurers cross-sold each
other’s products, providing Allianz with an opportunity to gain insight into the life business. A closer
union failed, but based on these experiences, Allianz formed its own business in 1922. Within three
decades of its creation, Allianz had become the
leading German insurance company in all the lines
of insurance it offered, both life and nonlife.
Silver medalist Aachener und Münchener,
founded in 1824, showed little ambition to become a broadly based insurance provider. “
Schus-ter bleib bei deinen Leisten” (loosely translated as
“stick to your knitting”) is an old German proverb
that aptly describes the company’s approach. In
stark contrast to Allianz, A&M did not diversify
out of its original business (selling fire insurance to
farmers) for the first 40 years of its existence and
then only when increased competition and slowing demand for the policies forced its hand. When
it did diversify, the new businesses represented
little more than product extensions. A&M’s first
diversifications were in reinsurance and insurance
against hail, both of which were targeted at its existing customer base. This reflected the attitude of
A&M’s agents, who did not feel they were capable
of selling to factories.
Not until 1924 – a century after the company was
founded and 25 years after first considering the
possibility – did the first real diversification occur,
with A&M’s acquisition of the Aachen-Potsdamer
Lebensversicherung, a life insurance business. Another step to gain a broader base of customers was
the formation of the Rheinische Gruppe, a loose
cooperative of 15 insurance companies with A&M,
Colonia, and Vaterländische at the core. Both deals were
steps in the right direction, but they proved too little too late.
The life insurance business was relatively small, and the Rheinische Gruppe never quite cohered, leaving A&M heavily
dependent on its rural business. When Russia occupied East
Germany after World War II, an agricultural region that gave
A&M 40% of its fire insurance business was lost entirely.
Geographic diversification is as important as product
range, as the contrasting experiences of the two leading
French cement producers show. Gold medalist Lafarge began
as a family-controlled cement producer in southern France.
In a business that in the eighteenth and early nineteenth
centuries relied heavily on regional contacts, the family was
well positioned to succeed, enjoying as it did a particularly
good relationship with officials of the state-run Corps des
Ponts et Chaussées (Department of Bridges and Roads). But
Lafarge felt that it could not rely on its home market alone
and diversified internationally at an early date. The first step
abroad was a large contract to deliver 110,000 tonnes of
FOUR PRINCIPLES OF
Exploit before you explore.
In managing growth, the tension between leveraging existing assets and
developing new ones is well known.
Great companies have a clear priority:
Diversify your business
portfolio. Great companies are
adaptive. They diversify their supply
bases, products, customers, and
Remember your mistakes.
Great companies do not fall into the
same trap twice. Meaningful stories
are passed on from one generation to
the next from which successive generations draw clear object lessons.
Be conservative about
change. Great companies go
through radical change only at very
select moments in their history, and
they do so cautiously.
lime for the construction of the Suez Canal in 1864. Other
projects followed in Spain, Italy, Greece, Lebanon, Chile,
Russia, Serbia, Romania, and Bulgaria. After World War II,
Lafarge used the cash generated by postwar growth to speed
its internationalization and diversify into related industries,
such as aggregates and ready-mix concrete. When the first
oil crisis ended the building boom in France in 1973, Lafarge
was doing business in 15 countries. Growth opportunities in
the developing world thus compensated for the slowdown
The story of Ciments Français was quite the opposite.
Originally, in 1846, a producer of Portland cement in northern France, the firm operated almost exclusively in France for
the next 100 years. The only exception was a small presence
in Morocco, starting in the 1950s. In 1971, Ciments Français
united with Poliet et Chausson to become the largest cement
producer in France, just before the oil crisis, which drove
down revenues in its main market in the Paris region by 40%
between 1974 and 1979. The company never recovered. In