Kimberly-Clark's new CEO sold its namesake mills to force a fight it couldn't retreat from

By the late 1960s Kimberly-Clark's core business was coated paper — the commodity mills, including the company's own founding mill at Kimberly, Wisconsin, that gave the company its name. The mills were profitable but structurally declining, competing on price in a business with no brand and no growth.

Darwin Smith, a Harvard-trained lawyer with no paper-industry background, became CEO in 1971. The conventional move for a company caught between a declining core and a promising but underfunded new line was diversification or a gradual, hedged pivot — keep the mills running for cash flow while slowly growing the consumer side. Smith concluded that as long as the mills existed as an option, they would keep drawing capital and attention away from the fight that actually mattered.

Sold the mills outright, removing the fallback so the company had no choice but to make the consumer bet work.

The mills existed as a fallback, so during hard years capital and attention naturally flowed back to them.

Selling the mills eliminated the option of retreat, leaving no choice but to make consumer products succeed.

With no commodity business to prop up short-term numbers, all capital and management focus went into building brands.

The forced focus enabled Kimberly-Clark to compete head-on with P&G and eventually win in diapers and other categories.

When a legacy business keeps absorbing resources 'just in case,' removing it entirely can force the organization to make the newer bet work, rather than hedging to death.

Wall Street and the trade press called the move stupid at the time, and large write-downs depressed profits for several years. Kimberly-Clark's stock went on to outperform the broader market and rivals including 3M, Coca-Cola and GE over Smith's twenty-year tenure; Huggies overtook Pampers as the top-selling disposable diaper, and in 1995 Kimberly-Clark acquired its former rival Scott Paper for $9.4 billion, beating Procter & Gamble in six of eight product categories.