How can companies balance multiple growth strategies? Premium
Companies with well-rounded build-borrow-buy growth strategies are 46% more likely to survive the next five years than those that do not diversify, according to a two-decade long study of hundreds of companies from around the world by authors Laurence Capron and Will Mitchell. So why do a full 40% of those surveyed insist on relying primarily on just one growth strategy rather than broadening their horizons?
It is not so much the perfect implementation of any given growth strategy that leads to success but rather the ability to juggle and decide wisely between multiple different approaches.
Today’s complex markets demand varied, balanced growth strategies. However, 40% of leaders are content to stick with the one strategy they know best. That one strategy is most often internal development, which in spite of its reassuring level of control also has its weaknesses. Other options include borrowing via short-term contracts and alliances, which offer the advantages of speed and flexibility, or M&A, which is riskier. Here is a quick overview!
1. When should you develop internally?
Is internal development the right strategy for your latest growth opportunity or, conversely, will it fail to create any real value? The key consideration here is resource relevance: are the company’s existing knowledge and organizational structures a good match with the targeted resources? Indeed, even when a company has the relevant technical expertise, internal development may call for dramatic, potentially unfeasible structural changes.
2. The untapped potential of partners
Short-term contracts represent the most flexible strategy, provided you can clearly define what you need and draw up a contract that will protect the value of each partner’s resources. If not, a broader strategic alliance or joint venture may be a better choice.
3. Buying is a high-risk strategy!
To figure out if M&A is a wise choice, it is necessary to determine whether the company will be able to integrate the targeted firm successfully (from simple resource alignment and timelines to resource divesture). The company must also be able to motivate key people from both firms by presenting a clear, compelling case for the acquisition and mobilizing middle managers for change, integration, and new team management.
Business leader testimony
For Sciforma’s CEO, Yann Le Bihan, day-to-day business involves choosing between three fundamental growth pathways: 1) building partnerships to support geographically diverse activity; 2) internal development of core technologies; and 3) technology acquisition via licensing agreements for non-core activities.
To read our dossier
How can companies balance multiple growth strategies?
Based on Build, Borrow, or Buy by Laurence Capron and Will Mitchell (Harvard Business Review Press, August 2012) and the interview with Yann Le Bihan, CEO of Sciforma, November 2012.
Business Digest nº 232, december 2012
Watch the video
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