How to Grow your Company

Rule 5: Revisit your strategy when you realize that the options considered thus far will not work.

Acquisition is the mode of last resort, but it does not mean that you should undertake an acquisition simply because you have rejected the alternative modes. If no acquisition path appears to make sense—either because you cannot find a relevant target or cannot identify a viable integration path—revisit more complex versions of the options you rejected earlier, such as more complex alliances or partial acquisitions.

At the same time, be prepared to change your goals, as there are almost always other opportunities out there that may be more viable targets for growth. If you cannot identify a successful route to your first goal, then step back and consider other opportunities. Quite simply, it is better to change your destination than to die trying to reach an unobtainable target.

Practice for Flexibility

Ideally, firms should start from positions of strength to experiment with new modes of growing before rigid habits and reliance on a dominant mode of growth start hurting their performance. As early as possible, begin to use multiple ways of achieving your aims and of developing goals that allow you to learn the skills of multiple sourcing options. Ideally, you should do this before your company develops an over-focused mindset about how to grow.

Of course, most companies develop habits that are hard to change. Therefore, executives must overcome resistance from entrenched groups and leaders. Powerful M&A teams are often reluctant to turn a prospective acquisition deal into an alliance. Company licensing teams may not be able to see the value of a more complex alliance for a full acquisition. Internal staff members often have difficulty accepting the distinctive quality of third-party resources.

The personal biases of the CEO and other members of the top management team may also complicate thoughtful decision making and can strongly shape the paths that the company selects. Some leaders are compulsive shoppers and use their deal-making savvy to expand their companies; others have the souls of inventors and engineers—preferring the integrity of organic growth. While it’s accepted that leaders need to push their companies to change, we believe that pushing a company to avoid relying on too few ways of changing is just as vital.

To succeed, CEOs and top-management teams must learn how to identify the right ways to grow the company, even when some paths may mean abandoning strategies with which they are comfortable. In parallel, they must develop the internal discipline to select their unique “build, borrow or buy” paths to growth.

Laurence Capron ([email protected]) is the Paul Desmarais Chaired Professor of Partnership and Active Ownership at INSEAD, as well as director of the INSEAD Executive Education Programme on M&As and Corporate Strategy. Along with Will Mitchell, she coauthored Build Borrow or Buy: Solving the Growth Dilemma. Will Mitchell ([email protected]) is the J. Rex Fuqua Professor of International Management and Professor of Strategy at Duke University’s The Fuqua School of Business, as well as visiting professor of strategic management, while holding the Anthony S. Fell chair in New Technologies and Commercialization at the University of Toronto’s Rotman School of Management.

Five Signs that You’re Stuck in the Implementation Trap

If you agree with one or more of the following statements, you may well be working diligently to pursue the wrong path.

1. Implementation is key: Our company believes that our success depends on working hard at implementing a specific mode of growth and repeating it in new projects.
2. We do it best: Our company’s mantra is “We do it best; our internal engineers and marketing staff are our future.”
3. Everyone else knows more than we do: We’ve stopped saying “We do it best;” now we say, “Let’s get rid of all this expensive internal deadwood and buy external skills.”
4. M&A is fast and fun: To buy external skills, we see mergers & acquisitions as a convenient, strategic shortcut and have embarked on a buying spree. We reward M&A teams for making deals rather than seeing them through to success.
5. Corporate development rules the roost from a single perch: The people who lead our acquisitions strategy dominate external sourcing of technology and marketing skills, while the licensing and alliances folks get the leftovers.

KEY TAKEAWAYS

• Companies often home in on a growth strategy and overcommit—working doggedly to perfect the wrong course of action
• Firms that use multiple ways to grow tend to outperform those that focus narrowly on one mode
• Be wary of a growth-through-acquisition strategy—most M&As fail
• If you cannot identify a successful route to your first goal, step back and revisit your strategy