Does your organization have a clear discipline in determining which strategy to pursue to achieve an objective? Build? Buy? or Partner?
If you answered, NO – you are in the majority. Unfortunately. A few organizations do, however, and one Proctor & Gamble has had excellent results for exercising that discipline. In the year 2000, they made clear and conscious decision to fuel their new product pipeline through a mix of 50% internal development and 50% through partnerships. Through this strategy, they have fueled phenomenal growth, over 22 billion dollar brands and a doubling of their stock price. Amazing in this acquisitive age, that M&A was not a significant strategic element for P&G.
I’d be very curious to see some rigorous research on what is the winning mix of build, buy, and partner for the most successful companies. We do know from many reports that M&A has a dismal success rate in creating new value or even preserving existing value. (And in the interest of full disclosure, we also know that alliance success is only high for those companies that have a established process of best practices in partnering.) A recent McKinsey report stated that the most successful acquisitions were those that provided complementary capabilities and expertise to the acquirer. Oh my! Isn’t this what alliance professionals advocate? It seems there is a lot of commonality in the due dilligence of partner selection and acquisition selection. The key decision criteria between whether to buy or partner is how important is it for the company to OWN the sought after capability.
Secret #2 is the second installment to the Eight Secrets of Successful Strategic Alliances webcast broadcast by the American Management Association.