Acquisition is one way to buy growth. It's not a bad way, but it’s becoming more difficult. For example, a company called Discord got an offer from Microsoft for over $10 billion and rejected it. This is a clear sign that it’s getting more expensive and more difficult for established companies to buy startups. It will still always be possible, but it's getting harder - a fact that large corporations need to come to terms with, and the reason why we’re beginning to see established companies choose different ways to grow.
Acquiring startups is one way to grow your company. And it’s understandable why business leaders like doing it. It’s tried and tested. They understand the process. Shareholders feel comfortable with it. CEOs aren’t risking their jobs trying something new. So acquiring startups is a useful tool for business growth.
But it’s not the only tool.
There is an alternative that involves generating new ideas and business models internally.
It’s crucial you have a process to do this well. It might sound trivial, but it's different from traditional management process. It's all about growth. You need to ask yourself questions like:
There are many different ways of growing your business, but what leaders need is another input. They need to ask themselves:
The answers are out there. They’re different from traditional management wisdom taught in MBA programs. Traditional management usually involves business improvements related to operations, distribution, or support, and process innovations that make an organization more effective.
The processes we’re talking about here are focussed on creating new types of business growth. It’s a different profession than managing the existing business. This is the profession of corporate innovation and entrepreneurship.
There are some large companies that do this well already.
Amazon, for example, has 1.5 million employees. It's hard to be bigger than that. There are a handful of organizations like China Railway or the National Health Service in the UK that have more employees. Still, Amazon is one of the largest companies on the planet but it’s also world class at innovation. So you have proof that size doesn't prevent you from being creative and innovative.
But what we also need to keep in mind is that Amazon is still relatively young. Their founderJeff Bezos said from the beginning: “We need to keep a ‘day one’ mentality. However big we get, we need to stay entrepreneurial in our thinking.” So it goes to show that it can be done. Large organizations can innovate internally without having to rely solely on startups to grow or innovate.
Another example is a company that is a bit older than Amazon - a Swiss company called Logitech.
Logitech is a medium sized company with approximately 6,000 employees, so it's big enough to be a relevant example for business leaders. They found themselves in a difficult situation around 10 years ago. They’d stopped innovating and were starting to struggle. So they hired a new CEO, Bracken Darrell, in 2013. He was brought on board to reinfuse an entrepreneurial spirit, and he’s been very successful. Big companies can be as innovative as startups. If they figure out how to do it, they're going to be even better because they have access to financial resources, patents, technology and existing customers.
The reason why younger companies and startups are more innovative is because they're fighting for survival; they have to innovate or they’ll disappear. You don't have the same drive for survival or the hunger to innovate in most established companies because they don’t feel that threat. But this is changing rapidly because those companies that become complacent are starting to fail. So the hunger is being created again as they begin to get disrupted. They don't have a choice anymore. Many of them have to innovate, otherwise they’ll also disappear.
If you’d like to learn new ways to grow your organization, why not register for our next Virtual Masterclass called Building Invincible Companies?
This blog was based on episode two of the Driving Innovation series with Alex Osterwalder, check it out here.