When it comes to their growth strategy, most entrepreneurs have some variation on the same theme: produce a good or service, market it, and supply that good or service to as many people in as big of a geographical area as possible. It’s called organic growth, and it’s a great strategy–but it also has its limits. There is a point in the lifecycle of every business where the company has three choices for continued growth: build, borrow, or buy. A new book out from Laurence Capron and Will Mitchell, Build, Borrow, or Buy: Solving the Growth Dilemma, explores these three options for business growth:
- Build. Companies that build choose to take an internal approach, but companies that successfully build must have the skills and resources needed to take advantage of the opportunity. If they don’t, companies are better served by looking at outside resources through borrowing or buying.
- Borrow. Borrowing allows companies to use outside resources through either contracts or alliances. At times, such as in the case of a simple software license, a contract between two parties may be all that’s needed. When things are more complex, however, companies may need to consider an alliance or joint venture. Alliances are most appropriate in situations where there is a lot of give and take between partners. Alliances make the most sense when both parties can agree on specific points of contact and share complementary goals for their partnership.
- Buy. If forming a successful alliance is too complex, the best option is for a business to “buy” the needed resources in the form of an acquisition. In a best case scenario, the acquiring company can lay out a smooth plan for transition and keep key personnel in place. Buying may be the best choice when you need both freedom and control over new resources.
According to the authors, business need a plan for growth across all three channels but often settle for only taking one approach, usually internal development. However, companies that rely exclusively on internal development can find themselves coming up short. Atari, Netscape, and Compaq are all examples of companies that relied too heavily on internal development and consquently fell behind the competition. At the same time, companies who rely too heavily on acquisitions and mergers can suffer from a lack of integration, then split apart. Tyco is one example of a company that made too many aquisitions without the internal development to hold the corporation together. Yet when companies get the balance right, they can achive solid growth. For example, Johnson and Johnson successfull y uses a multi-channel growth strategy.
3rd Eagle can help your business develop a multi-platform strategy for growth. We specialize in helping businesses build strategic alliances and partnerships that allow them to maximize revenue growth. Contact us to learn more about how 3rdEagle can help you build the right partnerships for your business.