We all want our companies to grow. OK, some of us just want our companies to insure we have more money. (These are generally the lifestyle business folks- like plumbers, handyman, and  the home workers.) Others of us are looking to really grow our businesses- gross revenue, bottom line (profit after taxes), employees, and notoriety.

No matter which type of growth you are seeking, generally it comes about from one of three ways…
1. Building upon what we already have.  We rely upon our internal resources- innovations, product development, marketing to new potential customers or markets,.
2. Borrowing from others. NO, not stealing. but, licensing the products of others or making an alliance or effecting a joint venture.
3. Acquiring other companies – or divisions- of other companies.

Choosing the right path is a critical choice. It’s not simply just the faithful execution of a plan- it’s whether that plan works for you. Let me give you a concrete example.

We had a client for many years. It was a large company and we worked with two of their divisions. This firm had the philosophy of being #1 or #2 in each of its market segments. Our job was to work with these divisions, creating new business opportunities (new product lines) and improving their existing ones, helping them capitalize on their market position.

We hadn’t worked with their other divisions. Until they asked us to work with yet another one- and we brought that group a new product; one radically different than offered by any other firm in the marketplace. While we undertaking clinical trials, the division management was less than enthusiastic about this new product that corporate management approved. The divisional management had a strong NIH ethic (Not-Invented-Here). Every step of the way, we received negative feedback- even though the trials were going splendidly, and corporate leadership was excited.

It was disheartening for our staff to deal with their various counterparts in the division. I had to spend a fair amount of time being a cheerleader for our team, so they would not lose their enthusiasm in light of the constant denigration by the client division.

Until one day, when we received notification from corporate management–they were terminating our project. When I called, they informed me that they had sold the division. They no longer believed this division would turn-around and become a world leader.

We were totally disheartened- but we realized that the severance funds (from our client) were more than sufficient to continue the trial- and our client insured us that our other work would continue. They were not dissatisfied with us or our efforts- but with the soon-to-be spun-off division.

Two hours later, we were informed that our clinical trial should wind up. The new product was considered “approvable”. The regulatory authorities clearly knew that this was a radically new, clinically beneficial, and inherently safe product. When we called our client to let them know, they responded that their decisions would not be changed- because a great product would not make the division management more amenable to their corporate philosophy. (It should be noted that this division was an acquisition from another firm five years prior.)

You see, this was the implementation trap. Things weren’t working as planned, so folks like us- and the corporate management- just doubled and redoubled their efforts. Even though the entire course of action was the problem. No amount of “best practices” would make that division a stellar group within the parent company.

And, it’s often true that we need to implement more than 1 of those 3 choices (listed above) to grow dramatically. It is critical to recognize the constraints and opportunities.
We can’t assume that everything we do internally will continue to be the best choice. Of course, we know what we do best- and are among the best to do those things. But, we need to continually assess and examine if there is a gap between the best we can do and what we need. And, what we do often (be honest, we are not the 100% best at everything we do every single day) and what we need to be to accomplish our growth plans.

As a general rule, assuming we have sufficient capital, acquisitions should never be the first choice. As a matter of fact, an acquisition should probably be the last choice. After all, almost 3/4 of all acquisitions fail. They are disruptive and costly for us- and they tend to diffuse or destroy the acquired entities’ strengths after the merger.

Which means we need to spend more time developing alliances and joint ventures. As an example, after our product was approved, we developed a joint venture with another, larger firm. One with a full complement of sales folks- which our firm, as an R&D enterprise clearly lacked. So, they complemented our abilities and provided a multiplier effect.  The key factor is the strategy for the product or joint venture needs to be in concert between the partners.

Unfortunately for us, that was not the case. We were on a mission to convert the marketplace, to deliver a treatment modality to patients that was more physiologic and safer. Our partner was hoping to convince their customers (and potential new ones) that they were offering a more complete market solution. Even as they only cared if the sales of their (internally produced) products increased. If they sold some of our product, great- but it was not critical to their overall plans. We had no desire to sell their products, because our staff knew nothing about them (with the exception of two of us)- and we were not going to be able to train our newly minted sales/marketing folks to do otherwise.

To be honest, our partner did have, in the back of their mind, to acquire our firm, after they learned more about us. Unfortunately for them, we had no similar desires. We were on a mission- and that did not include becoming part of something else. As we each learned about each other- and we learned of the hidden desire of our partner, we did not renew the arrangement.

On the other hand, another joint venture in which we were involved resulted in the acquisition of our offering. Because our partner was clearly keen on selling our “stuff”, we were not wedded to a mission (other than growing the product sales and profits), and our partner had the resources to make everything successful. Which is the fourth consideration to success.

Our partner had a clear integration path. They knew they could exploit the combined assets and resources more fully than they could with a simple alliance with us. And, they wanted to grow their firm- and the addition of our products could be a vital step in their overall plan.

Our partner knew that short-cuts never really work with post-merger integration. (Look at the various airlines that have failed due to such short-sightedness. Piedmont/USAir, Hughes Airwest/Southern/NorthCentral. Or Compaq’s acquisition of Tandem and DEC [Digital Equipment] which necessitated in their being subsumed by Hewlett Packard. [I could add the acquisition of the dialysis division of our client into another entity- and it’s necessity to be spun off once again, as a failure of post-merger integration, a failure to instill corporate values in the acquisition.] Compare those to the mergers of United/Continental or Delta/Northwest- entities that spent considerable effort insuring the success AFTER the merger was completed.)

So, what’s your plan for growth?