Be Different or be dead

November 27, 2017

Why the best growth strategy is to make a culture and transplant it

Source: Pexels

In an unpredictable and intensely competitive environment every business faces a challenge to grow.

They generally apply one of two strategies to achieve this end.

▪️The first is to grow organically; focusing the organization’s resources primarily on their existing customers with current and new products and they rely on obtaining new customers by winning them away from their competitors.

▪️The second is to expand their customer base by acquiring another company and essentially importing the customer base that they hold. Apart from anticipated synergies such as reduced operating costs the purchaser buys a customer base with an existing revenue stream.

There are mixed views on which approach is the most effective.

Organic growth can be slower than desired; acquisition growth can, at least on paper, be fast and effective, but can often result in organizational integration issues (for example cultural and leadership differences) that prevent growth objectives from being achieved.

▪️There is a third growth approach, however, which is a kluge of organic growth and acquisition strategies; I rarely see this option used by any organization.

This involves creating a brand or culture and transplanting it in the business acquired. If an organization has been successful in creating a culture around serving customers, for example, they would look to buy a company with significant growth potential and transfer their customer focused culture to it.
They would treat other common core competencies such as technological and strategic fit as secondary considerations.

Richard Branson is a good example of a leader who has been successful doing this. He developed a customer centric culture In his businesses and then applied it to new businesses he bought but had no prior experience in.

For example his music business spawned his customer focus competency which he then applied subsequently to the many different businesses he acquired.

It makes sense.

Any business requires a strong customer bias to be successful. Incubate it in your own (semi-controlled) environment and then replicate it in the businesses you acquire.

There are three huge benefits of this ‘culture transplant’ approach.

1. Your competitive advantage is scaled and multiplied across all businesses you buy;

2. Business integration risks are reduced as cultural differences are less of a factor;

3. The time to realize acquisition synergies is shortened as critical barriers to execution such as structure and employee engagement are minimized.

If you’re in the hunt for an acquisition as a means to grow, look for a company who first has a culture leaning in your direction and then has opportunities for synergy and growth.

Cheers,
Roy
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• Posted 11.27.17 at 04:20 am by Roy Osing
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