A Third Way to Growth
People and businesses are programmed to build, to improve, to grow – it is in our team psyche and commercial
DNA. Recent years of no-growth in mature markets have been deeply disconcerting for business leaders. For the first
time in our working lives, a sustained period of zero to minimal growth affects most Western Hemisphere trade
blocs, and is predicted to persist. Flat markets find many leaders ill-equipped to attain strategic goals and maintain
adequate profitability.
The two traditional ways to grow are increasingly difficult in unfriendly economic times:
- Organic growth is harder to achieve, since it requires higher risk tactics and larger investment to gain
market share in a risk-averse buyer climate – more marketing, more product development, greater speed
to market, higher sales intensity, improved service, and keener pricing. Even to stand still is challenging! - Acquisitions are harder, because target businesses show a deteriorating run rate, dubious brand value,
greater volatility, and often an empty New Product pipeline. Vendors dream of boom time values, banks
favour lower gearing and multiples, and shareholders look conservatively for yield.
There is a Third Way – Strategic Alliances. This is the synergy way, enabling business allies (without losing their
independence) to pool their assets and capabilities so that 2+2=5. To ally with another business is to collaborate and
share with them – at various levels of partnership – without merging balance sheets or governance. To do certain
things jointly – such as marketing, sales, design, research and development, purchasing, production, or training. Risk
is mitigated while growth is accelerated. And while 100% ownership of IP may be a casualty, the innovate-launchharvest-cull
cycle is now so fast that sharing innovation risk and cost makes increasing sense. Web browsing finds a
body of recent research supporting alliances as the fastest and least expensive way to grow a business.
In a NZ-Australian market context, all but our largest companies will enter alliances with overseas firms for various
reasons, including: –
- Filling critical capability gaps
- Flattening the learning curve
- Accessing leading proven IP, technology and plant
- Providing network, channel or regulatory access Down Under
- Co-branding for competitive advantage
- Supply chain co-operation, including outsourced manufacturing
- Pressure from the ally’s international customers for Down Under service presence
Conversely, in major Northern markets, we generally ally with strong marketers to enable our technical, project, niche product, and co-operation capabilities to participate in joint ventures and to gain access to major buyers.
While the pre-agreed goals and exit mechanisms, and the asset, licence and structure elements of a good alliance
are important, the trick is to get the soft side right. Partners need to be principled, big-hearted and trustworthy.
They need to ensure compatible cultures, to share and collaborate genuinely, to commit (short, medium and long),
to interact with each other as closely as with their own key clients or divisional managers, and to develop incentives
that cause each to treasure the partnership. Being a form of marriage, an alliance will prosper if each partner gives
60%. For more, visit:
Alliances are not the be-all. But they are currently the fastest, least costly and least risky way to accelerate or
resume growth.