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Defending Your Turf
John read this morning that …
GE will buy more Tech startups in 2017 than Google. It must be true because I read it on the internet. Not only that - it was Hunter Walk himself that was writing - following up on pieces from both the NYT AND the WSJ.
Personally, I am not sure what that proves. If you are a large conglomerate defending your corner, I wonder how many ’existential threats to your existence you would buy per year. Would Walmart have bought Amazon back in the day - had they been using a working crystal ball?
Oh wait … it looks like Hunter might be thinking the same way as he lists the 4 drivers that cause organisations to buy other organisations.
Buying Talent
Buying Product
Buying Customers/Revenue/Distribution
Buying Peace of Mind
Or as Maslow might have drawn it …
What would be interesting to learn is the numbers and the dollar amounts in each of those categories for individual companies and as an aggregate in specific industries.
And yes - I do know that GE is probably one of the more innovative giant conglomerates around - so this is not to pick on them.
Graham conjectures that …
… the possibility of “prospective diversification” is being overlooked here. Looking to the future, seeing the possibility of your core businesses becoming less important, and buying into the areas that offer promise. Or, as a variant of that, doing what Anheuser-Busch and Heineken have been doing – seeing the rise of craft beers and buying up some of them, not to close them but to have part of that action, building an alternative business unit out of the businesses started in reaction to your own core business…
John gets the point …
… adding to that thought the fact that tobacco companies are buying up land ready to farm Marijuana - which will magically become more acceptable and legal across all 50 states as soon as they (the tobacco companies) are ready - and thus have the laws changed accordingly.
That said, it is rare to find nimble footed large conglomerates that can do this consistently - ie through the hard times as well as the good times. When the going gets tough those little offshoots are often the first to be shot go. My friend Geoff Moore has written a lot about this dilemma in Dealing With Darwin and Escape Velocity.