To find the context of this blog, please do read this one I published recently. To summarize, this is a part of knowledge sharing of my panel talk at GHCI. Just as a note of caution, please do not expect the below answers to be elaborate as these were conveyed in a time limit of 3-4 minutes. I have tried to recollect these to the best of my knowledge.
Question: You have a portfolio and you have a strategy to grow into a new space. You have a choice of expanding your portfolio by organic growth or inorganic growth. How do you decide?
There are three ways that I can think of-
Every company is once a start-up. They come up with an idea, build it from ground-up, test the waters, release it to customers, market it, improve on the offerings and either achieve success or has to change the course of action. Building in-house remains one of the most fundamental ways to grow the portfolio. Not only start-ups, even the more established and successful organizations also invest a lot of time and energy to build products after achieving initial success. Most companies have set R&D budget that is spent on building the products that helps meet the needs of today or the perceived wants of tomorrow. Established organizations also drive the internal innovation to build in-house by means of the programs such as Innovators program, Start-up accelerators programs or “Spin-in” (where a sub team is asked to work on independent workplace on a particular idea to further give it shape and productize it).
Talking of Mergers and Acquisitions, I am reminded of a term- “Toothbrush test”. You may be wondering how toothbrush is related to this topic. A while ago, I learned about this statement from Larry Page, (former CEO of Google), which he asks before any acquisition and the answer to which drives the decision to acquire a company or not-