Growth Champions: The Battle for Sustained Innovation Leadership

CHAPTER 2

Alternative Strategic Approaches to Growth

The repertoire of success stories we can draw on to unpick the drivers of successful growth is extensive and we therefore need to be clear on the criteria we are using to select the best. However, before we do this, it's worth considering the relative merits of alternative strategic approaches to growth.

M&A-Driven Growth

For many years, growth via mergers and acquisitions (M&A) has been a much-vaunted strategic ambition for a number of companies. Rather than grow from within, the ability to buy market share or enter new markets via M&A has been a stalwart of the corporate toolkit. However, while the attraction of a quick fix is clear, the ability to deliver the benefits has been consistently inconsistent. KPMG, McKinsey, and Deloitte have all been quoted as saying that around 70% of mergers and acquisitions fail to achieve expectations and that more than half destroy value. Back in 1987, Michael Porter identified that between 50% and 60% of acquisitions were failures; in 1995 Mercer Management Consulting claimed that 60% of the firms in the Business Week 500 that had made major acquisitions in the preceding decade were less profitable than industry averages; and in 2004, McKinsey found that only 23% of acquisitions have a positive impact on return on investment.

If it is true that the vast majority of mergers and acquisitions destroy value why do companies still take this course of action? Perhaps, while growth is the public ...