When Growth Stalls: How It Happens, Why You're Stuck, and What to Do About It

5.4. The "A" Word

When organic growth isn't happening—or isn't happening enough—acquisitions can look awfully attractive. And acquisitions can serve an important strategic role, eliminating competition, streamlining back office and support functions, and providing quick economies of scale. Our research suggests that some level of acquisition activity can be beneficial, as long as it doesn't lead to a lack of consensus (culture clashes, infighting) or a loss of focus, in what the legendary investor Peter Lynch might call "diworseifications."^[]

One company that practices the right kind of acquisition strategy is Cisco Systems. Since the early 1990s, Cisco has pursued more than 125 acquisitions as a key pillar of its growth plan. Most of the companies ...