Sustainable growth in High Tech is not a solo sport
August 17, 2020
August 17, 2020
“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.1” –Jeff Bezos, Amazon CEO
That’s tough love from Jeff Bezos, a man who definitely knows his way around business growth and innovation. Executives in the High-Tech industry are living volatility. Ask any of my clients about change and you’re likely to hear about the blurring of industry lines, 5G and IoT, evolving AI, XaaS, and more. And let’s not forget the yet-to-be-determined impact of COVID. It’s no wonder 75% of executives believe that the stakes for innovation have never been higher.
But that innovation is key to the sustainable growth that keeps businesses not just alive, but thriving, in today’s environment.
In the uncertain times we’re living in, inorganic growth becomes more important than ever because organic growth can feel like an increasing gamble, subject to so many unpredictable factors. Instead of turning to the usual remedies as part of an overall inorganic growth strategy--specifically M&A and joint ventures (JVs)—I see more companies using strategic alliances to generate new growth.
And realistically, the usual remedies aren’t consistently working like they used to. M&A deals and JVs can easily fall short in an environment like the one High-Tech companies are in now. M&A can be risky, expensive, resource intensive, and subject to regulatory scrutiny. JVs have complicated legal arrangements, require standing up a separate entity, and tend to be inflexible and slow-moving. As a result, innovation slows, time to value lengthens, and growth objectives aren’t met. Recent Accenture research shows just 27% of M&A transactions result in both revenue and operating margin growth.
On the flipside, nearly 2,000 new business alliances form every year2. These alliances, if forged properly, can create new value faster and in new ways, giving High-Tech companies the ever elusive sustainable growth CEOs want for their companies.
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Innovation is key to the sustainable growth that keeps businesses not just alive, but thriving, in today’s environment.
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Let’s talk about what partnership traction looks like when done successfully.
In 2018, Roche and GE, traditional competitors, forged an alliance to develop an integrated digital diagnostics platform for oncology and critical care treatment. The companies agreed to develop jointly-branded clinical decision support software for faster, more accurate, earlier diagnosis and individualized treatment. The complex explanation is the companies apply advanced analytics to in-vivo data from GE’s medical imaging and monitoring equipment, along with in-vitro data from Roche.
The strategic alliance means oncology care teams with multiple specialists can access a comprehensive data dashboard to better collaborate and align on treatment decisions for cancer patients. In the critical care setting, data from a patient’s hospital monitoring equipment is integrated with their biomarker, genomic and sequencing data, helping physicians to identify, or predict severe complications before they strike.
Not only does this alliance make great strides toward precision healthcare for cancer patients, it also allows each of the healthcare giants to capitalize on the other’s strength—taking innovation and potential 2 growth to an entirely new level.
Let’s look more generally at some of the competitive advantages of strategic alliances that I see, regardless of industry:
Strategic alliances are not a panacea. They can deliver rapid value, but you need to avoid some common pitfalls:
Realizing value in a High-Tech partnership takes work. So how do you manage through these challenges and set your alliance up for success?
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Innovation and growth are no longer solo sports, especially in High Tech. But “group swim” is turning out really well for a lot of companies.
1 BrandGarage
2 INSEAD Strategic Alliances Blog