Reinventing Corporate Growth: Implementing the Transformational Growth Model

Chapter 1

 

The Transformational Growth Imperative

 

This book is about corporate growth, the kind of growth that sustains share price, funds expansion and allows employees to increase their scope of responsibilities. Growing at the rate Wall Street expects and shareholders demand presents a dilemma. A $50 million dollar company needs $10 million dollars in new sales to grow at a 20% rate. A $5 billion dollar company needs $1 billion dollars in new sales to grow at that same rate. As firms grow larger, their ability to sustain even moderate rates of growth decreases. The implications of slow growth are profound. Wall Street punishes firms that miss their targets. Employees flee stagnant firms in search of new opportunities. Competitors push even harder when they sense a firm losing momentum.

 

There are two traditional solutions to the problem, growth through internal product development and merger/acquisition. Internal product development (also known as organic growth) is the process of using internal resources to create the next generation of products. The problem is, we tried that solution last year… and the year before that. The complexity of today’s markets far outpaces the firm’s ability to keep up. Products contain new and more complex technologies than ever before. Customers demand quality and services only dreamed about just a few years ago. What company can afford to assemble all of the technical skills needed to create the next generation computer chip? How can one firm create, develop and market the next blockbuster drug? To succeed in the organic growth game, firms must dramatically drop development time and differentiate their product in innovative ways. Otherwise, they lose the lion’s share of profits to “fast followers” and watch their product morph into commodity status. In the final analysis the organic growth model works, but it’s risky and has a low yield.

The second solution is to acquire another firm. Since growing the corporation at the rate Wall Street expects is extremely difficult, the knee jerk reaction is to buy other companies. During the 1990s, corporations went on a binge of mergers and acquisitions. Cisco, Lucent and Tyco International purchased hundreds of companies to fill product gaps and enter new markets. Unfortunately, acquisition targets bite back. Studies show that 70% of acquisitions fail[1]. The high failure rate is a result of multiple shortcomings that include unrealistic valuations, faulty synergy assumptions, an over-reliance on investment bankers, and the inability of managers to integrate the skills of radically diverse organizations. When these shortcomings converge during the acquisition process, the result is negative growth and the loss of shareholder value. In the final analysis, most firms are woefully unprepared for the complexities of M&A.

 

Transformational growth, or t-growth for short, is a third solution that emerged in the 1980s. It is a radical innovation of the organizational type. The firm grows in new and profitable ways by joining forces with other world-class companies and sharing resources. For example, strategic alliances open new markets by combining the strengths of two firms and focusing them like a laser beam on a new opportunity. Pfizer and Warner-Lambert joined forces to market Lipitor^®, a mega-blockbuster with revenues of over nine billion dollars per year. Pfizer repeated the performance by co-marketing Pharmacia’s Celebrex^®, another multi-billion dollar drug[2]. These examples are not anomalies. The extent of transformational growth in the pharmaceutical industry is breathtaking. Seventy percent of Schering Plough’s product line comes from collaborative relationships[3]. Seventy five percent of Bristol Myers Squibb’s products come from external collaborations[4]. Sixty two percent of Johnson & Johnson’s pharmaceutical revenues come from products acquired from the outside[5]. Licensing accounted for $65 billion of large pharmaceutical company revenues in 2002-2003. That figure is expected to exceed $100 billion in 2006[6]. T-growth is powerful because it places world-class resources in managers’ hands….rapidly.

 

In the last 20 years, t-growth changed the face of the pharmaceutical industry. Today, drug companies are so steeped in transformational growth that every link on the value added chain is open to the outside world. The R&D organization works with universities and small biotechnology companies to access the latest technologies. The clinical trials group collaborates with medical centers in Russia to test the safety and efficacy of new drugs. The manufacturing organization hires contract manufacturers in India to make products while the sales organization co-markets the firm’s products in Europe. Growing externally allows pharmaceutical companies to rapidly enter new therapeutic areas, quickly access new products, reduce commercialization risks and decrease time to market.

 

T-growth allows a firm to combine its resources with another company’s and accomplish goals that neither firm could achieve alone. The key insight is that organizational resources are not fixed pools of assets that reside inside the firm. Transformational growth managers see the world as a vast pool of resources that can be combined with internal resources in innovative ways. This vision allows them to extract value from underutilized assets by making the assets available to others. The vision also allows managers to compensate for internal weaknesses in technology, markets or skill sets by joining forces with another firm that is strong.

 

Box

If organic growth barely keeps up with GDP growth and 70% of acquisitions fail, management must create a third option: a new source of products and brand equity to meet marketplace demands.

End box

 

 

Break down the walls!

Courageous CEOs challenge their organizations to break down the walls and invite the outside world in. Visionary managers see the entire world as their new product development organization and gather the finest resources available to create products. These men and women are changing more than their organization. They are changing the nature of business itself.

 

Most management books are designed to help managers think differently. This book is designed to help managers act differently. We will follow executives as they redefine their firms in search of a better way to grow. We will help employees break out of the cubicles of their minds and embrace external products and technologies. We will watch product development teams win marketplace battles by integrating their skills with the talents of others.

 

This book breaks through the 50,000-foot fluff of buzzwords such as “win-win” and “leverage” and takes you into the trenches. We will follow managers as they gather in groups of twos and threes … and tens, to lead their employees in this new growth model. This is more than a book on corporate growth. It is an open letter to management, a challenge to rethink the boundaries of the firm and view the entire world as one resource base. Many will find this book provocative. Some will find it disturbing. The value of these words will be judged by their impact on the only two measures that count, the bottom line and the firm’s ability to maximize its presence in market space. Business history is on the move. Let’s get started.

 

Maximizing the firm’s presence in market space

Any attempt at transformational growth begins with an accurate understanding of the firm’s footprint in market space and the innovative ways leading firms maximize that footprint. Visualize market space as a topographical map. Spread it out on the table of your mind and look at the terrain (see Figure 1-1). The height of the hills represents the size of the revenue streams; the width of the hills represents the amount of market space they cover. The valleys are areas of opportunity where complementary products can build value. Rips in the earth show where technological discontinuities are devastating markets.

 

 

The conversation in the board room must include a passionate debate about changing the map’s contours and maximizing the firm’s footprint in market space. What must the firm do to create revenue volcanoes and increase the size of the hills? How can the firm broaden its market offerings and expand a hill’s width? This will be a difficult discussion in many Board Rooms. It’s hard to admit that the firm’s map is deteriorating because traditional markets are tightly linked to growth in the Gross Domestic Product. It’s painful to acknowledge that market space is crowded with a mixture of old competitors, new competitors, and aggressive international firms. It’s difficult to discuss the fact that customers expand globally and find local suppliers eager to meet their needs. Talented individuals from the developing world, who once built their careers in the United States, are going home to build the competitors tomorrow. The result is a slow growing economic pie and a fast growing set of competitors fighting for their share. The business world was always dynamic. The new elements are complexity and the speed of change.

 

The power of innovative business models

Ask traditional managers about growth and they will describe the process of growing a product or market. Ask innovative managers about growth and they will describe the power of imaginative business models. T-growth managers are generators of value. They combine the complementary strengths of multiple companies in long-term relationships. The interconnectedness of firms in the network creates an independent source of competitive advantage. Consider the advantages of creating the “dream team” combination of alliance partners to attack a market. United Parcel Service (UPS) radically transformed its delivery model through t-growth. UPS managers searched the world for delivery firms who shared UPS’s rigorous corporate values around quality delivery. By forming a global network of delivery relationships, UPS can deliver a package anywhere in the world. Think about the business model implications of that statement. UPS management had three choices. They could (a) accept the infrastructure costs and time delays of building new UPS facilities everywhere, (b) take the financial risk of purchasing firms all over the world and “buy” a network, or (c) rapidly form a global network of alliances that utilize the in-place infrastructure of their partners.

 

Although UPS management chose the network approach, they did not ignore organic and acquisitive growth opportunities. They extended their t-growth model by acquiring Mailboxes etc. Now millions of United States customers have easy access to UPS facilities. They took the model one step further by forming an alliance with Ebay to make it simple for Ebay customers to ship items. Today, UPS is globally recognized as a premier delivery company because they carry out their strategy using a combination of external, internal and acquisitive growth.

Eli Lilly and Company is another example. Lilly has over 100 alliances that support its organic and acquisitive growth efforts. Its joint venture with Icos Corporation markets Cialis^®, a direct competitor to Pfizer’s Viagra^®. Its commercialization agreement with Boehringer Ingelheim GmbH distributes the anti-depressant Cymbalta^® outside the United States. Its relationship with Ligand Pharmaceuticals Inc. develops products in the areas of metabolic and cardio-vascular diseases. Its alliance with ISIS Pharmaceuticals Inc. focuses on drugs for metabolic and inflammatory diseases[7]. To support these relationships, Lilly developed the most advanced alliance management system in the industry.

 

Alliances are only one piece of the transformational growth puzzle. Working with the venture capital community, licensing and selling non-strategic assets are equally important. In January 2004, Lilly launched its third venture capital fund, the $50 million dollar Lilly MedTech Venture fund. In January 2003 it announced plans to sell four low performing brands[8]. The important point is that transformational growth is an integrative strategy. Organic and acquisitive growth retain their central roles. External relationships add a third leg to the stool.

 

 

The effect of patents on topographical market maps

A patent grants the patent holder a 20 year monopoly on an innovation. During that time, the inventor can optimize the product, develop the market, earn a reputation for quality, and recoup the R&D investment without fear of competition. Patent protected products allow the patent holder to generate revenue volcanoes and change the face of their topographical maps. Prilosec^® is an example. This AstraZeneca prescription drug is a “best in class” proton pump inhibitor (PPI). Doctors prescribed it to millions of patients with acid reflux disease. It met the needs of patients and quickly reached blockbuster status with sales over one billion dollars per year. However, markets can implode with the expiration of a patent.

 

With the patent expiration date looming, AstraZeneca executives faced a difficult decision. Should they watch the patent expire and let generics take over the market, or should they create a lower dose product that is safe for anyone to buy “over the counter” (OTC) at the local drug store without a prescription? Creating a low dose version was the easy part. The hard part was developing entirely new channels into the OTC market. They needed a world-class OTC partner, and found it in Procter and Gamble’s Personal Health Care and Pharmaceutical divisions. By combining AstraZeneca’s OTC strength Prilosec with P&G’s OTC expertise, they changed the face of the market map. Some HMOs refuse to pay for an acid reflux prescription drug until the patient fails on OTC Prilosec. Others raise the co-pay on prescription acid reflux drugs so that it is cheaper for patients to buy non-prescription Prilosec. With 85% of the patients succeeding on the non-prescription strength drug, an entire mountain range, the acid reflux prescription market, collapsed into a much smaller set of hills, while the OTC mountain emerged.

 

 

The effect of entering new markets on typographical maps

The Pepsi-Lipton partnership changed the topographical market map by opening a new channel to market. Lipton^® is a world recognized brand. In the United States, it sells high quality tea, in bags, that consumers brew at home. However, the success of Snapple^® showed that Americans wanted “ready to drink” tea in bottles. The barrier is not putting tea in bottles. Lipton can do that. The barrier is distributing bottled tea to thousands of mini-marts and gas stations across the country. Lipton’s distribution channels reach into grocery stores where consumers purchase bagged tea, but they did not reach into convenience stores where consumers purchase “ready to drink” tea. A partnership with Pepsi-Cola^® was the solution.

 

The Pepsi-Lipton partnership combines the tea expertise and brand equity of Lipton with the bottling expertise and channels of Pepsi-Cola. The relationship is as simple as it is powerful. Lipton provides tea concentrate to Pepsi bottlers. They bottle the tea and use Pepsi distribution channels to bring it to market. It is important to understand how each firm’s topographical map improves. Pepsi leverages its bottling facilities by selling a bottled tea under Lipton’s premier brand. This is a product Pepsi would not create on its own. Their bottling plants distribute administrative overheads over more products, and Pepsi bottlers generate additional revenues from their existing distribution network. Lipton Tea avoids the cost of developing new distribution channels while generating revenues from “ready to drink” tea. This is a classic example of an alliance between partners with complementary strengths. One firm has the product, the other has the distribution channels, and both firms win in the marketplace.

 

The area under the hill is the battleground of business.

Think of the organization as a box in which limited resources are allocated to accomplish strategic goals. When the corporation’s people, systems and technologies are heading toward the goals, the inertial forces are overwhelming. Changing goals is difficult even when the business environment undergoes a radical change. Kodak is a case in point.

 

 

Box

Newton’s second law of physics applies to organizational inertia as well. A body in motion tends to stay in motion….. and so do companies.

End Box

 

 

Even the most casual photographer knew that digital cameras were going to be the technology of the future. Pundits have been predicting the replacement of silver halide film with digital images since the 1960’s. This information was not a surprise to Kodak executives. If anything, they had more competitive intelligence on the progress of digital photography than anyone else. The question is, “What did they do”?

 

Inside Kodak the debate about the advantages and disadvantages of digital photography raged. Educated men and women argued about the slope of the curve predicting how quickly consumers would abandon silver halide and move to digital photography[9]. Digital projects were launched, but the firm always returned to what it knew best: silver halide film. All the while, other firms aggressively translated their digital strategy into a patent landscape that protected their business interests and blocked competitors. In September 2003, Kodak management finally announced their full dedication to digital imaging.[10]

 

The Kodak story is not new or unique. Most managers design their firms for yesterday’s marketplace. These same managers are genuinely confused when the old models do not work. The truth is that modern corporations are designed that way. The industrial revolution was a turbulent era. Many different management structures were tried and rejected as too fragile. The corporate form survived because of its stability and ability to resist market turbulence.

 

These characteristics become liabilities when business environments move too quickly. When the coefficient of change in the organization is out of phase with the coefficient of change in the business environment, shareholders suffer. Management’s challenge is to balance the need for stability with an organization structure that values adaptiveness, responsiveness and flexibility. If it’s true that t-growth is the new growth model, then the implications for organizational design are profound. Management must search for the optimum set of internal projects and external relationships that allows the firm to carry out its strategic intent.

 

 

The Transformational Growth toolkit

Organic growth and acquisitive growth retain their importance. Since the literature on these topics is well established, we will not review it here. Rather, we will explore four new tools, or distribution channels, that t-growth firms use to maximize their footprint in market space: strategic alliances, working with the venture capital community, out-licensing and in-licensing.

 

Accessing resources through strategic alliances

Strategic alliances are the fastest growing tool. An alliance is a relationship in which two firms come together to accomplish a common goal. These relationships work best when each firm has a subset of the resources needed for marketplace success, but must combine them with a partner’s assets to achieve a full set of resources. The Pepsi-Lipton Partnership is an excellent example, but the term covers a variety of relationship structures including:

 

·      In-licensing relationships

·      Joint development agreements

·      Joint ventures

·      Co-marketing agreements

·      Collaborative research agreements

 

The wide variety of strategic alliances allows management to access almost any conceivable resource. Some seek technology to create new products (in-licensing agreement) or add new features to their existing product lines (joint development agreement). Others want to enter a new country with a local partner and/or take an equity position in a new firm (joint venture). Some need market access (co-marketing agreement) or the ability to access the scientific skills (collaborative research agreement). These forms of corporate marriage changed the nature of competition in the pharmaceutical, electronics, media, and internet industries. They are rapidly changing the landscape in other industries as well.

 

BOX

How important is t-growth in your industry? Five questions for management:

 

1.     How important are strategic alliances in your industry today?

2.     How important will alliances be in 3 years?

3.     Which company in your industry is leading the external growth effort?

4.     Does your firm explicitly include alliances as a tool to carry out business unit strategy?

5.     Who is responsible for your firm’s alliance initiative?

 

End box

 

Working with the venture capital community

Building strong working relationships with the venture capital community (VCC) is another t-growth tool. The VCC is the t-growth equivalent of a seismic early warning system. It helps managers predict where technological discontinuities will transform the topographic map.

 

A technological discontinuity is a product that (a) dramatically increases performance over existing market offerings (b) dramatically decreases cost or (c) combines both a and b. These discontinuities are the t-growth equivalent of an earthquake. The advent of biotechnology changed the entire pharmaceutical industry. The internet is transforming the way every industry delivers information. DVD technology turned the VCR into another knick-knack that needs dusting. Working with the venture capitalist community increases the probability that managers will identify technological discontinuities early and position their firms to capitalize on the opportunity.

 

Working with the venture capitalist community provides additional rewards. Real benefit comes from combining two VC patterns into a coherent picture of tomorrow’s market space. The first pattern emerges from common themes in the business plans that cross the VC’s desk. These themes suggest where innovation is heading. The second pattern is the flow of venture capitalist investment into specific technologies. These investments show where hundreds of millions of dollars are converting early stage technologies into commercial products. Combining these patterns into a coherent picture identifies the technical drivers of tomorrow’s typographical maps.

 

More importantly, the timeframe is predictable. Venture capitalists invest in firms with the expectation of cashing out in 3-5 years. This timeframe suggests when an early stage product will be on the market, or will be close enough to market quality to affect typographical maps. Nano-technology is a case in point. Venture capitalists are investing billions into this technology. By following the deal flow, established firms can predict which nano-technologies are likely to emerge in the marketplace 3, 5 and 7 years out. By forming alliances with leading nano-technology companies, established firms influence management thinking and shape the fledgling industry.

 

 

Out-licensing

Out-licensing is a rapidly expanding t-growth tool. It increases the height of a mountain by generating revenues from the firm’s patent portfolio. It increases the width of a mountain by applying the firm’s technologies to a broader market segment, or to market segments unrelated to the firm’s core businesses. Out-licensing can radically change a topographical map. IBM generates over one billion dollars of licensing revenues annually, at a profit margin of 90%[11]. That’s the equivalent of adding an entire business unit onto the firm.

 

This example will clarify the concept. Lucent Technologies developed a plastics technology to simplify the manufacturing of cell phones by eliminating the need for screws. The technology used a combination of pressure and heat to melt the plastic endpoints on the two halves of the cell phone just enough to fuse them. Although Lucent licenses this technology in the cell phone industry and increases the size of its hills in its traditional market, it makes far more money licensing the technology to toy manufacturers who use it to produce plastic toys.

 

Out-licensing transforms topographical maps in other ways as well. Harley Davidson^®, the motorcycle company, created a volcano by licensing its trademark to clothing manufacturers. Today, all types of men and women wear clothes with the Harley Davidson logo. This allows Harley Davidson to generate revenues from customers in a wide variety of market segments that have nothing to do with motorcycles. Trademark licensing is extremely profitable because there are no cost of goods sold, no inventory, no marketing expenses, no manufacturing costs and few administrative overheads. Licensing fees go straight to the bottom line. More importantly, Harley Davidson motorcycles are more popular than ever. So long as Harley Davidson management ensures that the licensees protect the Brand’s integrity, each licensee becomes a salesperson that pays Harley Davidson for the privilege of displaying the firm’s logo.

 

 

In-licensing

In-licensing allows a firm to access all of the technologies it needs to remain competitive. Today’s products are a complex technical puzzle. No one firm can generate all of the pieces internally. In-licensing allows the firm to collect the pieces and provide them to internal project teams for assembly. Sometimes the puzzle is extremely complicated.

 

When Marshall Phelps was the Vice President of IBM’s Intellectual Property and Licensing group, he demonstrated the importance of in-licensing to IBM by opening up an IBM laptop and placing a little red flag on every piece of in-licensed technology. There were 135 red flags[12]. IBM’s experience is not unique. Many firms use in-licensing to gain access to leading edge technologies. When competitive pressures require a constant flow of innovation into the firm’s product line, in-licensing technology is one answer. However, the firm must develop an in-licensing infrastructure that includes the ability to understand the project portfolio’s technical needs, find a company with the solution, evaluate the quality of the solution, determine its value, negotiate the license and integrate the technology into the internal product. Firms that build this capability develop an independent source of competitive advantage.

 

 

Innovating with the outside world: a new research paradigm

The virtual research laboratory is the hallmark of transformational growth. Today’s research organization bears little resemblance to its predecessor of just 10 years ago. Physical walls are irrelevant. The true organizational boundaries are defined by the firm’s ability to generate intellectual property, improve technical skill sets, and manage a virtual team. When firms master these skills, they convert the creativity of scientists all over the world into products and market share. Gus Watanabe, Eli Lilly’s recently retired Executive Vice President of Science and Technology, called it “Research without Walls”. He reminded Lilly researchers that “they are one small part of a global research community that is pursuing biomedical innovation”[13]. By tapping into the global research community, t-growth companies leverage the value of their R&D organization far beyond anything they could generate internally.

 

T-growth is also a risk management tool. The risk profile of a technology changes radically as it moves through its lifecycle (see Figure 1-2). Most new technologies never leave the laboratory bench. Research scientists use their intuition and long years of experience to eliminate ideas as too impractical, too far away from commercialization, or simply impossible. Surviving ideas begin a tortuous journey toward commercialization whose success is better predicted by the single-minded persistence of the innovator than by any set of logical criteria.

 

Figure 1-2: The risk of a product development project drops dramatically as it move through the research and product development phases.

 

The typical history of an invention begins in an entrepreneur’s laboratory. The first step is a patent that provides the entrepreneur with a level of protection as he/she develops the idea and overcomes early technical hurdles. Expenses rise rapidly as the technology is transformed into a bench level “proof of principle” demonstration. The funding needed to move from bench level demonstration to marketable product is well past anything most entrepreneurs can generate. Using venture capital funding, corporate partner funding or a combination, firms move the technology to a point where a commercialization alliance with a large firm is feasible.

 

The theme that runs through Figure 1-2 is that technical risk decreases as the technology matures. This decrease in risk is associated with an increase in value. The goal of large firm managers is to form a t-growth alliance at inflection point A where much of the technical risk is eliminated and where the cost is still reasonable. When executives strike too soon, they spend time and resources bringing the technology up the curve. When executives wait too long, they risk losing the technology to more aggressive competitors.

 

 

The Want, Find, Get, Manage Framework

Exploring this new world requires a framework, a way of looking at this “outside-in” world. There are a variety to choose from. Deb Chatterji, the former Chief Technology Officer of BOC Group, developed a theoretical model for using external alliances to meet internal needs[14]. Nelson Sims outlined tools and metrics he used to help Eli Lilly & Company manage their portfolio of external relationships[15]. Managers at Roche use one of the best models. They break their t-growth efforts into the four-stage “Want, Find, Get and Manage” Framework (see Figure 1-3). It is a simple but effective framework that asks managers to describe:

 

·      "Want" - What external resource(s) does the firm need to meet its strategic intent?

 

·      "Find" - What mechanisms will the firm use to find these external resources?

 

·      “Get” – What processes will the firm use to plan, structure and negotiate an agreement to access the resources?

 

·      "Manage" – What tools, metrics and management techniques will the firm use to implement the relationship?

 

 

 

Figure 1-3: The “Want, Find, Get, Manage” Framework provides managers with tools, metrics and management techniques to optimize every stage of an external relationship.

 

 

In each stage Roche institutionalizes processes and systems to maximize the impact of the process. In chapters 2-5 we will explore the fundamentals of the “Want, Find, Get, Manage” Framework (WFGM) and its implications for organizational design. That exploration includes a review of the processes leading firms use to become “best in class” practitioners. In Chapters 6 and 7 we will follow companies such as Boeing and Unilever as they convert their extensive network of venture capital relationships into an external research and development arm. Chapter 8 is devoted to growing hills by converting the patent portfolio into royalty streams through out-licensing. In Chapter 9 we will introduce Alph Bingham and follow along as he transforms the Internet into Eli Lilly’s global research organization. We will also learn how Dupont and Air Products and Chemicals, Inc., use information technology in innovative ways to change the shape of their topographical maps.

 

Conclusion

Strategic alliances, relationships with venture capitalists, out-licensing and in-licensing are methods to maximize the firm’s footprint in market space. T-growth is the process of integrating these external activities with organic and acquisitive growth to maximize the firm’s value. The goal is to create an integrated portfolio focused on the firm’s strategic drivers.

 

Some managers will resist. Unimaginative managers believe that cost cutting is the most trusted methods for growing mountains. In theory, taking unnecessary costs out of the system sends additional revenues to the bottom line. The problem lies in the definition of unnecessary costs. Today’s firms have cut costs to the bone. Managers slash away at the firm’s core competencies in a counter-productive effort that takes a heavy toll.

 

The best t-growth companies look past their immediate surroundings and search the world for opportunities. How committed are leading companies to transformational growth? The Business Development Group at Roche developed a corporate infrastructure for accessing external technology that is second to none. They have radically transformed their firm’s product pipeline in three years. Alan G. Lafley, the CEO of Procter & Gamble, challenged his organization to acquire 50% of new product ideas from the outside. Jeff Weedman, head of P&G’s business development organization, tells anyone who will listen that his goal is to replace the “not invented here” syndrome with the “proudly found elsewhere” approach. The leadership positions taken by Eli Lilly, Roche, P&G and others are not anomalies. They are the result of senior management commitment to mitigating the risk of internal product development and a fundamental realization that relying on acquisitive growth is a self-limiting strategy. No single firm has the resources to do everything.