Most CEOs recognize that business creation is critical to success. McKinsey’s annual New Business Study shows that executives expect new products, new services and new businesses to generate nearly 30% of their revenues by 2027.
An article published by McKinsey itself, “Buy and Scale: How incumbents can use M&A to grow business”, shows how large companies can learn from digital disruptors in the M&A process. The latter have a strategy that is completely opposite to that of their more traditional competitors. Instead of focusing on one or two acquisitions to capture cost synergies and leverage their economies of scale, disruptors make a series of acquisitions to increase their growth (buy and scale), a strategy that has proven successful given that companies that make more than 5 acquisitions grow at twice the rate when compared to companies that are more selective when it comes to M&A.
To help companies implement the “buy and scale” strategy, McKinsey recommends 5 points to be followed:
1. A wide range of M&A objectives based on a clear strategy
2. Governance structure for managing a portfolio of start-ups
3. Incentives based on well-defined KPIs
4. Retaining the entrepreneurial spirit and start-up culture
5. Start-up access to company resources
With the proper implementation of these 5 points, companies can use M&A as an arm for innovation and creation of new businesses, generating competitive advantages and allowing growth beyond organic growth.
Link to McKinsey article: https://lnkd.in/d8E2f2EB
