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in timid gradualism and small experiments, Maverick was aggressive, taking every opportunity it could to obtain new digital resources. It listened to pitches from investment bankers and bought Internet media companies; it allied with partners that were developing interesting products in digital niches; it negotiated licenses for digital technical skills. It also gave internal development teams substantial latitude to create digital resources.

      Maverick won kudos from media and business experts for its energetic strategy and for the way it mixed external partnerships with internal explorations—at a time when its competitors were much less exploratory, either internally or externally.

      But even with Maverick’s investments of money and time in amassing new resources, frustration had crept in among employees. The company was nowhere near as strong as it should have been in the market. Its acquired businesses were not well integrated, and no tangible synergies were emerging. No one had clear oversight of an increasingly apparent tangle of licensing and alliance partners. No one seemed able to articulate how each partnership should contribute to tangible offerings that would advance the digital strategy. The lack of clear and coherent direction demotivated employees, as many fragmented resource-development initiatives pulled people in different directions.

      In its aggressive opportunism, Maverick acted quickly while others in the industry were overly cautious, vacillated, and wasted time. But it also acted arbitrarily. Too little strategic coordination guided its decisions as it funded some projects internally, worked with partners on others, and sought M&A targets for yet other projects. The firm struggled to exploit the potential benefits of all this activity. The result subjected employees to a chaotic process of expensive, time-consuming acquisitions and partnerships. Indeed, a reputation for extreme disorder came to characterize Maverick Publishing.

      In contrast to one-trick Merlin, Maverick was partly on the right track in its use of multiple growth paths. But it failed to carefully analyze important circumstances and contingencies that, we have learned, must factor into decisions about which growth paths to choose for what kinds of resources. Instead, Maverick’s decisions on whether to build, borrow, or buy were arbitrary in each instance. In this way, chaos was introduced into the DNA of Maverick’s strategy.

      Do you recognize similar tendencies in your own firm to fall prey to either path-dependent or opportunistic growth strategies? If so, what would constitute a more successful way of selecting the right pathways to growth?

      Build-Borrow-Buy Growth: The Right Cure for Each Condition

      Consider a third approach, the build-borrow-buy strategy. During the past thirty years, Panacea Pharmaceuticals has participated in the biotech revolution and led the creation of the evolving networked model of global innovation. Over time, the firm learned about new technologies and changing markets, relying increasingly on a mixed portfolio of internal R&D, basic contracts, alliances, and acquisitions to develop and market its pharmaceutical innovations.

      The firm employs high-performing teams of internal R&D people throughout the world. But unlike some competitors, Panacea has long supplemented internal development with external sourcing. It has raised the bar high for investing in internal projects, most of which must draw upon the company’s proven skills in core therapeutic areas.

      Externally, the firm has resorted to multiple licenses, which give Panacea access to compounds, products, and targeted skills that complement internal activities. Panacea also pursued more complex partnerships—to jointly develop new products and explore new markets—when contracts were deemed insufficient to support high levels of partner interaction or to coordinate and protect key resources.

      Wherever alliances led to steadily increasing strategic value or required more substantial collaboration, Panacea would try to convert them into acquisitions, buying out former partners. It also made direct acquisitions in strategically important therapeutic areas for which Panacea needed quick access to capabilities that would accelerate internal learning.

      By carefully selecting different paths for obtaining new resources, Panacea underwent a radical transformation. It maintained its leading position as the industry expanded globally. It developed a disciplined understanding of when to build a new resource internally, when to contract or ally with other firms to borrow resources, and when to follow the demanding path of buying another company.

      Unlike Maverick, Panacea learned how to properly mix build, borrow, and buy strategies. Unlike Merlin, it avoided relying on only one trick. Instead, Panacea has become multidexterous, a master of all three modes, with the seasoned judgment to know when each is warranted and most likely to produce success.

      The Promise of the Book

      Our research and experience suggest that a well-developed build-borrow-buy capability is a powerful tool for achieving growth. The book spells out a step-by-step resource pathways framework for choosing the best way of obtaining the resources you need to compete effectively when new opportunities arise. We call this creating a strong selection capability. (See “Glossary of Key Terms” at the end of this chapter for a rundown of terms we use throughout the book.)

      As we elaborate on the resource pathways framework throughout the book, we will show how various large and small companies around the world developed sustainable growth strategies reflecting this framework. We will describe how some firms have grown faster, and with less disruption, than many competitors—becoming more profitable and developing long-term competitive advantages as a result. These firms avoid many of the perils of growth by applying a more orderly process, earning dividends from the hard work they invest in selecting and implementing their growth strategies. Conversely, we will show how companies that either fail to adopt or stray from these principles struggle to grow effectively. Indeed, such derelictions often contribute to the collapse of firms—whether they are taking their first steps after initial successes or are once-powerful industry leaders.

      The ideas in our book may prove valuable for many decision makers: for CEOs and other members of the top management team who are shaping your firm’s strategic vision, for members of corporate development staff who are identifying major steps for achieving the vision, and for any decision makers who help decide where and how to seek new resources. Each of these stakeholders has an indispensable leadership role in ensuring that the resource pathways framework will deliver powerful enterprise benefits.

      We hope that you will benefit from this learning journey. To be sure, there is no foolproof, GPS-like system that provides a step-by-step guide to the resource pathways. Leaders must still exercise sound judgment and build organizations with the discipline to develop a strong selection capability. Only through the combination of wisdom and discipline can businesses achieve the optimal mix of build, borrow, and buy modes to pursue successful growth.

      GLOSSARY OF KEY TERMS

      The following terms will appear throughout the book:

       Resources: assets that a firm needs to create goods and services for customers; may include physical assets such as plants and equipment; intangible assets such as know-how and intellectual property; or human resources—employees and other internal and external stakeholders who contribute to your business activities.

       Strategic resources: resources necessary to reinforce current competitive advantages, to lay the groundwork for future advantage, or to do both.

       Existing resources: resources a firm currently owns or controls or to which it has established reliable access.

       Targeted resources: resources a firm currently lacks and wants for opportunities to create valuable new goods and services for existing and new customers.

       Resource gap: the distance between existing and targeted resources.

       Selection capability: a firm’s ability to select the appropriate pathways to fill resource gaps.

       Build—internal development: changes that a firm undertakes on its own to create value by recombining existing capabilities or developing new ones. Such efforts may involve training internal staff, executing internal product

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