The May 2016 issue of Harvard Business Review has an interesting article, “How to hedge your strategic bets” by George Stalk Jr and Ashish Iyer. The article focuses on 3 strategic options: Temporary organizations, exploratory acquisitions and Disposable factories.
While I found the complete article informative, it was the exploratory acquisitions part that really caught my attention. And the reason was an uncanny parallel between the example cited in the article and another one unfolding in the industry.
The authors cite the exploratory acquisitions path taken by Brooks Automation, while seeking to diversify, to leverage their expertise from semiconductor into the life science industry.
A similar example is Applied Materials seeking to diversify from its core business of semiconductor equipment manufacturing into yes, life sciences. In this case though there is an investment (instead of an acquisition) made in 2014 by its venture arm, Applied Ventures, into a biotechnology start up called Twist Bioscience. Twist Bioscience is developing a proprietary semiconductor-based technology platform for synthetic gene manufacturing. The aim is to overcome industry inefficiencies by synthesizing DNA on silicon instead of traditional plastic.
I find this a good example of charting growth through adjacencies. Applied Materials is exploring a demand centric growth space – Biotechnology and is adopting an experimental approach through this investment.
In n fact, one is seeing the extending into adjacencies path being more trodden by such corporate venture investment route than the exploratory acqusitions one. Perhaps the former route is also one which offers a better risk mitigation (e.g. integration, building the right cultural & other internal enablers especially) than the latter one. It doesn’t distract one into missing growth opportunities in one’s core business. Additionally it facilitates meeting of one of the key screening criterion for adjacencies – limit the number of new variables to a small manageable one.
Do share your thoughts…