Giant companies buy other companies all the times with the goal of diversifying, maintaining revenue growth and leveraging their infrastructure (See Disney, Fox). Such acquisitions are designed to be “Big to Bigger.”
But can companies seed their own farm teams via new business units, startup acquisitions and partnerships? Can they truly transform their companies to reflect up-and-coming trends in business?
Amazon most famously did it with Amazon Web Services. Microsoft is doing it with its revised focus on consulting, cloud-based services and consumer products. Kroger is attempting to do it in groceries with prepared foods and delivery.
GE, to its investors’ chagrin, has never successfully done it. GE, the master of squeezing blood out of a turnip, relied too long on cash cows and selling spin-offs, despite very public efforts to highlight new directions and a lot of “success theater” (a move to tech-friendly Boston, the creation of a software division, etc).
Consultants David Kidder and Christina Wallace, in their new book, New to Big, argue that companies need to deliberately foster such organic growth. The authors are leaders of Bionic, an innovation consulting firm for larger corporations; Kidder is the author of The Startup Playbook and founder of Clickable, an SEO firm.
The authors argue that New to Big must sit alongside Big to Bigger in the corporate mindset. “In the same way an MBA program teaches a form of management for administering and growing existing businesses, entrepreneurship and venture capital are, together, a form of management for discovering and building new businesses. Enterprises need both,” note the authors.
They also argue that companies need to stop focusing on Total Addressable Markets (TAM), which only deal with near future results. Companies also can’t rely on the accuracy of “Voice of Customer” research: customers cannot be expected to anticipate their needs and connect all the dots.”Total Addressable Problems” and “Opportunity Areas” are a stronger focus.
Years ago, for instance, investors who assessed Uber’s potential in terms of grabbing a slice of taxi and limo revenues would have missed its true role as a re-shaper of all public and private transportation (and perhaps, food delivery as well).
Kidder and Wallace provide a highly readable and thought-provoking playbook for companies that deal with the many sticky issues of developing in-house farm teams (i.e. ensuring that a temporary posting to a farm team doesn’t hurt an executive’s career.) The book cites several examples of corporate farm team products, such as Nike and its app for runners; and TD Ameritrade). At this point, however, there aren’t really many examples. Maybe this effort will spur more.