Interview  -­‐  Laurence  Capron  analyzes  corporate  development’s  build,  borrow  and  buy  options  -­‐  Brian  Leavy    One  of  the  most  difficult  challenges  for  most  strategists  is  how  to  sustain  corporate  growth.  This  is  particularly  acute  for  established  companies  that  have  reached  a  scale  where  further  double-­‐digit  expansion  is  no  longer  conceivable  without  diversifying  into  new  areas.  The  overall  corporate  track  record  to  date  has  been  unconvincing  at  best,  with  too  much  value  being  destroyed.  Waves  of  merger  and  acquisition  activity  may  culminate  in  later  rounds  of  corporate  restructuring,  while  diversification  through  internal  corporate  venturing  (ICV)  may  devolve  into  ‘‘periods  of  intense  ICV  activity  .  .  .  followed  by  periods  when  such  programmes  are  shut  down  again,  only  to  be  followed  by  new  ICV  activities  a  few  years  later,’’  as  management  experts,  Robert  Burgelman  and  Liisa  Valikangas,  noted  some  years  ago.[1]    So  what  are  we  still  missing  in  our  approach  to  corporate  development  that  might  help  us  to  turn  the  odds  in  our  favor?  This  is  the  question  that  Build,  Borrow  or  Buy:  Solving  the  Growth  Dilemma  (HBR  Press,  2012),  by  Laurence  Capron  and  Will  Mitchell,  sets  out  to  address.  Dr  Capron  is  the  Paul  Desmarais  Chaired  Professor  of  Partnership  and  Active  Ownership  at  INSEAD  and  director  of  the  school’s  executive  education  program  on  M&A  and  corporate  strategy,  and  she  has  been  examining  such  issues  in  depth  in  her  own  research  and  consultancy  activities  for  more  than  a  decade.  One  the  major  findings  reported  in  her  book  is  that  too  few  companies  consider  the  full  range  of  ‘‘build,  borrow  and  buy’’  options  in  their  corporate  development  efforts,  while  the  odds  for  success  significantly  favor  those  that  do,  and  do  it  in  a  disciplined  and  systematic  way.[2]    Her  interviewer,  Brian  Leavy,  is  the  AIB  Professor  of  Strategic  Management  at  Dublin  City  University  Business  School  (brian.leavy@dcu.ie)  and  a  Strategy  &  Leadership  Contributing  Editor.    Theme  1:  the  changing  context  for  corporate  development  and  the  need  to  consider  the  full  range  of  resourcing  options    Strategy  &  Leadership:  In  your  new  book,  Build,  Borrow  or  Buy,  you  make  the  case  that  companies  need  to  consider  the  full  range  of  corporate  development  pathways  to  effectively  pursue  strategies  for  growth.  In  today’s  business  environment,  why  is  this  both  pressing  and  opportune?    Laurence  Capron:  Many  companies  rely  on  a  single  growth  mode  instead  of  considering  the  full  range  of  options  and  selecting  the  growth  mode  that  best  fits  the  market  conditions  and  their  resource  constraints.  For  example,  over-­‐reliance  on  internal  growth  (build)  can  make  your  company  slow  to  acquire  the  new  resources  you  need  to  survive  in  a  fast  moving  environment.  Making  too  many  acquisitions  (buy)  within  a  short  period  of  time  can  lead  to  organizational  incoherence  and  fragmentation,  while  relying  too  heavily  on  licenses,  contracts  and  alliances  (borrow)  can  make  you  vulnerable  to  your  partners’  shifting  priorities.  Choosing  carefully  among  different  growth  modes,  and  developing  the  right  blend  of  options,  will  help  you  take  speedy  advantage  of  emerging  opportunities,  while  minimizing  the  cost  of  doing  so.    S&L:  Can  you  give  some  examples  of  companies  that  employ  the  full  range  of  growth  options  to  advantage?    Capron:  Johnson  &  Johnson  (J&J),  in  the  pharmaceutical  industry,  is  a  good  example  of  how  firms  can  blend  effectively  internal  innovation  with  acquisitions.  J&J  is  widely  regarded  as  one  of  the  world’s  most  innovative  and  reliably  successful  companies  and  has  built  a  sophisticated  sourcing  discipline  that  allows  it  to  adapt  continuously  to  changes  across  its  product  segments  and  geographies.  This  discipline  adroitly  mixes  internal  development  and  acquisitions,  combined  with  active  post-­‐acquisition  integration  and  ongoing  reshuffling  of  its  resource  portfolio.  A  further  example  is  Essilor,  the  French-­‐based  global  leader  in  the  corrective  lenses  sector.  This  company  has  always  put  internal  innovation  as  the  heart  of  its  growth  strategy,  while  at  the  same  time  using  external  pathways  to  tailor  its  development  of  disruptive  technologies  through  research  partnerships  with  leading  research  institutions  like  CNRS  and  Stanford  University,  research  joint  ventures  like  that  with  Nikon  in  Japan  and  also  acquisitions.    S&L:  What  are  the  risks  in  attempting  to  pursue  multiple  modes  simultaneously?    

Capron:  There  is  the  risk  of  spreading  your  resources  too  thinly,  especially  when  it  comes  to  execution,  and  it  can  be  hard  to  exploit  the  benefits  of  learning  and  specialization,  if  some  depth  of  expertise  is  not  allowed  to  develop  in  the  use  of  particular  tools.  The  important  thing  to  remember  is  that  each  of  these  growth  modes  is  a  just  tool,  not  your  strategy.  Some  companies  that  pride  themselves  on  their  M&A  expertise,  for  example,  often  fail  to  make  this  important  distinction,  and  choose  the  tool  even  when  it  isn’t  the  most  appropriate.    S&L:  One  of  the  biggest  impediments  to  more  companies  adopting  a  multiple  mode  approach  is  what  you  refer  to  as  the  ‘‘implementation  trap.’’  What  is  this  and  how  does  the  overall  perspective  offered  in  your  new  book  help  companies  to  avoid  this  danger?    Capron:  Firms  that  tend  to  rely  on  only  one  or  two  growth  options,  like  internal  development  and  M&A  can  often  fall  into  an  ‘‘implementation  trap,’’  where  execution  problems  are  immediately  suspected  when  outcomes  are  disappointing,  when  the  real  problem  lies  further  back  in  inappropriate  mode  selection.  The  trap  is  insidious  because  failure  to  recognize  when  the  issue  is  one  of  selection  rather  than  implementation  only  tends  to  compound  the  problem  through  doubling  down  on  the  wrong  response.    For  instance,  R&D  cultures  and  teams  typically  prefer  to  develop  future  capabilities  through  organic  innovation.  As  one  executive  at  a  leading  European  telecom  firm  told  us:  ‘‘We  have  superb  technical  skills  on  the  engineering  side.  Internal  people  tend  to  think  they  should  be  given  a  chance  to  do  it  on  their  own.  We  need  to  break  this  perception  barrier  .  .  .  We  need  to  develop  a  capability  to  manage  alliances  and  acquisitions.  The  issue  is  how  you  bring  such  process  skills  into  our  peoples’  mindset.’’    By  ignoring  opportunities  to  employ  a  broader  range  of  growth  modes  and  by  failing  to  understand  what  circumstances  suit  the  different  modes  of  obtaining  resources,  firms  resort  to  their  historical  biases  and  often  fail  to  adapt  themselves  to  the  present-­‐day  strategic  realities  they  face.  To  help  companies  to  avoid  this  danger  by  making  the  executives  aware  of  their  own  biases  and  helping  them  to  ask  the  right  questions  we  devised  a  ‘‘Resource  Pathways’’  framework  (Exhibit  1).    Theme  2:  internal  development  and  when  to  build    S&L:  In  looking  at  the  different  pathways  in  your  framework,  why  do  too  many  firms  tend  to  turn  to  internal  development  without  enough  consideration  given  as  to  whether  it  is  likely  to  be  the  most  effective  option  in  any  given  context?    Capron:  Most  businesses  naturally  think  of  internal  development  first  when  they  need  new  resources  because  resource  ownership,  with  proprietary  control  over  intellectual  property,  often  goes  hand  in  hand  with  sustainable  competitive  advantage.  Furthermore,  maintaining  strong  internal  capabilities  also  enables  firms  to  be  more  effective  in  screening,  evaluating  and  integrating  external  knowledge.  It  also  makes  them  more  attractive  as  business  partners  when  it  comes  to  forming  alliances  or  acquisitions.    However,  executives  making  growth  decisions  often  choose  internal  development  reflexively,  without  first  assessing  the  resources  they  need  to  develop.  They  forget  that  no  pathway  is  inherently  superior  to  others;  superiority  is  solely  a  function  of  context.  So  they  are  often  reluctant  to  seek  needed  resources  externally,  believing  that  success  is  ultimately  a  matter  of  devoting  enough  money  and  effort  to  internal  projects.    North  American  automakers  GM  and  Ford  historically  fell  into  this  trap.  They  were  determined  to  develop  and  manufacture  most  components  in  their  own  subsidiaries,  even  though  in-­‐house  knowledge  of  some  technologies  lagged  behind  the  market  and  superior  hird-­‐party  options  were  available.  This  overreliance  on  internal  development  was  one  reason  the  firms  lost  their  strong  leads  in  the  global  auto  industry.  Certainly,  they  would  often  have  been  better  served  had  they  turned  earlier  to  external  sourcing.    

Exhibit  1  -­  The  Resource  Pathways  Framework:  full  model    

   S&L:  Your  framework  says  that  the  key  consideration  in  determining  whether  to  choose  the  internal  development  mode  is  the  ‘‘relevance’’  of  the  firm’s  internal  resources.  How  should  ‘‘relevance’’  be  assessed?    Capron:  To  assess  it,  we  focus  on  two  dimensions.  The  first  is  knowledge  fit,  which  considers  how  closely  your  existing  knowledge  base  aligns  with  the  targeted  resources.  The  other  dimension  is  organizational  fit,  which  refers  to  the  compatibility  of  your  established  systems  and  values  with  those  needed  to  develop  the  targeted  resources.  Many  executives  recognize  the  importance  of  knowledge  fit,  but  too  few  carefully  consider  organizational  fit.    Media  companies,  for  instance  frequently  faced  internal  resistance  when  attempting  to  parlay  existing  print-­‐media  skills  into  the  digital  domain.  A  media  executive  from  a  company  that  combined  its  print  and  online  newsrooms  told  us  that  journalists  from  the  print  newspapers  removed  their  names  from  online  articles  –  which  they  regarded  as  lower  in  quality,  credibility  and  sophistication.  The  cultural  divide  between  the  print  and  digital  units  hampered  the  diffusion  of  skills  across  the  whole  organization.    S&L:  What  are  the  some  of  the  biggest  mistakes  that  companies  tend  to  make  when  it  comes  to  dealing  with  this  relevance  question  and  how  best  might  they  be  avoided?    Capron:  Many  companies  overestimate  the  relevance  of  their  internal  resources.  Yet  we  need  to  push  ourselves  to  be  honest  and  clear-­‐eyed  about  whether  our  existing  skills  really  are  strong  enough  to  meet  the  competitive  challenges  and  opportunities  that  we  face.  Companies  often  grossly  underestimate  the  gap  between  what  they  have  and  what  they  need.    Established  European  telecom  firms  in  the  late  1990s  often  fell  into  that  trap  when  they  began  to  move  into  the  data-­‐networking  environment.  Many  of  the  early  moves  failed  because  they  over-­‐relied  on  their  traditional  internal  skills  and  development  processes.  Eventually,  they  found  that  they  needed  to  use  

alliances  and  acquisitions  to  complement  their  internal  R&D.  Similarly,  most  media  firms  have  been  struggling  to  add  and  blend  digital  activities  with  their  traditional  printed  activities.  For  instance,  Axel  Springer,  the  leading  German  publishing  group,  quickly  discovered  that  it  couldn’t  generate  enough  growth  by  turning  traditional  print  into  digital  formats.  So  it  changed  paths  and  embarked  on  multiple  acquisitions  of  ‘‘native’’  internet  businesses  like  AuFeminin.com    Theme  3:  external  pathways  –  when  to  borrow,  when  to  buy    S&L:  Traditionally,  firms  have  tended  to  think  in  terms  of  simply  build  or  buy.  Why  have  they  been  slow  to  look  at  intermediate  ‘‘borrowing’’  options  such  as  contracts  or  alliances?    Capron:  In  their  mania  for  control,  executives  often  fall  for  M&A  as  a  seductive  shortcut,  yet  70  percent  of  acquisitions  fail,  so  firms  tend  neglect  these  borrowing  options  at  their  peril.  Used  appropriately,  options  such  as  basic  contracts  and  alliances  can  provide  access  to  third-­‐party  resources  under  more  flexible  terms  and  at  lower  risks  and  costs  than  an  acquisition.  M&A  is  inevitably  an  expensive  and  complicated  entanglement  that  should  only  be  pursued  as  a  last  resort.  Overemphasizing  the  need  for  control  and  leaping  unnecessarily  to  acquire  a  company  can  lead  you  to  waste  time  and  investment  capital.  And  you  will  also  miss  opportunities  to  learn  from  a  variety  of  independent  partners,  ultimately  inhibiting  your  ability  to  refresh  core  resources.    However,  when  it  comes  taking  full  advantage  of  the  borrowing  option,  it  is  also  important  to  recognize,  as  emphasized  earlier,  that  an  external  sourcing  strategy  is  most  effective  when  coupled  with  strong  internal  capabilities  that  will  help  you  absorb  new  knowledge  into  your  firm.  Relying  exclusively  on  external  sourcing  makes  the  firm  vulnerable  and  partner-­‐dependent.  For  example,  the  Romanian  automaker  Dacia  manufactured  licensed  versions  of  French  Renault  models  for  more  than  thirty  years  without  ever  developing  a  single  indigenous  model  (Renault  acquired  Dacia  in  1999).  In  contrast,  Korean  automaker,  Hyundai,  initially  developed  cars  in  collaboration  with  Ford,  but  ultimately  was  able  to  successfully  market  its  own  model.    S&L:  The  main  issue  to  be  addressed,  you  argue,  in  choosing  a  contract  over  an  alliance  is  whether  the  targeted  resource  is  ‘‘tradable.’’  Under  what  conditions  do  contracts  work  best?    Capron:  Obtaining  and  absorbing  resources  from  others  using  contracts  can  be  difficult  because  firms  may  know  little  about  available  external  resources,  their  true  market  value,  or  the  prospects  for  obtaining  comparable  resources  from  alternate  suppliers.  So,  there  are  reasons  to  be  cautious.  That  said,  the  issues  are  often  manageable  and  the  benefits  plentiful.    Contracting  is  most  appropriate  when  you  have  clarity  about  resource  definition  (including  resource  value  and  the  required  supporting  relationships),  and  when  neither  partner  ventures  unprotected  into  contractual  arrangements.  We  refer  to  cases  in  which  both  resource  clarity  and  value  protection  are  high  as  modular  agreements.  In  a  modular  agreement,  it  is  straightforward  to  describe  not  only  the  resources  you  want  to  trade  (by  license  or  other  contractual  mechanism),  but  also  the  terms  that  will  protect  the  value  of  the  trade  for  both  parties.  In  practice,  modular  agreements  are  common.  For  example,  Eli  Lilly  has  secured  more  than  200  licensing  agreements  over  the  past  two  decades,  comprising  contracts  that  confer  rights  to  compounds,  products,  delivery  technologies  and  devices,  development  and  production  processes,  software  and  geographic  markets.    On  the  other  hand,  it  is  often  difficult,  if  not  impossible,  in  many  situations  to  delineate  and  to  protect  current  and/or  future  resources  with  enough  clarity  to  make  a  contract  workable.  For  example,  in  2007,  Raytheon’s  legal  office  formed  a  contracts-­‐based  partnership  with  five  other  companies  to  develop  an  IT  system  for  border  inspections  in  the  United  Kingdom.  The  £650  million  ‘‘Trusted  Borders’’  project  involved  extensive  technical  uncertainty  as  well  as  open-­‐ended  commitments  by  the  partners.  Over  the  next  three  years,  the  project  encountered  substantial  coordination  problems  and  failed  to  produce  a  viable  product.  The  British  government  finally  suspended  the  project  in  2010.  In  such  cases,  alliances  or  other  more  complex  inter-­‐organizational  relationships  are  almost  always  the  better  option  for  obtaining  targeted  resources.    S&L:  When  does  acquisition  become  a  better  option  than  alliance,  and  what  are  the  key  considerations  involved?  

 Capron:  Alliances  tend  to  work  best  when  the  exchange  of  knowledge  and  other  resources  requires  focused  engagement  by  partners  who  share  compatible  goals,  where  the  effective  interface  between  the  activities  of  the  two  partners  is  quite  confined,  and  the  number  of  employees  involved  in  coordinating  the  partnership  interactions  is  relatively  small.  As  the  complexity  of  collaboration  rises,  alliances  require  more  structure  and  control,  along  with  more  nuanced  forms  of  pay-­‐off  for  all  parties.  For  example,  the  international  partnership  between  Renault  and  Nissan  is  a  successful  complex  alliance  that  is  held  together  with  substantial  formal  structure,  involves  significant  operating  collaboration  in  areas  such  as  market  development  and  supply  chain  management  and  uses  cross-­‐equity  holdings  help  to  keep  incentives  aligned.    In  cases  where  the  coordination  needs  are  even  more  extensive  and  the  partners  clearly  have  different  strategic  needs,  unified  ownership  through  acquisition  may  then  become  the  most  compelling  way  to  fully  exploit  the  combined  resources.  However,  acquisitions  require  many  steps  to  exploit  their  potential  value,  and  the  real  killer  in  most  failed  deals  is  weak  post-­‐merger  integration.  Even  firms  experienced  in  M&A  struggle  with  this.  Although  some  firms  manage  to  develop  repeatable  templates  that  fit  some  types  of  acquisitions,  even  experienced  firms  need  to  adapt  their  practices  for  integration  planning  and  practice  as  they  move  into  new  markets  and  businesses.  In  a  real  sense,  post-­‐merger  integration  is  more  job-­‐shop  ingenuity  than  assembly-­‐line  automation.    Post-­‐merger  integration  will  be  feasible  only  if  you  can  clearly  map  the  integration  process  and  sustain  the  motivation  of  key  people  at  both  firms.  Overly  centralized  control  can  harm  cooperation  between  target  and  acquirer,  and  destroy  the  value  of  the  combined  resources;  yet  too  little  control  may  lead  to  lost  opportunities  for  value  creation.  If  you  decide  that  you  will  not  be  able  to  integrate  properly,  you  should  take  a  further  look  at  less  integrative  options,  such  as  alliances  or  partial  acquisitions.    Theme  4:  managing  the  resource  portfolio  dynamically    S&L:  You  highlight  the  need  for  ‘‘build-­‐borrow-­‐buy’’  resource  sourcing  portfolios  to  be  re-­‐evaluated  on  an  ongoing  basis  and  realigned  when  necessary.  Why  do  many  companies  find  this  difficult  to  do,  and  what  are  the  consequences  of  failing  to  do  it?    Capron:  Revisiting  your  past  choices  requires  that  you  understand  the  roots  of  challenges  that  you  now  face.  When  resource-­‐development  projects  encounter  challenges,  the  problem  often  lies  beyond  the  reach  of  such  ‘‘implementation  trap’’  remedies  as  working  harder  at  what  you  already  do  and  resides  instead  in  the  type  of  control  you  are  exerting  over  exploiting  the  resources.  This  may  no  longer  be  appropriate,  and  may  even  have  been  the  wrong  approach  from  the  start,  so  change  may  be  required.    For  instance,  if  you  made  an  acquisition  when  conditions  actually  favored  an  alliance,  then  you  are  paying  the  financial  and  organizational  costs  of  exerting  excessive  control.  Acquisitions  typically  exact  higher  set-­‐up  and  integration  costs  than  other  sourcing  options.  Organizationally,  burdening  the  acquired  firm  with  the  bureaucratic  complexities  and  demands  of  the  acquirer’s  corporate  structure  can  impair  its  esprit  de  corps,  de-­‐motivate  its  employees,  and  hamper  its  innovative  productivity.  Faced  with  these  prospects,  you  should  explore  ways  of  giving  the  target  firm  a  longer  leash,  including  significantly  more  autonomy.  Similarly,  changing  circumstances  could  compel  you  to  revisit  your  ‘‘borrow’’  choices.  Where  once  it  made  perfect  sense  to  rely  on  a  basic  contract  to  obtain  key  resources,  the  time  may  have  come  for  more  engagement  than  a  contract  or  alliance  can  provide,  and  acquisition  or  the  building  of  a  new  internal  competence  may  now  be  the  only  sensible  alternatives  (Figure  7.1).    

Figure  7.1  -­  The  selection  capability  cycle    

   S&L:  In  realigning  these  portfolios,  you  argue  that  corporate  leaders  need  to  distinguish  carefully  between  their  ‘‘internalized’’  and  ‘‘borrowed’’  resources.  Why  does  this  distinction  become  so  important  when  revisiting  past  choices?    Capron:  It  is  important  to  recognize  that  internal  development  and  M&A  are  different  ways  of  arriving  at  the  same  place,  gaining  possession  of  new  resources  over  which  you  can  exercise  complete  control.  Whether  you  developed  them  yourself  or  secured  them  through  acquisition,  the  resources  become  internalized.  By  contrast,  resources  obtained  through  your  contractual  and  alliances  partners  are  only  borrowed  –  to  the  extent  that  you  remain  dependent  on  partners  for  current  and  future  exploitation  of  the  resources.  The  distinction  is  crucial  when  you  come  to  revisit  past  choices,  because  you  require  different  mechanisms  in  order  to  change  your  level  of  control  over  internalized  versus  borrowed  resources.  For  instance,  for  borrowed  resources,  you  can  terminate  a  contractual  relationship  with  a  resource  partner.  However,  to  divest  resources  that  you  bought  through  an  acquisition  or  built  through  internal  development  tends  to  be  more  painful  and  costly,  and  companies  are  generally  too  slow  to  take  this  step.    S&L:  Can  you  give  an  example  of  a  company  that  effectively  managed  its  resource  realignment  process?    Capron:  An  excellent  illustration  is  Danone,  the  French-­‐based  multinational  in  the  food  sector.  Since  deciding  to  redefine  its  mission  as  bringing  ‘‘health  through  food  to  the  largest  number  of  people,’’  the  company  has  substantially  restructured  its  resource  portfolio  over  the  last  decade,  shifting  emphasis  away  from  staples  such  as  cereals  and  biscuits  to  concentrate  on  four  key  lines  in  the  ‘‘healthy  food’’  arena  –  fresh  dairy  foods,  baby  nutrition,  medical  nutrition  and  bottled  water.  Over  half  of  Danone’s  total  revenues  now  come  from  fresh  dairy  products,  where  the  company  has  become  the  world  leader  with  a  strong  collection  of  innovative  yogurt-­‐based  products.  Building  upon  this  platform,  the  company  has  also  established  itself  as  a  global  leader  in  both  infant  and  medical  nutrition,  and  world  #  2  in  bottled  waters.    Realignment  involves  two  main  directions,  securing  greater  control  over  resources  of  increasing  strategic  value,  and  while  reducing  or  relinquishing  control  over  those  that  are  becoming  more  and  more  

peripheral.  In  realigning  its  corporate  portfolio  in  line  with  its  new  health-­‐oriented  mission,  Danone  took  multiple  steps  to  increase  its  control  over  resources  within  the  health  and  nutrition  domains,  including  intensifying  its  R&D  investment  into  probiotics  (build),  a  key  technology,  while  increasing  its  equity  stakes  in  some  of  its  strategic  partners  (borrow),  like  Yakult  in  Japan,  and  Avesthager  in  India,  and  moving  to  outright  acquisition  in  the  case  of  others  (buy),  like  Stoneyfield  Farm  in  the  US.  It  also  divested  resources  in  indulgence  categories  such  as  biscuits  and  alcoholic  beverages  that,  while  still  quite  profitable,  were  no  longer  a  good  fit  with  its  new  strategic  positioning.    S&L:  You  encourage  firms,  big  and  small,  to  develop  a  ‘‘balanced  portfolio’’  of  build-­‐borrow-­‐buy  initiatives,  and  to  keep  their  pipelines  stocked  with  internal  and  external  sourcing  opportunities.  What  are  the  main  activities  and  challenges  involved?    Capron:  Firms  without  adequate  internal  skills  will  struggle  to  absorb  external  resources  effectively;  those  that  cannot  tap  external  sources  will  struggle  to  refresh  their  internal  resources;  and  those  without  the  ability  to  learn  from  contractual  and  alliance  partners  will  face  reduced  flexibility,  missing  key  opportunities  to  explore  unchartered  domains.  In  short,  this  is  why  you  need  to  nurture  a  balanced  portfolio  of  build,  borrow,  and  buy  activities.    The  next  challenge  is  to  choose  between  the  different  sourcing  modes.  Of  course,  without  viable  opportunities  across  the  range  of  sourcing  modes,  you  will  have  no  choice  but  to  fall  back  on  what  is  available.  To  avoid  that,  you  need  to  nurture  a  pipeline  of  build,  borrow  and  buy  opportunities.    Firms  that  recognize  the  challenges  of  identifying  and  connecting  internal  resources  often  invest  in  corporate  knowledge  centers,  best-­‐practice  databases,  skill  inventories,  and  knowledge  maps.  They  also  develop  incentives  for  employees  to  free  up  time  to  identify  and  share  knowledge.  Cultivating  a  range  of  external  options  is  valuable  in  exploring  emerging  product  lines,  geographic  markets,  business  models,  commercialization  tools,  and  other  exciting,  but  highly  uncertain,  new  opportunities,  and  you  can  reduce  the  risks  of  using  an  unclear  resource  by  engaging  in  exploratory  activities.  A  well-­‐rounded  portfolio  of  resource  skills  should  include  three  tools  that  will  help  you  do  this–partial  acquisitions,  spin-­‐ins,  and  investments  in  relevant  venture-­‐capital  funds.  Any  of  these  temporary  mechanisms  can  transition  to  deeper  engagement  when  opportunities  become  more  clearly  defined  over  time.    S&L:  Finally,  what  do  you  see  are  the  biggest  organizational  challenges  facing  corporate  leaders  that  might  want  to  follow  your  advice  and  become  more  experimental  with  these  multiple  modes  of  growth?    Capron:  To  succeed,  CEOs  and  their  top  management  teams  need  to  learn  how  to  identify  the  right  ways  to  grow  their  company.  In  parallel,  they  must  build  the  discipline  within  their  company  to  choose  and  follow  those  multiple  paths  to  growth,  and  be  willing  to  risk  experimenting  with  new  modes  of  growth.  This  is  not  easy.    CEOs  must  overcome  the  resistance  of  their  entrenched  teams  and  leaders.  Internal  staff  often  have  a  hard  time  accepting  the  distinctive  quality  of  third-­‐party  resources,  powerful  M&A  teams  are  often  reluctant  to  turn  a  prospective  acquisition  deal  into  an  alliance,  while  licensing  and  alliance  teams  might  not  be  too  willing  to  pass  the  relay  baton  to  the  M&A  team  when  needed.  In  addition,  some  leaders  themselves  are  compulsive  shoppers  and  pride  themselves  on  their  deal-­‐making  savvy  when  looking  to  expand  their  companies,  while  others  have  the  souls  of  inventors  and  engineers,  leading  them  to  prefer  what  they  view  as  the  integrity  of  organic  growth.  So,  CEOs  must  also  learn  to  recognize  and  overcome  their  own  biases.  Using  the  Resource  Pathways  Framework  can  provide  the  basis  for  developing  and  communicating  a  more  convincing  and  compelling  rationale  for  growth  mode  realignments  in  ways  that  colleagues  across  the  organization  will  find  much  easier  to  relate  to  and  support.      

Notes  1.  Burgelman,  R.A.  and  Valikangas,  L.  (2005),  ‘‘Managing  internal  corporate  venturing  cycles,’’  MIT  Sloan  Management  Review,  Summer,  26-­‐34.  2.  Capron,  L.  (2013),  ‘‘Cisco’s  corporate  development  portfolio:  a  blend  of  building,  borrowing  and  buying,’’  Strategy  &  Leadership,  Vol.  41,  No.  2.            This  article  is  ©  Emerald  Group  Publishing  and  permission  has  been  granted  for  this  version  to  appear  here  http://www.build-­borrow-­buy.com/  Emerald  does  not  grant  permission  for  this  article  to  be  further  copied/distributed  or  hosted  elsewhere  without  the  express  permission  from  Emerald  Group  Publishing  Limited.