Recently, there is a rising trend in Chinese companies to do oversea acquisitions for expansion. However, as the readings of this week suggest that enterprise should not only pay attention to stay focus on self strength but also to the coherence of the strengths.
As the New York Times article, “G.E. Goes with What It Knows: Making Stuff”, states, “Its heritage of industrial innovation reaches back to Thomas Edison and the incandescent light bulb...”. G.E. was one of the greatest manufacturing companies in the world. However, it was lured by the lucrative financial service and had half of its revenue coming from that. This makes G.E. hit hard in the financial crisis. By now, G.E. has sold its financial business unit, G.E. Capital, and return to stable profitability.
Microsoft made a similar mistake. It bought Nokia trying to enter the smartphone market. Of course, the company’s management expects to see synergy between the cellphone maker and its strong technology background. However, it turns out to be “Pseudo adjacencies” described in the “Seven Ways to Fail Big”. Google bought Boston Dynamic trying to set a foot in the robotic and intelligent manufacturing industry. Although the tech giant is very strong in artificial intelligence, the product of Boston Dynamics are way short for mass-production. Now, Alphabet has to put it for sale.
Staying focus on self strength cannot be the best strategy. In “The Coherence Premium”, it says, “But a capability in isolation is not enough to produce the coherence premium”. A better strategy is to build strengths which can interact with each other like a system. As a social network website, Facebook knows the importance of photo sharing. Its purchase of Instagram has been considered as one of the best deal in a decade. The majority of its users are young people who are very likely to like play video games. So, Facebook bought most of the most popular web-page or cellphone games, allowing users to interact with connections on Facebook, to deepen the users’ reliance. In its latest and largest acquisition, Facebook bought Whatsapp, the most widely-used instant messenger, to provide a more vivid way of interactions within its community / social kingdom.