Alliances, partnerships, acquisitions, mergers, and joint ventures are no longer exceptions in most businesses–they are part of the core strategy. As companies look to external partners for acquiring even strategic resources and capabilities, they need a practical road map for ensuring these relationships generate value. What combinations of resources do we need? How do we manage them over time? What profits will we earn? Will they justify our investments?
In his new book, Benjamin Gomes-Casseres shares insight from decades of consulting and academic research on how companies create new value by “remixing” resources with other companies. Organized around three laws, Remix Strategy explains how companies can gain the most from their business combinations
The following is an excerpt from Remix Strategy.
The Three Laws of Business Combinations
Successful business combinations—those that turn out to be a profitable use of resources—all follow the three laws. These laws are not formulated as commandments or orders, but are necessary conditions for success. All business combinations must have the potential to create joint value, must be governed to realize this value, and must share value in a way that provides a reward to each party’s investment. Each laws points to a set of practical implications:
First law
The value created by the combination should exceed the total value that would be generated by the players acting alone. The first law asks these practical questions: How much more value can we create in the market together? What specific resources must we combine to create this value?
Second law
The combination must be designed and managed to realize this joint value. Which partners and structures fit this goal best? How do we manage to risk and uncertainty inherent in such combinations?
Third law
Each participant must earn a return sufficient to justify the investment. How do we divide the joint value created? How will value be shared over time?
I’ve arrived at the three laws of business combinations through my thirty year of consulting, teaching, and academic research on partnership strategy. Taken together, the laws provide a powerful, systematic approach for creating and capturing value from your partnerships. The management tools in this book help you apply the laws to specific decision—from when to form a combination, to how to manage collaboration, to how to ensure that you get a return on your efforts.
Other books explain how to structure deals or how to navigate complexities of organization and culture. This book provides core principles and a practical framework for creating and capturing value, no matter the path chosen. Order your copy today from Amazon. Or leave a comment below for a chance to win a copy.
About The Author
Benjamin Gomes-Casseres is an expert in alliance strategy and a professor at the International Business School, Brandeis University. He has been studying, teaching, and consulting on business combinations for thirty years. He is the author of two books, The Alliance Revolution and Mastering Alliance Strategy, and of articles, cases, and videos on how companies create value from external resources. To learn more about the ideas and tools in this book, visit remixstrategy.com.
Reprinted by permission of Harvard Business Review Press. Excerpted from Remix Strategy: The Three Laws of Business Combinations. Copyright 2015. Harvard Business School Publishing Corporation. All rights reserved.
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Great article on how each player must be equally responsible for his/her share of performance and return.