Business book review: Build, Borrow or Buy

As the authors put it in the opening line of this excellent book, “There is something broken in the way many businesses obtain the resources they need to grow.” Their argument is that although most companies are good at identifying what resources they need in order to grow, they are much less expert in identifying what to do about it – in other words making an intelligent choice over whether to build them, borrow them or buy them. Whether you term it as “bridging the resource gap” or developing a “strong selection capability” as the authors do, it’s clearly an essential part of any businesses strategy, and one which this book intelligently and instructively examines. The core message is that “... firms that learn to select the right pathways to obtain new resources gain competitive advantages.” As you’d expect from a book just published, the case studies reach right up to the present day, including the takeover of the Cambridge-based Autonomy by HP and examples from the smartphone industry. The latter is used as an example of over-estimating your internal capabilities (The “Build” part). “...both Nokia and Research in Motion have struggled to respond to advances in consumer smartphones. Both companies overvalued the relevance of their existing internal resources in responding to advances from Apple, Google, HTC and Samsung.” The authors suggest a way of deciding what route to take by asking simple questions: Are your internal resources relevant? Are the targeted resources tradable? How close do you need to be with your resource partner? Can you integrate the target firm?  The book illustrates these points with a wealth of well known and less well known cases where companies got it badly wrong, including Schering-Plough, Toys 'R' Us, the Indian automotive firm Hero, and BP’s beleaguered Russian ventures. Case studies from Cisco, Johnson & Johnson, and GE in the USA, Danone in Europe, Massmart and MTN in Africa, Tata in India, Banco Itaú in Brazil, Coca-Cola FEMSA in Latin America, are more successful examples. The authors' argument is that there is no one right way of growing, and that firms at different times, and for different reasons, should pursue whatever is most suitable, using their framework to help make the right decisions. Nevertheless, many firms rely on only one model for growing, and suffer accordingly. The authors maintain that research shows that firms using a robust ‘build-borrow-buy’ framework to procure new resources are 46 per cent more likely to survive over a five-year period than those using only alliances, 26 per cent more likely than those using only M&A, and 12 percent more likely than those using only internal development. Personally I found the chapters on “When to borrow via alliance” and “When to buy: acquisition versus alternatives” fascinating, as was the example of Johnson & Johnson’s successful development of the cardiac stent, characterised here as “a striking example of melding resource acquisition, internal development, and realignment.” I’d say this book is essential reading for anyone involved in the growth of their company, and in the end, that’s all of us. Build, Borrow or Buy is published by Harvard Business Review Press,  £21.99, ISBN 9781422143711. Visit build-borrow-buy.com, hbr.org. Tom Otley