It's A Who-Can-Disrupt-First Game: How leading Brands Acquire to Innovate

If you’re looking to acquire-to-innovate, we can help you center your strategy around preserving the startup-culture that will help you reach new markets.

In 2013, startup-brand Plum, then the fastest growing organic food brand, struggled to find the resources to reach their mission: to give the best food to as many kids as possible. So, when Campbell offered to acquire the startup, Plum agreed but vowed not to lose its soul in the process. Meanwhile, Campbell wanted to strengthen their core business by tapping into Plum’s innovative culture and products and, thereby, appeal to newer generations.

The good news was that both brands’ goals had something in common: for Plum to help Campbell’s meet its acquisition goals, it had to keep its soul. As an organic brand, its values-driven company culture, once instilled into its products, was key to attracting new generations.

It’s a Who-Can-Disrupt-First Game

Since Plum’s acquisition, other Fortune 500 brands have also acquired smaller brands to stay relevant before up-and-coming generations.

Hershey entered this innovation game by purchasing startup brands like Brookside Foods, SoFit, Krave Jerkey, BarkThins, and Amplify. Says Hershey CEO Michele Buck, “Hershey’s snack mix and meat snacks products with Amplify’s Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands will allow us to capture more consumer snacking occasions…We’re always looking for the Millennial generation and what else can we buy that appeals to these consumers.”

These brands know big-business best practices can produce improvements, but in a constant-disruption world, they have to disrupt from within before a competitor beats them to the punch.

The secret: protect your acquired startup’s innovative culture.

The good (and challenging) news is that acquired-startups rarely share the cultures of big-business brands. So brands like Hershey and Campbell must keep the best practices that made them industry leaders and incorporate the new brand into the parent company, all while maintaining the innovative startup culture. A challenge indeed!   

The answer, according to Harvard Business Review, lies in the secret behind what is called ambidextrous organizations. Their study revealed that 90% of brands that put ambidextrous organizations — internal, but standalone, organizations — in place reach their innovation goals. This strategy, they vow, is a proven means of forward-thinking brands (like yours!) to innovate without nixing their big-business best practices.

Even when brands like Campbell acquire — instead of create — such standalone organizations, the strategy remains the same. When Campbell allowed Plum to operate separately, for example, Campbell still allowed them to tap into the big-business capabilities, consumer insights, and the supply chain needed to accelerate their startup innovation. In turn, Plum products and values helped Campbell reach new generations.

It’s Easier Said Than Done.

Creating culture-protective barriers like Hershey and Campbell may seem simple, but brands like USA Today prove it’s easier said than done.

When USAToday.com became a standalone organization, the print unit didn’t see USAToday.com as an innovation partner but as competition. In response, USA Today’s executive team cut off the .com unit from the parent-company resources it needed to thrive on its own. For a time at least, USAToday.com’s innovation stopped, leaving few profits to show for an enormous investment.

When acquiring startups, many organizations run into roadblocks like USA Today. We have found that there are a handful of acquire-to-innovate plan elements that separate the success stories from the horror ones. Let’s look at them:


1. Define what needs preserving. Before acquisition, find out what causes directly shape your acquired-startup’s innovative offerings and develop a plan to preserve them.

When Campbell offered to acquire Plum, Plum’s leadership first defined the cultural elements that contributed to Plum’s so-called soul. Their soul, as defined in their mission, was to do anything necessary to both sell healthy foods and tackle infant hunger and malnutrition. To preserve these values and the means to reach them, Plum founder Neil Grimmer wrote them into Plum’s post-acquisition bylaws, and Campbell committed to upholding them.

2. Put “standalone” into action. Build or preserve a separate startup-operations location.

Clearly, USA Today has turned around its early USAToday.com stagnation. To do so, they created shared goals across their television, online, and print units while keeping them as separate brands in separate facilities.

Hershey’s SoFit brand also operated in their pre-acquisition location and before regional markets. At the same time, Hershey pumped big-business resources into it and allowed SoFit’s original team to remain intact and in charge. This meant status-quo policies were kept at bay and the responsible-risk-taking startup culture could persevere.


3. Allow distinct leadership and staffing models. To preserve a startup culture, be sure not to dismiss the people who make it work, or the staffing models that attract and retain them.

Grimm was so concerned that Campbell’s corporate staffing model would stall future innovation that he permanently documented the process used for brainstorming and creating new products as the means for structuring Plum’s teams. Grimm said the goal was to future-proof Plum’s culture.  


4. Insulate your startup’s culture from big-business policies and processes. Don’t overburden startup decision-making processes with big-business key performance indicators (KPI), established workflows, or documented processes. If you do, you’ll tie the hands of team members who seek to act as necessary at the moment inspiration hits.

In its continued pursuit to jumpstart stagnate profits, USAToday.com initially built its own staffing model marked by a younger generation. In turn, the team created the collaborative, fast-paced, and agile culture needed to deliver relevant and timely content to an always-on Internet-reader base. For this team, quantity was a KPI they had to meet.

USA Today’s print unit, in contrast, remained unchanged. Reporters worked independently and invested time into in-depth story coverage for an audience seeking a more informative read. Here, long-form-content delivery was a more important KPI to grow and retain readership.

Notice the two staffing models drove each team to deliver on different KPIs, ones that made them relevant and profitable before their own audiences.

5. Reward acquire-to-innovate parent-company champions. Your acquired company can suffer without adequate resources from the new parent company. To boost parent-company executive buy-in and resource support (while also future-proofing your parent-brand mission), put complementary cross-brand KPIs in place that support your startup. Then, put incentives in place to reward your parent-company employees when they boost those KPIs.

When USA Today’s print-newspaper reporters road blocked USAToday.com’s success, Tom Curley (then USA Today’s president and publisher) promoted a new vision: “It’s a new world, and we need to be ready to move into it.” And, his parading around as a Cyberpunk caricature with blue hair ensured no team member overlooked it. He also dismissed parent-company team members who refused to contribute to USAToday.com’s success. Lastly, new leadership came with shiny new incentives to support all units.

6. Put an unbiased transition leader in place. Make room for unbiased transition management, one that is objective and not tied to big-business norms. To do so, you may need to bring in a new stakeholder or even hire an acquisition-management firm.

USA Today’s early missteps paints a vivid, albeit scary, picture of what can happen when core brand stakeholders view acquired-startup disruption as a threat. For the print paper, Curley had to dismiss talented contributors to USA Today’s industry-lead standing. To avoid this, unbiased transition management can develop rewards and buy-in for all units to work together toward shared successes.

It’s Your Turn.

USA Today’s print and digital-subscription combo now serves over 2 million daily readers and tops the list of today’s most widely read news publications. Together, Hershey and Amplify look forward to projected $20M 2 year synergies. And, Plum enjoys a compound-annual-growth rate that’s 300% that of their competitors combined. As a result, Campbell profits from a 91% increase in Amplify sale rates since acquisition.

If you need help centering your acquisition strategy around innovation, we’re here to walk alongside you, helping you to grow your investment and your competitive advantage in a constant-disruption world.

 

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