Monday, February 2, 2009

Driving Innovation Through Acquisition: Watching Unilever

Companies looking to expand into new areas typically seek to acquire an existing business to give them a head. This can be especially logical when the new area is a strategic fit with corporate strategy and involves a rapidly growing area such as health care, where time is of the essence and rapid momentum is often needed to compete. But there are numerous risks in this path, including the risk that the new company won't have a culture that fits effectively with the acquiring company, that the distribution system or other aspects of the company don't fit with the capabilities of the acquirer, and that the technology and brand is not as effective or as protected as believed.

One case study worth watching is that of Unilever's acquisition of TIGI, owner of the Toni & Guy hair products line in Europe. Unilever has been shedding companies in many other areas, and this acquisition shows its intent to grow rapidly in the haircare area. The TimesOnline article for this story provides some interesting insights into Unilever's strategy. It will be interesting to see if they succeed or end up withdrawing from this area in the next three years, or require further costly acquisitions to gain momentum.

Growth is easy to drive by acquisition, but what about innovation? Their success here will require continued innovation or they will quickly be outpaced by others. Will Unilever develop the skills and personnel to drive innovation success in haircare? Is the acquisition designed to continue the innovations behind TIGI? We'll know in the near future....

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