HP’s (HPQ) purchase of Autonomy and Google‘s (GOOG) purchase of Motorola Mobility have one important ingredient in common. These are radical adjacency strategies. A radical adjacency is an acquisition that takes the buyer into areas where its management has no current experience. Nor does the buyer company know the sector like an insider.
The challenge of radical adjacencies is so few work.We have to change that.
Failures can be absolute or relative. Google for example has so far failed to create a new $1billion business to go alongside its search business. HP bought Palm, a simply adjacency given the way Apple had already blazed a trail from computing into smartphones. Now HP is on its way out of smartphones. Five years back HP bought Voodoo, the high end games computing platform, to shake up its PC business. Voodoo product lines were discontinued in 2009. HP could well be out of PCs.
Another radical adjacency bit the dust recently when Cisco closed its consumer video business Flip.
The problem is we don’t have a theory or body of practice that teaches executives how to do radical adjacency well. We have a body of practice that says build on core competency.
Meanwhile many companies are swimming in cash, are under pressure to improve their numbers or like Google to prove their management in changing market conditions, and have what looks like a highly logical rather than deeply cultural approach to their businesses.