Leaders of large incumbent companies face a dilemma. Their companies' size gives them great market power, but it came at the expense of their original Founder’s Mentality^®. Can they rediscover their original mission, as well as the voices of the customer and the front line, before the burdens of size and complexity drag them down?

Figure 1

Incumbents can regain their Founder's Mentality by joining forces with entrepreneurial companies

Leaders of insurgents, meanwhile, want to benefit from the same global scale and resources as incumbents while avoiding the so-called best practices that lead the incumbents astray.

For both, the key is to rediscover—or maintain—the Repeatable Models® that were at the heart of their successes. In our book Repeatability, we give examples of companies—we call them Great Repeatable Models®—that have done exactly that.

But companies don't have to go it alone. Insurgents and incumbents are increasingly discovering a third path that allows them to enjoy the benefits of scale and scope while retaining their Founder’s Mentality. It is, in fact, a variation on a familiar model: the joint venture or formation of a new company.

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About the Founder's Mentality

The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth.

Acquisitions typically involve one of two approaches:

• Buy or sell outright, and merge completely and fast. This school of thought instructs buyers to acquire new companies and gobble them up, integrating them completely into existing operations while combining brands, systems and so on.
• Buy minority positions, let the targets operate independently, do minimum integration and collect a share of revenue as the dividend. This approach allows sellers to maintain independence but also benefit from the networks they've joined. Buyers gain new revenues and new flags on their global maps, but don’t have to worry too much about the new entities.

The third path is much closer to the second, but with a twist. Incumbents are increasingly looking to insurgents as partners in global growth. The partnership helps defend the insurgent’s independence while also influencing the incumbent. The incumbent benefits from the insurgent’s Founders Mentality, as leaders of the smaller partner are invited to key board meetings to “tell it like it is.” The insurgent benefits enormously from the global scale of its larger partner, but retains the ability to opt in or out of certain capabilities depending on whether they serve the company's local requirements.

We increasingly observe such partnerships as a component of both market and product strategies. Incumbents view this as a necessary first step toward a broader rediscovery of their Founder’s Mentality. One CEO told us, “We discovered that a lot of our JV partners in emerging markets had better cultures than we did. Previously, we had taken them over and ‘made them us.’ But then I thought, what if we keep them independent, but ask them to serve on our management board? This would be a tremendous mechanism to get the voice of the founder back in our debates.”

In fact, when we ask incumbent companies that are pursuing this third path to describe the single greatest benefit they get from their smaller partners, the answers are remarkably similar. As one executive in charge of a large incumbent's international operations said, “In conversations with the heads of these companies, one theme consistently emerges: They show their front line what great is, and then they work hard to get them to commit to being great every day.”

Inspiring as that may be, that won’t transform a large incumbent overnight. Nor will the third-path approach solve all of an insurgent's scale and scope problems. But the new company they establish just might help the incumbent rediscover what its company did when it was at its greatest. And then the next step is to figure out how to get the organization to commit to being great every day.

Related

Path One: From Insurgent to Great Repeatable Model

Companies can achieve scale without losing their "founder’s mentality."

Founder's Mentality^®, Great Repeatable Models^® and Repeatable Models^® are registered trademarks of Bain & Company, Inc.