A lot of companies have hurt themselves with acquisition processes that are insufficiently rigorous and data-driven. Too bad they weren't as methodical about "buy" decisions as they are about "build" initiatives, right?
Nope. In fact, according to Anand Sanwal and other adherents of a discipline known as corporate portfolio management, there's ample room for improvement in the way companies invest in organic growth.
CPM zeros in on operating expenses, 25% to 40% of which Sanwal says are discretionary. That's not to say they're unimportant -- just that companies don't think hard enough about how effective their spending on IT, marketing or R&D (to name some major examples) really is. "CPM is a discipline about how to make organic growth more efficient," says Sanwal.
Co-author of a
book called "Optimizing Corporate Portfolio Management," Sanwal was until recently vp of corporate portfolio management and strategic business analysis at American Express Co. These days he's building a consulting firm called
Brilliont and campaigning against what he calls "Investile Dysfunction."
The symptoms of Investile Dysfunction will be familiar to most corporate dealmakers. Personality and relationships play an outsize role in decisions, and accountability is too slight.
A survey by the
Corporate Portfolio Management Association asked members what drove decisions that should have been rejected. Politics, said 55.3% of the respondents. Gamesmanship, said 15.3%. Inertia, said 12.7%. And here's the kicker: "No idea," said 14%.
The CPMA counts some well-known corporate names -- many of them active acquirers who do plenty of build-buy-partner analyses -- among its members, including American Express, Unilever, Novartis AG, Johnson & Johnson, IBM Corp. and many more. -
Kenneth Klee
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Adele Gulfo
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