Pull yourselves together

Nothing helps a CEO sleep soundly at night better than knowing they have a good growth story to tell. But it’s no longer a straight choice between organic expansion and full-on merger or acquisition. Now there is a middle way: a strategic alliance or a joint venture (JV), both of which are increasingly important in bringing new products and innovations to new markets. What’s more, often they are doing so more effectively than either of the established – but potentially capital intensive and time consuming – routes.

What’s driving this emerging collaborative agenda? For once it’s not just about slick new technology, although that can certainly play a part. Rather, says John Kennedy, president of Europe, Turkey and India for global drinks giant Diageo, it’s a question of using alliances and JVs as part of a wider growth strategy, to bring out the strengths of both parties and create a whole that is more than the sum of its parts.

“If you look at our industry, innovation is a big growth engine,” he says. “We’re living through a time when the pace of consumer change is greater than it’s ever been, and the level of growth we’re seeing across new brands is accelerating.

“Our mindset has always been that we should be doing a lot of work ourselves, and also that we should be partnering with the most innovative and interesting people in the industry. So we do scale activity – JVs and M&As [mergers and acquisitions] with existing big businesses. But we are also looking at who’s coming up on the horizon with something that could be great five or ten years down the road.”

It’s a trend that business leaders in the UK are particularly alive to, as the results of the latest KPMG CEO Outlook Survey demonstrate. No less than 42 per cent of UK CEOs rank strategic alliances as their most important growth strategy, compared with 34 per cent of global CEOs.

Getting a good fit is vital to a successful partnership, says Kennedy. Diageo has a distinguished portfolio of major brands, from Smirnoff Vodka and Captain Morgan Rum to Bailey’s, many of which started life as the brainchild of a driven founder. “We’re trying to develop the next great brands for a new generation, and we really believe in the founder model,” he explains. “If you look at our top ten brands, they are almost all named after the founder – Charles Tanqueray, Johnnie Walker, Arthur Guinness. The owner is critical, so it’s important to figure out how we can help them succeed rather than just trying to spin their great idea into the Diageo mould.”

To that end, Diageo has formalised the process by setting up its own corporate venturing arm, Distill Ventures, to invest in bringing some of the most promising new drinks brands and entrepreneurs to a wider audience of consumers. Since 2015 when it was established, Distill Ventures has invested “a significant amount of money” in more than 15 companies from all over the world, including non-alcoholic spirit brand Seedlip and US single malt whisky Westward.

It’s a model many others are looking to follow – 69 per cent of UK CEOs in the Outlook Survey said they are planning to undertake corporate venturing in the next three years. The key, says Kennedy, is to think not only about how a deal might benefit you as an investor, but also about what the invested company will stand to gain: “Is this someone with something interesting for the market? Would it help them, not just financially, to lean into your company to accelerate their journey? We have found it can be a very happy marriage because they bring something new and we bring a level of capability and resource that entrepreneurs tend to appreciate.”

When it works, venturing is a two way street for all involved. “It has a really positive impact on Diageo’s culture,” says Kennedy. “We inject some support into these businesses, and they inject an agile entrepreneurial way of working back into the culture. Everybody wants to work with these people.”

Lessons in business life

Starting out
Worry less about yourself and more about the business. I confess I spent a lot of time in my early career thinking things like, “Did I look good? Did I make the right presentation, and will it get me a promotion?” It uses a lot of energy. Instead, focus on what the organisation is trying to achieve, and how you can help.

Growing up
Try to do your boss’s job as well as your own. Not in an intrusive way; try to help them succeed. Mentally stand in their shoes, see the issues and opportunities they see, and how you can contribute. Because that’s the orientation and skillset of people at the next level – if you want a bigger job, start doing it now, don’t wait until they give it to you. 

Staying up
Keep growing. Developing your skills, awareness and experience is the key to sustained success. Complacency is the death knell for an executive. If you ever get to thinking, “You know what? I’m pretty good, I could do this in my sleep,” you’re in trouble because the world is changing so fast. You also need to look after yourself physically and mentally to consistently perform at a high level. 

For more information, visit
kpmg.co.uk/ceooutlook.