I was recently reading Playing to Win by A.G. Lafley and Roger Martin and realized that acquisitions and new initiatives only work when they build on your company’s existing skills. This insight sheds light on why some many acquisitions or extensions in the game industry fail. In order to win (to use the authors’ language), or what I would describe as building sustainable competitive advantage, the book shows you need to build systems that support winning. If an acquisition or new initiative requires different systems, however, being part of a company that wins in its space a different way can doom your efforts. This insight is crucial when considering an acquisition (either as a buyer or seller) or pursuing a new business unit.

You need competitive advantage

One of the themes of this blog, and my conversations with almost everyone, is that you need to have unique, sustainable competitive advantages if you are going to succeed. There are a lot of smart people, there are a lot of people who have raised investment, and if you think factors like these are going to make your company a success you probably need to start thinking about the next company you want to start because you will fail. Very rarely does a strategy of trying to be smarter than your competitor actually work. It is an arrogance that I have seen lead to the waste of millions of dollars of investment and years of sweat equity. Instead, great businesses are built by creating processes, technologies and other unique and non-replicable systems that make your product or services more valuable to customers (or cheaper) than your competitors. Continue reading →