I made a strong case in a previous post that strategy research should have been asking how strong firms grow cash flows, not deliver profit ratios. I had two main push-backs – 1. is growth relevant in present conditions? – 2. survival is really all that matters.  The first is easily dealt with – stronger cash flow ‘growth’ than rivals can of course imply less decline when everyone is going backwards .. would you rather cash-flows fell by 50% or only 20%? We just need to add the check that this is sustainable – as I have argued with the Starbucks case, slashing costs to sustain immediate cash-flows [and support ROIC] is hardly welcome if it damages future cash flow. I find the second response intriguing – that strategic management is all about survival, and anything extra management may achieve is just a welcome bonus. First, this does not seem to have been the primary concern of CEOs for most firms during reasonable economic conditions [at least after the high infant mortality of start-up!]. Maybe it should have been. But there’s a bigger question as to whether survival should be the aim in any case. It is easy to see situations in which it would be in everyone’s interests for a firm not to survive, but to be acquired – both in positive and negative circumstances.

• In my time practising strategy, we constantly sought out promising smaller businesses to acquire and develop. This was good for their owners, who got good cash returns for their investment – good for customers, who got faster and wider access to the good products and services of those businesses – good for employees, who got more job and career opportunities – good for suppliers, who got a stronger, faster-growing  customer to supply – good for their management, who often had access to bigger jobs or else also left with a nice cash handout. Apart from competitors, I can’t think of any group who suffered. Indeed, many smaller businesses start up with the deliberate intent of being acquired in this way. For a big-scale example of a serial-acquiror who has exploited this phenomenon, it’s worth checking out Cisco – here’s an interview with their head of business development and just one case study on the story .. you will find a ton more case studies at European Case Clearing House.
• It’s not even clear that death necessarily does harm when it’s the final outcome of business failure. If death = acquisition by another company, investors can get value that would otherwise have disappeared, customers can get continued provision of products and services that may otherwise have discontinued, suppliers get a continuing sales opportunity, and employees get the chance of a continued job rather than redundancy.

Unfortunately, even when others would benefit hugely from a business being absorbed by another, one small group likely to suffer unfortunately dominates whether it happens or not – management themselves. So I find myself wondering how many firms are currently strugging to survive when it would be best if management spent their time seeking a buyer instead. The only form of survival I can see that might be a reasonable aim for strategic management is the avoidance of bankruptcy – but that’s the extreme case, and responsible management should be able to find better solutions in almost all cases, well before that becomes unavoidable.