Should You Build an Adjacent Business?
Does your growth strategy involve investing in your core business, or are you better off building a new business in an adjacent market? This is a common question for business builders.
We recently spoke with a growth company CEO who was facing this issue. Celina Rayonne Caesar-Chavannes is the CEO of a successful Canadian pharmaceutical research firm called ReSolve Research Solutions. She is considering the acquisition of a professional care facility, which could be a basis for research studies. Here's a summary of our discussion.
What is the strategic benefit from starting the new business? How would the new business benefit from your core business, and vice versa?
The new business, the clinic, will benefit from ReSolve's experience and brand recognition within the pharmaceutical industry. Sponsors (pharmaceutical companies) choose clinics to conduct research, often based on expertise. Although our clinic will be new, ReSolve has managed clinical research for a variety of physicians and clinics over the years; as such, pharma will trust our skill and expertise in a new enterprise.
As well, a "research intensive medical clinic" will allow our patients access to the most novel and innovative forms of treatment and care, which will ultimately result in better outputs within a person/patient-centered culture. More studies in our clinic's pipeline will result in more revenue.
A second benefit is that this new model allows for the company to grow, and for me to transition to a new CEO. Currently ReSolve is not sustainable if I were to leave, get sick, etc. ReSolve Research Solutions has passed the critical threshold for transition from entrepreneurial enterprise to a structured company. This model will allow for that structure and ensure that we are ready to scale.
So there is a strategic component as well as a leadership component. What is driving your personal need to build this business?
I wanted to have an internationally recognized research firm, with international clinics. I want to stay true to that vision and plan for the company. It needs to grow. I do not have a choice. The current landscape of the pharmaceutical industry dictates that pharmaceutical companies will choose networks to conduct studies that are able to recruit patients quickly and efficiently. This new model allows this to happen. The old model will drive the company into extinction within two to five years.
We think Celina has a great insight into her market and is asking the exact right questions. But, as she well knows, running a clinic is an entirely different business than running a research firm. We advised her to explore a number of options around how she could take her vision and make it a commercial success.
Building a clinic is only one investment choice, and there are others that might still profitably achieve her vision. If she does build the clinic, thinking about a partnership or affiliation may be viable options to an outright acquisition. We will stay tuned to see what she decides.
Are you facing a strategic question in your business about whether to enter a new adjacent market? Send us your thoughts and questions at firstname.lastname@example.org.
KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale
Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.