Do Mergers Stifle Innovation?

The recent acquisition of Zipcar by Avis may provide some lessons about how innovative business models can be preserved—or destroyed—when a big fish takes in a little one.

The car-sharing industry received some interesting news last week with the announcement that rental-car giant Avis had purchased Zipcar, the well-known and innovative car-sharing startup.

Reactions have been mixed, to say the least. While some analysts believe Avis’ acquisition will benefit the industry, others see a threat to Zipcar’s innovative business model.

“Those of us that follow the innovation space have always been excited by Zipcar’s progress,” said Saul Kaplan, founder and chief catalyst of Business Innovation Factory. “The question around the acquisition is ‘What will Avis do with it?’ Will they continue to support and enable the new business model, or will they mash it together with their core business model? A lot of us worry that if they do that, all the innovation is going to be lost.”

That has been the trend over the years, Kaplan said. Larger companies have a tendency, when they feel threatened by new, disruptive business models, to absorb the upstart competitor, impose their culture, and squash any opportunity for further innovation.

Associations can learn a thing or two by watching how Avis handles Zipcar after the acquisition.

“The real trick here is that the more disruptive the new business model is, the more likely it is that the leaders of the core try to lean against it and feel threatened by it,” said Kaplan. “It’s really important for top management to run interference on that, to make sure that the new business model has the appropriate autonomy and resources to be able to grow and to thrive.”

This is especially important as associations explore new business models of their own.

“There’s a lot of pressure on the core association [membership-based] business model,” Kaplan said. “And I know many of them are trying to figure out how they can innovate within the current model and explore new models that aren’t necessarily member-based. I think that they can learn … by watching what Avis does with [Zipcar], and whether they’re able to fuel it and enable the new business model.”

In his recent book, The Business Model Innovation Factor: How to Stay Relevant When the World Is Changing, Kaplan suggests organizations can continue to innovate by creating a “sandbox” that sits inside the old business model. There, they can “design, prototype, and test entirely new business models—even those that might disrupt the core model. It’s important that conditions are right in that sandbox to enable whole experiments of entirely new models,” he said.

How is your association supporting innovation in your industry, or in the association space? Share your story in the comments.

(Veer RF)

Rob Stott

By Rob Stott

Rob Stott is a contributing editor for Associations Now. MORE

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