Integration 2.0 Evolves Beyond Post Merger Integration
We were now in the era of Integration 2.0. While traditional Post Merger Integration focuses on the mechanics of integrating an acquired company after the”deal”, Integration 2.0 is strategic, looking at integration as a continuity – with each phase being the foundation for the next. This starts from the moment a company strategically considers an acquisition, through every acquisition/integration phase, ultimately laying the seeds for the transformation that the acquisition has now made possible.
The unique dimension of Integration 2.0 is that this is takes place in tandem with an emerging world of hyper-connectivity that allows, and even demands, that we leverage the acquisition opportunity, fusing it with the array of next generation outlooks, practices and tools. That is what M&A Integration 2.0 is about.
A grasp of Integration 2.0 is a “must know” for participants in the newly resurgent M&A market. The current level and type of M&A activity is in a phase that was not predicted just one year ago. It has taken several years for those involved in M&A’s to regroup and re-seize their ground. This remarkable re-emergence has several special drivers that characterize it. This edition of the Beyond the Deal Newsletter examines this resurgence, including its special opportunities and challenges. Also in this edition is the first of two installments of a conversation with Francois Gossieaux and Ed Moran, co-authors of the recently published book, The Hyper-Social Organization: Eclipse Your Competition by Leveraging Social Media (wwwfacebook.com/hypersocialorg/). Incorporating the type of outlook discussed in The Hyper-Social Organization significantly enhances your ability to engage employees from both organizations involved in the acquisition in key ways that substantially aid the potentials for unprecedented gains from these major strategic acquisition ventures. Think over what is being presented and get back to us with your questions and ideas.
The M&A Drumbeat Grows Louder and For Good Reason
August saw the busiest month for M&A’s since 2007. Some highlights of the month’s acquisition activity are: HP and Dell fight over 3Par Inc, with HP eventually coming out as the bidding winner for $2.7 billion, Intel’s $1.4 billion acquisition of Infineon Technologies AG, Burger King’s sale to 3G Capital $4 billion, and the largest deal, not yet realized, was BHP Billiton’s bid for Potash Corp for $39 billion. And it is still possible that BHP Billiton could be outbid by interested Chinese companies. In this changing world there are no boundaries and new entrants come to the table at any time and from any place.
A combination of factors has driven this burst of M&A activity. One is that companies have built up massive reserves of cash, reputedly in the neighborhood of $2.3 trillion worldwide, in good part as a result of extensive cost cutting campaigns and a rigid curtailing of development. Companies eventually realized that cash by itself does not generate revenues. Cash can buy back stock, pay larger dividends but it does not, by itself generate new markets. Huge stockpiles of cash burning a hole in corporate pockets, coupled with very low interest rates and the limited growth prospects for existing offerings finally became the recipe for the substantial jump in acquisitions.
A key and related factor is that the cutbacks in internal expenditures and layoffs have hollowed out many company’s capabilities for innovation. R&D efforts were pruned and idea development streams for breakthrough offerings were systematically starved or eliminated. The result is that there has developed a condition with two faces: One is lots of financial resources and the second is little capability for internal organic growth.
How do companies such as HP or Dell seek to resolve this dilemma? They seek out companies that have unique capabilities or resources they don’t have. How else are they going to compete over time in a world where leaps in cutting edge technologies or having access to key resources make the difference between winners and losers?
The contradiction is that companies that have healthier innovation practices are also in the process of renewing themselves on an ongoing fashion (such as IBM, and possibly Dow and Wells Fargo), and as part of that will tend to be more effective at acquisitions and integrations. They are more attuned to the range of assets, both tangible and intangible, and how those assets can be accessed and leveraged for significant gains. These companies are active across the whole array of development. They are engaged in organic growth, acquisitions where it organic growth cannot accomplish specific goals, as well as in strategic alliances, licensing and any other arrangement that will enable achieving strategic goals.
It took about three years for companies to overcome the trauma of the recession and return to actively pursuing acquisitions. There are many more acquisitions in the pipeline since many more firms have similar cash build-up and limited organic growth prospects. At the same time this recovery is still fragile, with the possibility of new downturns. The best policy is to continue to develop the core capabilities of:
- Strategic agility
- Market agility
- Organization building
- People management and
- Knowledge management and learning
These acquisition capabilities are core to the everyday health of the firm and simultaneously provide for the necessary level of readiness when opportunities/conditions for acquisitions present themselves.
A Conversation on The Hyper-Social Organization: Eclipse Your Competition by Leveraging Social Media with Francois Gossieaux and Ed Moran
Most of us are familiar with the phrase, “May you live in interesting times.” That adage looks to be a good description of our current era. Just as we are experiencing unprecedented upheaval and the birth of the “new normal” we are also developing new frameworks and models for thriving in these new conditions.
I had the pleasure of speaking with Francois Gossieaux and Ed Moran, co-authors of their newly published book, HThe Hyper-Social OrganizationH. This work has offers a set of breakthrough understandings on the principles and practices that are necessary to leverage social media in core ways to move beyond your competition. Sections of the conversation will be published in a series of blogs.
There are specific lessons here for what the emergence of social media means for achieving successful integration of major acquisitions as well, particularly that we need to shift our thinking of our acquisition integration processes from “business processes” to thinking of them as “social processes.” This changes the whole nature of how we go about carrying out an integration. The conversation below gives a perspective on what is involved in emerging as a Hyper-Social Organization. The examples discussed may be on other than integrations but they are indicative of the possibilities for how to rapidly achieve this type of transformation. Integrations not only bring two companies together to operate as one: A successful integration also sets the stage and vision for the new company to emerge, how it will operate, what its offerings will be, how they will be accessed by its customers and all of the relationships that allow for this to happen. Hyper-social organization is the wave going forward. Choose to be in the vanguard or to fall behind the curve.
JC: What do you mean when you say that, “The Hyper-Social shift should be based on the realization that your customers can now interact with you and others in the way they always wanted to but couldn’t”?
FG: There is an asymmetry between the information that was available from companies and the information that people could find out about the products those companies offered. We are not hardwired to deal with corporate entities and getting ”corporate speak” sent to us. Yet, from a scalability point of view, for the longest time, this was only way we could get information about products and services that we were buying. Deep down, we trust friends and colleagues and people from our tribes who are giving us information about where to go and not to go. All of a sudden, when social media came out about, what happened is, we now have massive platform for participation that allows the social, for which we humans are hardwired, to scale to the point where it makes a difference again in business. And, all of a sudden we had enough critical mass of other people that we could talk to and get recommendations from, which is something that we much prefer, versus getting information from companies. The other thing to realize is that one of the core human features that we are seeing at work here is that of reciprocity: I will scratch your back, because I know that at some point, someone in the community will scratch my back when I need it. One of the things that we do that is human is being reciprocal. When you have a conversation with another person, it typically is steeped in reciprocity. When you talk to someone at a party, it triggers something in the other person’s head. She will build up on it. That will trigger something – And that is how a conversation builds. If somebody is just spewing information about themselves, you are going to quickly move on to somebody else at that party. The same is true in business environments. We much rather get information in a reciprocal fashion than in a non-reciprocal fashion. That is what companies tend to do with us. We don’t treat our customers in the context of reciprocity. We just push stuff at them. That is why we gravitated back to something we felt more comfortable with, and some we are just more hard-wired to deal with rather than to deal with faceless organizations.
EM: People read review sites. People want information that comes from their tribes. The conventional wisdom a few years back was that people don’t trust other nameless and faceless people on the web. People get past that. If you are looking for a product, you will look at the star ratings and reader views and come to a conclusion that this is something I want to buy or not.
People, when they engage with companies, want to hear what other people are interested in that product or lifestyle are doing and their decision making. When you think about conventional legacy business, that is usually not part of the equation. You have channels. You send information down that channel to your customer or target. That is not the way people in the digital economy think.
We try to communicate to companies that this hyper-social shift is not discretionary. Companies need to make room for the way human beings do commerce – socially.
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