Quote of the Month:
“Watch the turtle. He only moves forward when he sticks his neck out.”
Lew Gerstner
In this Newsletter
This first article in this Newsletter is a set of observations from my November trip to
Shenzhen, China for a Knowledge Cities Summit and to neighboring
Hong Kong. China is engaged in a necessary dynamic to generate
enough growth to match its enormous and rapidly expanding
population. China is not just growing through low cost production
and simply bulking up. It is making a variety of experiments in
approach, design and technology to become a more knowledge-based country. This inevitably extends to making cross-border acquisitions geared to gain access to expertise and resources but also significant entry into global markets. Some of these major acquisition forays were rebuffed, more so on a political basis than an economic one.
Over time those barriers will lessen, but the tough
challenges of how well the various types of Chinese organizations are
prepared to follow up with effective integrations will remain. Cultural
issues are paramount here (not understating all of
the other integration challenges common to any integration) and we
will continue to explore them.
The second article is a conversation with Euan Semple, a leading
advisor on the design and implementation of social media tools in
business.
Our conversation expands on social media themes in the September discussion with Jessica Lipnack. The focus here is on what is practically involved in incorporating social media tools so that new combining organizations can use them to markedly enhance the flow of personal and organizational knowledge during the course of integrating two, often very different, firms. Enabling critical knowledge flow is essential to building the capabilities in the newly combined organization. Using social media tools can dramatically reduce frictions and uncertainties have their own high costs and drag effect, while yielding better informed decisions, speeding the rate of integration processes and raising the quality of the integration.
In This Issue:
• Comments on the trip to Shenzhen China and
Hong Kong: The need to understand
underpinnings of Chinese Culture in emerging
Cross Border Acquisitions
• A Conversation with Euan Semple on Uses of
Social Media in Integrations
Visit to Shenzhen, China and Hong Kong: What Does This Enormous Growth Mean for Cross-Border Acquisitions?
The trip to Shenzhen, China in November, 2009 to participate in the
2nd Knowledge Cities Summit and neighboring Hong Kong was more
that worthwhile. Shenzhen had been a village of 30,000 people prior
to 1980 and is now a city region of 10,000,000 people. The
relevance to this newsletter is that Chinese metropolitan regions are
scrambling to become knowledge based and international in scope.
As that happens there will be a significant growth in the number of
cross-border M&A’s that take place.
China’s historic emphasis on being the low cost producer is
decreasing. China is becoming one of the countries with strong efforts to transformation into being knowledge-based, with its cities
in the vanguard of that effort. It is not entirely alone. Other
countries, such as Finland, are also taking significant steps to
become knowledge based as well.
As much as Chinese cities have had explosive growth in the last thirty years, the next decade will be
even more telling. Shenzhen is in discussions with Hong Kong to
develop joint metropolitan economic zone on their common border,
with the goal that the overall region will surpass London, Paris,
Chicago and Los Angeles economically by 2020. These plans not only
involve domestic companies but also include recruiting major
international firms as well.
The opportunity for breakthroughs in technology and types of offerings will be remarkable, as will be the
breakthroughs in new types of organizational arrangements.
No doubt this rapid expansion will involve acquisitions, strategic
alliances, partnering and the like. Yet little attention has yet to be
paid to the necessary conditions, processes practices, and values that
will be the basis for success in these ventures.
At the Summit, colleague Artie Ng (of The Hong Kong Polytechnic
University) and I gave a session on the underappreciated dimension
of how ancient Chinese Wisdom is incorporated into the management
philosophies that guide actions of Chinese firms, including how they
will carry out cross border acquisitions. The attendees at our session
were quite struck by our unprecedented effort to take into account
dominant Chinese cultural values, versus Western values, in an M&A
integration setting. One of our next steps is to develop case studies
into the different Chinese businesses types (state owned, family
owned and emerging entrepreneurial firms) tend to be culturally
influenced in carrying out M&A’s and their integrations.
Yes, culture does matter, and understanding the interplay between
Chinese and Western values in acquisitions and integrations is
fundamental to good outcomes.
Conversation with Euan Semple on Using Social Media Tools to Accelerate Integrations
How Do You Start Using Social Media Tools in An
Acquisition Setting?
JC: How can an acquiring company use its social media set up to
bring the core capabilities of the acquired company to the surface?
ES: In many instances people are rushing into social media tools. It
takes time to build a culture where people feel comfortable enough to talk meaningfully about the big issues that would be relevant to them
in a larger situation. People need to have established trust with each
other and be comfortable using what is invariably quite an open
system to talk about these sorts of things. Companies also need to
have established a scale of use within the organization that makes it
representative. If a company were to deploy these social tools in a
rush before anticipating a merger, it would risk having a full subset
of your organization not getting to important issues. By doing it they
could wind up alienating significant parts of the population who have
not yet become part of that network.
JC: Should a company start with some form of pilot program?
ES: Most people who have been successful with using these tools
have started small and implemented them incrementally. It is better
if people discover their advocates and extend by word of mouth from
people who have had some success and have benefited from using
the tools, who can pass on that enthusiasm to others. I have yet to
see instances where a successful social media initiative has come
through central senior dictate. People suddenly stop opening up.
JC: Does the company have to find a receptive population and
perhaps a champion or two?
ES: Definitely. In the early days you are more likely to be
successful by finding out about individuals who are already working
these ways on the web outside the organization, or are interested in
doing so. You need to find the pioneer population or people with
enough pain. If there is enough of a problem, people are willing to
consider something radically new. That is another possibility.
Good Questions is the Answer
JC: What would a social media approach for an
acquisition/integration look like and how could it work?
ES: It is not only possible but advisable to influence the
conversations that take place in these spaces. In my experience,
you do that mostly by asking good questions. If there is a situation
that is about to arise, such as a merger, you begin to ask questions
about how people feel about that. Ask them what their anticipated
reactions will be. Ask them how best to make it work. Part of the
shift involved in working in this way is that managers, rather than
making pronouncements or deciding things in isolation, have the
opportunity to manage by being interested, by focusing people to
change some things that matter and helping to influence the
conversations by asking really good questions.
If you have a population that is used to doing this, you could come in quite hard with some targeted focused questions. If people are less
comfortable and experienced then you probably have to start more
gently and a bit more generally.
One of the issues that needs to be dealt with is that you end up with
a mixed population, with early adopters who get quite confident and
get familiar with each other and adopt the jargon quickly. That can
be quite off putting to “newbies” as they are known. An effort has to
be made collectively to go out of your way to encourage, welcome
and engage those who are less competent. It would be helpful to
have a mentoring capability. We had an unofficial mentoring process
that operated effectively at the BBC where people would go out of
their way to make it easier for new people coming in.
Don’t Do This Unless You Take Your People Seriously
JC: What would impede or undermine the effectiveness of using
social media in an acquisition setting?
ES: The biggest risk is if people felt it wasn’t being taken seriously.
If using social media tools is done in a token sort of way, which
happens quite a lot, people begin to notice that they are encouraged
to say what they think and are given the impression that the process
will be a collaborative one but actually the real decisions and real
conversations are taking place in a conventional way behind closed
doors. Obviously there is a degree that will have to be the case.
Nobody is naive about that.
The degree to which the process is seen as engaging and
collaborative will determine its success. A lot of the reasons that
mergers and acquisitions fail is because nobody took the cultural
issues seriously enough. This isn’t just nice to have, or some
idealistic thing of having everyone involved in every decision. It is
more to do with that if you want people to become engaged in the
reasons for the change and understand, they have to be allowed to
talk about it.
Managers talk about developing a culture and managing community.
It is people who establish culture or engage communally. Many, if
not most of the tools we have available to us to manage organizations have been pretty blunt instruments in comparison to
the subtleties that are involved. The prospect of social tools is to be
able to be much more congruent and sophisticated about how you
engage people in those kinds of cultural environments.
Most of us inhabit multiple communities or tribes. That is especially
true in expert environments involving high level research like
pharmaceuticals. People have at least as much connection with other
professionals at the same level in other organizations as they do with
people in different disciplines and at different levels within their organization.
In the past managers have tried to tidy up the environment, make it
more organized. Now it is beginning to be understood that it is
necessary to have the messiness that the social tools engender. You
begin to realize that you need to know what is happening as well as
what is interesting and to see those as expressions of patterns. You
need good tools and good people to discover both weaker and
stronger signals in the mess so that you then become more informed
as to what is going on.
JC: What are some compatible organizational structures that
support that?
ES: A lot of what gets in the way of any organizations is politics and
power and simply having these tools does not remove that. The
playing field may have changed but many of the rules are the same.
However a “small pieces loosely” joined approach seems to make the
most sense. Instead of forming large bureaucratic divisions have lots
of relatively autonomous teams communicating all the time.
What Is Needed to Make This Happen
JC: What values, technologies, software, etc. need to be in place
(that is, the knowledge ecology) so that people are comfortable in
using social media and will use it?
ES: Use whatever works. I’ve watched people pitch the “killer app”
or build integrated, shiny knowledge tools but they are have not as
successful as they should have been. The churn rate of the new
technology is quite high. The latest things are coming along quite
fast, much faster than your IT department is used to dealing with.
There are a whole host of new issues in managing that, making
things rational enough to get value out of them without getting stuck
with them once they become old. Through experience, the
predictability of which tools will work for which people is not clear.
We had a situation at the BBC where you we had one technology that
initially did not click but suddenly six months later it suddenly began
to take off.
In going back to the ecology idea, the thing is to have a variety of
tools, try them in different circumstances and see which takes and
which develop faster and better. Rather than trying to upfront plan
everything that you are going to do. It is made easier by the fact
that these tools are relatively cheap. There is also the possibility for
people to do things outside their firewall to begin with. Part of what
is behind the emergence of cloud technology is that this technology
makes it possible to do things without jumping through all of the
hoops currently necessary in our constrained IT environment. Having a range of options that are relatively low cost enables you to
migrate without too much pain. That kind of approach is more likely
to succeed.
Very often you don’t know what your needs are until you start using
the tools. One of the challenges of SharePoint is that you need to
have an idea of what you want before you start building it. Most
people don’t have a clue about that until some way down the road.
A characteristic of this environment is a high degree of perceived
ownership by the user.
If people are going to engage in social tools they have to feel to
some extent that they are in control of their tools.
JC: What kind of time, effort and other kinds of resources would be
required to develop and implement such a system?
ES: There are lots of different ways to approach this. Over
engineering and over managing will make these kinds of things less
successful. The premise from the outset should be not to spend
more than you have to on them.
You do need to discuss ownership before you start, though. The system can and should to a high
degree become self-managing and self-regulating so you don’t have
to assign lots of conventional administering to the effort. On the
other hand, it does take an effort to grow the environment. Most of
the time and effort needs to be spent explaining, enthusing and
drawing people into the environment.
JC: What people need to be involved in this effort? Do you need: A
core group to frame the effort, an interface group, some middle
managers and everybody else?
ES: These efforts need people who are themselves enthusiastic and
engaged. It is not going to work if you have picked someone just
because he or she has the right job title from HR. We are talking
about quite a big shift in how people work and perceive their
organizations. That’s not going to happen unless there is a degree of
energy and commitment behind it.
People have to see this as a pathway to get somewhere. One, they
have a passion for it and second, it is a vehicle for getting
somewhere in their lives. It is not just another system that people
have to learn. It is a social-technical phenomenon.
JC: What kind of resources does an organization need to make this
work?
ES: The technology can be relatively off the shelf and customized as needed with a degree of local expertise. The core group can be three
or four people who guide and develop it. These people manage
networks of other people who take on different degrees of
responsibility themselves. In real terms, it would take a fair amount
of people’s time and energy, but in terms of dedicated jobs it
shouldn’t be too much.
The BBC, when I was there, had about 25,000 staff and our effort in
some way reached almost all of them. That was implemented by my
team of two to three people and the technical side, pretty much one
person. Once we got to more formal management we had about ten
people involved, but this was part of their other jobs. The actual
initiative was carried out by three or four of us. We spent about
$400 on the original software and I guess over our six years spent a
total of about $40,000 on a total of five systems and the hardware
they ran on.
The storage effort does not require huge amount of data. It is
mostly plain text. The minimum requirement is you don’t need to
use new technology at all. You can just use Facebook, which costs
nothing.
JC: Is this more an intelligence factor than a finance factor?
ES: Making the right judgments about what you spend and where
and what you get back for it matters more than anything else.
JC: What is the possible configuration of ingredients that will yield
exceptional outcomes?
ES: The whole thing is based on the hyperlink. It is the ability to
point to things or people or conversations or information that is
useful. I have seen organizations that have spent lots of money on
knowledge repositories and document storage which can’t be linked
to readily. They have a proprietary system. That means you can’t
point to the instance of the information you want to get at.
The main point is to make it as standards-based as possible and to
avoid locking stuff up in over-engineered technology. These tools
are proliferating on the Internet and grew without everybody having
to agree to use the same software, because they are using standard
protocols and whatever. In a way this is the antithesis of the
environment that Microsoft builds which tends to lock people into
specific file formats, specific standards, etc.
People have to have easy and familiar ways to find and point to
interesting stuff. The more that this happens the more collective
sense making you get and the more value you get from your
technology investment. As far as different types of tools, there needs to be a range. Some
tool will be more suited to some people than to others. Some
activities will be more suited to some than others. The nature of the
information that you are trying to store and retrieve will be different.
People will move from one tool to the other. They may have an off
the cuff conversation with Twitter, but want to point to some content
in their blog or some formal regulated information stored in a
document. The point is that users will be able to join them all up
themselves. The context will be more of a matrix.
Confidentiality and Security
JC: What about confidentiality and security issues?
ES: The security thing is an interesting one because to some extent
centralized security is doomed to fail because it constrains things too
much or does not keep up with the speed of changing technology.
The ability of users to be more in control of what they share with
others will be more important but people do need to be educated as
to the sensitivity of the data. Deciding who sees what, why and
when, is highly contextual and difficult to manage centrally. Give
people the tools to manage their own security but spend the time
explaining to them what is risky and how to avoid that risk.
Willingness and Engagement Matter
JC: How extensive does this effort have to be to make it work?
ES: That goes back to the question of how you get people engaged.
In a merger and acquisition sense you want as many as possible to
be making a more effective move towards the other company.
Equally, if you have a particular group who are willing and keen, you
can be very effective with these technologies.
The key measure is: Making something better or doing something
that couldn’t have been done otherwise happen.
Influence not Control
JC: How are social media being used during M&A integrations?
ES: People are more and more using the tools on the web when
these situations arise. From another perspective, I would not be
surprised if people from a target company are, on their own
initiatives, communicating on LinkedIn and other social media about
alternative positions as an acquisition of their company is being discussed and underway.
A company does not have an ability to control; it has the ability to
influence.
The Possibility of Unprecedented Gains
JC: How would implementing such a framework allow a new
organization to remake and reposition itself?
ES: People are beginning to understand that their own staff is their
best advocates in the market place. Conversations are not only
taking place amongst the staff of the new combined organizations
but also with the clients of the two originating companies. There is a
huge potential to migrate your corporate message and branding and
to be explicit with customers about the reasons that any merger
would improve the services and products they are being offered. If
you are able to talk about the reasons behind the merger and
benefits of the merger, both internally and outward facing, that
surely is a good result.
JC: Thanks very much for a participating such a provocative and
exciting conversation.
Euan Semple
Euan Semple is a leading authority on the use of social media. He
gained unparalleled experience as Director of Knowledge
Management at the BBC and subsequently with major organizations
such as Nokia, the World Bank, NATO and Scotland’s National
Performing Companies. He has unique insights into how to make
social media work for large and small companies as well as
governmental and not for profit organizations. His focus is on how
social media affects businesses and how they relate to increasingly
connected and vocal customers. He enables organizations to get
ahead of the competition in this often bewildering game.
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