|
Acquisitions and strategic alliances offer the opportunity for quantum jumps in competitive advantage -- but they are also challenging to execute effectively. It’s well documented that a majority of acquisitions fail to achieve the strategic and financial objectives that originally justified the investment. One of the chief causes of value destruction is the way in which companies pursue cost synergies through the elimination of redundancies. Driven in part by the desire to stabilize the new organization as quickly as possible, all too often the integration efforts unknowingly sacrifice critical market, product, technical, and process knowledge within the organization, along with key customer relationships, because there is not yet a clear understanding of the particular value drivers or where they reside in the company. (It also doesn’t help that the acquiring managers naturally see themselves as the "winners" in the deal and this attitude often leads them to discount the inherent value of the knowledge and relationships they’ve just paid so handsomely for!) Furthermore, complex organizations operate primarily through influence, and major structural changes destroy the established working relationships on which influence depends. Alliances carry their own challenges -- in particular the difficulty of sustaining strategic and operational alignment across two complex organizations that often have very different cultures and business objectives.
Successful management of acquisitions and alliances doesn’t just happen -- it requires a rigorous and systematic focus on implementation. Despite the poor track record of success for acquisitions and alliances, the good news is that failure is not pre-ordained. However, to avoid the many traps that tend to accompany these arrangements, companies need to take a systematic approach to developing the necessary infrastructure. The starting point is to recognize that signing the agreement is only the beginning of an extended process. As much thought, energy, and talent needs to go into making the deal work as went into bringing it to fruition. Integration initiatives and alliance programs need to be founded on an understanding of the strategic value each party is pursuing in the relationship. To accomplish this, executives must articulate and communicate the direction and desired outcome early and often to all key constituents. In addition, the transition from pre- to post-deal must involve clear hand-offs of accountability and knowledge. In those situations where there is no single point of accountability, the executive teams in both organizations must explicitly share the accountability, and dedicated staff needs to be assigned with the appropriate skills to manage the relationship on a day-to-day basis. These are among the disciplines that companies must institutionalize if they are intent on pursuing growth through acquisitions and alliances.
|