Friday, February 27, 2009

Mergers & Acquisitions = Marriage & Acceptance

Imagine that you meet someone. Imagine that you fall in love. Imagine that you decide, that together you are better, more complete, greater than when you are apart. So you decide to get married.

So far so good. You look at your possessions and your expense. Each of you have a place of your own. In your respective homes, you have the following: satellite/cable, local and long distance phone, internet, water, electricity, TV, couch… oh and of course the mortgage or rental feels.

Are you with me? Good. So you decide what any smart couple would do… you agree to keep things as they are, pay all the redundant services and say no to the opportunity to improve as a result of this combined union. You, in effect are saying no to the concept of "economies of scale and scope."

Yes, this is asinine. Plain stupid. I mean, who would do that? Who I ask you?

Try this for size: the overwhelming majority of large corporations that acquire companies. The lack of integration is criminal. The acquirer and target seldom integrate their back office solutions (ERP, etc), their policies and processes. They continue to work as independent companies within their own silos. Then everyone wonders, why didn't we get the value that we thought we would get?

Leaders have the foresight to understand the true benefit of the merger. It is not that 1 + 1 = 2 , but rather 1 + 1 = 3. Yes, you did the math right. The combined company is now producing something that they individually would never have been able to produce. Unfortunately, most acquisition generate this equation: 1 + 1 = 1.5. In these cases, the acquisitions destroy value. They don' t create value... and to compensate for this missed opportunity, the organization resturctures and everyone forgets that bad episode. After all, there's a hot acquisition prospect in the horizon... it's a no brainer!

I'd love to hear stories about acquisitions that you've been a part of or have witnessed.

Monday, February 9, 2009

Expanding Universe

Blogger's Note: Apologies for not posting for some time. I got sidetracked with other matters: evacuation form home due to Porter Ranch fire, Holidays, and overall focus on other matters that are near and dear to my heart.

Momentum is an interesting phenomenon. Are things getting better, worse or stagnant? Our ability as leaders to really understand these states of action will help us understand how well we're doing.

I was watching a great program on TV about the universe. It walks the viewer through the history of the universe, from first scientists that studied the heavenly bodies, the evolving theories, the conflicts between schools of thought, etc.

One topic that was of interest to me was the concept of the "Steady State Universe" vs. "The Expanding Universe." Today we understand that the universe is not steady state (never has been), that it is expanding (always will be), and it has been expanding for billions of years, every since the big bang; Where from a singularity was born the cosmos. Key point: we are in an expanding universe. Since our inception we have been in motion… always in motion.

Typically in management we look at our operation (project team, support team, operations, etc) and we analyze our health by saying that things are getting better, worse, or pretty much steady state. It is this third state that worries me. Most of us interpret steady state as the "good" or "OK" state since it is predictable and implies management has a handle over the operation. Hey, at least it's not getting worse right?

I say that there is no such thing as steady state. Steady state causes a false sense of security. You are either improving (i.e. driving the operation towards stated goals) or getting worse (i.e. not driving the operation towards stated goals). To be clear, you may have a stated goal of 95% On Time Delivery. This goal is steady but all the things that happen in the background are always in flux and need to be managed.

As the universe shows us, we are always in motion. The dynamics of teams, customers, and the economy are applying forces in chaotic patterns. To think that all is steady is to close your eyes to the obvious. A good manager will be vigilant to the slight fluctuations and understand what the underlying causes are so that corrections can be made. Fundamentally, isn't this the concept behind continuous improvement? If you don't always improve, then you are always getting worse. Your competitor will make sure of that.

Don't get me wrong. There is a place for "Stabilized" operations. A bad operation will need to go through a maturity cycle where you get control of the situation. But that is a brief and short period of time. The next step is move this operation towards greatness. Getting control and stabilizing is part of the journey. But to stay there is the equivalent of going to the airport and not boarding a plane.