Successful M&A Requires a Clear Vision

An astute CEO can often augment organic growth with acquisitions, but a majority of acquisitions fail to deliver expected returns. CEO Carol Koffinke of Beacon Associates says that “60 to 80 percent of all mergers and acquisitions fail to meet their merger goals.” Why do they fail?

Much has been written about acquiring companies’ failure to realize the value they envisioned for their acquisitions and the why’s: a lack of proper due diligence, cultural mismatch, lack of integration planning, unforeseen market factors, etc. However, of all the possible reasons for failure, M&A experts put the lack of a clear vision at the top of the list.

Source: “Creating and Executing a Winning M&A Strategy,” Merrill Data Site and The M&A Advisor, October 2013

While a clear vision can accelerate execution of any growth strategy, successful M&A demands a level of clarity most companies fail to achieve. Why do companies launch into an acquisition without sufficient vision and planning? Here are the most common reasons we’ve encountered in working with top executives:

  • Some CEOs don’t naturally think strategically. A CEO who’s risen through the operational ranks can end up with a “make stuff, sell stuff” philosophy and a view that strategy is merely a set of slides for board and investors, while in fact, a clear strategy drives revenue and profitability.
  • A CEO can be overwhelmed by the daily pressure of running the business. Periodically answering the question “are you working on or in your business?” can prevent the urgency of daily concerns that distract from the CEO’s paramount responsibility –  increasing shareholder value.
  • Pressure to make quarterly goals can diffuse and erode the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s brand and slow its ability to generate new business.

How can a CEO be more intentional about growing the company through acquisition?

  1. Find a way to set aside time to think and discuss new directions. In this new social media world, it’s easy to develop a chronic short attention span. Focused thought is required to create breakout strategies.
  2. Take an honest look to make sure you’re not hanging onto more than you should. How to cross the second chasm, i.e. growing a company from small to big, is described in Doug Tatum’s insightful book, No Man’s Land. Pick up a copy and read it this weekend. (If you think you don’t have time, you need to read it.)
  3. Discuss growth challenges with objective trusted advisors. Use CEO peers at Vistage and experienced consultants as soundingboards to call out any “elephants in the room.” They will help you establish the clear vision needed to drive your acquisition initiatives.

How to Increase Your Influence

Some people have more influence and impact than others, and these same people always seem to have incredible networks. They may not be wealthier or brighter than their friends, but everyone leans in when they talk and remembers what they say. 

What’s their magic? Having spent decades observing highly influential friends and acquaintances in my business network, here are a few thoughts about habits that increase influence:

Check Your Ego – How long do you want to interact with a self-absorbed person?  When a colleague needs help, be willing to sacrifice your goals for theirs. It’s not all about you; it’s about making good things happen around you.

Leave More Room – While “no plan is a plan to fail” is a good thought, it’s equally true that too tight a plan leaves no room for creativity that results in breakthrough ideas. Plan sufficiently, but leave time in your calendar for serendipity.

Pick Your Battles – When faced with a decision, ask 3 questions: Is this urgent? Is this important? Is this reversible? Realize that urgent matters far outnumber critical ones. Act on the most important matters in a timely way, then when a truly serious problem comes along, you’ll have more time and energy to address it.

Share Your Insight – When you find useful and positive information, consider who would be most helped by this knowledge, then share it with them. I’ve practiced this for years, and the instant communication we have now (email, text, social media) makes it much easier.

Keep It Cool  – When panic strikes, the coolest head prevails, and influence grows. A doctor long ago taught me to start deep muscle relaxation exercises reflexively when stress arises. You too can train yourself to relax and think clearly under stress. Remember that few decisions in business are life-threatening or irreversible.

Keep the Faith – Most importantly, choose to look at things from a higher perspective, and place your faith in something beyond yourself. (Again, it’s not all about you.) Determine your purpose in life beyond making money and buying more toys, then operate with that foundation as your core.  Start each day by reconnecting with that larger personal identity before the relentless battle for your consciousness begins and you’re drawn into darkness, irrelevance, or time-wasting activities.

To summarize, don’t strive to be an influential person. Instead try to deliver value in every interaction, and influence will follow.

 

Backstory: What’s the Genesis of Self-Fueling Partnerships?

The word “coopetition” has been around much longer than most people think. I first encountered it when my boss Ray Noorda, Novell CEO, brought it back into use in the early 1990s to describe his insight about the then-emerging market for local area networks (LANs).

Novell was one of a number of companies competing to become the LAN market leader. Ray decided to encourage his competitors to focus on “growing the pie”, i.e. the networking market, rather than continuing to fight for a bigger slice of a small market. We created the Networld trade show (later renamed Networld/Interop) and invited every company related to the networking industry to participate, including our closest competitors. The show rapidly grew to become the largest tech gathering of its time, engulfing Las Vegas for a week every year.

Working in and leading a group of a dozen highly talented people who built partnerships with the largest companies in the industry was one of the most exhilarating experiences of my career. During that time, Novell’s partnership efforts helped it hit a billion dollars in revenue faster than any company to that point. In addition to a network of over 20,000 resellers who depended upon us for a significant share of their revenue, we grew partnerships that aligned leading companies (e.g. CA, Compaq, HP, IBM, Lotus, Oracle) behind our network operating system and encouraged them to develop new solutions for our customers.

Observations made during that time led me a few years ago to coin the term “self-fueling” to describe partnerships carefully constructed to last. Like most useful concepts, the definition of a self-fueling partnership is simple:

“a relationship structured so that positive results for the first party drives it to act in ways that increase positive results for the second party, and vice versa.”

The partnership between ATT and Apple is an excellent example. It lasted several years enabled each to them to capture significant market share. We all owe a debt to the late, great Ray Noorda for pointing the way to self-fueling partnerships by selling the idea of coopetition to the industry.

 

CEO Flow v. Multitasking

In a recent article in Small Business Trends, CEO Curt Finch of Journyx contrasts the benefits of “flow” over “multitasking” in achieving optimal employee productivity. Recent studies show that multitasking can be highly unproductive, while flow is much better:

“As defined by author and psychologist Mihaly Csikszentmihalyi, flow occurs when you enter a state of intense and effortless concentration on the task at hand. It is often referred to as ‘being in the zone,’ and employees are far more productive while in this state than at any other time.”

That made me wonder to what extent the same principle applies to CEOs and how they use their time. Most CEOs are paragons of multitasking. Each day comprises formal and informal meetings and calls that address a multitude of topics across multiple domains. A CEO friend once described it this way: “It feels like I’m walking the halls of the office and people are ripping off pieces of flesh as I walk by. At the end of the day, I’m exhausted.”

As with employees, multitasking would seem to be the natural enemy of flow for CEOs. Of course a CEO must necessarily handle more than one issue at a time, but if you continually find yourself without enough time to adequately address important but not urgent issues, multitasking may be slowing your company’s growth.

Finding uninterrupted time to consider how to grow the company is a common CEO challenge. Achieving “CEO flow” may require a level of discipline above what you’ve applied in the past. Delegating more tasks to your executive team, encouraging them to be more mutually accountable, and becoming more protective of open space in your calendar can enable you to become the chief visionary officer that your company needs.

Are you spending time in the zone that’s needed to create the right vision, or are you always multitasking?

Self-Fueling Partnership: Apple and AT&T

“In this new wave of technology, you can’t do it all yourself; you have to form alliances.”                           -Carlos Slim Helu 

Addressing startup entrepreneurs at RISE Week Austin, I asked, “If the richest man on the planet thinks alliances are critical, shouldn’t you?” (As a four-time startup survivor – 1985, 1995, 2000, 2002 – I’m driven to give CEOs the knowledge and passion they need to accelerate growth through partnerships.

The Apple/AT&T partnership was a classic: Apple sought broad distribution while AT&T needed new technology. Together they demonstrated how to create a self-fueling partnership, i.e. one that is structured such that positive results for the first party drives it to act in ways that increase positive results for the second party, and vice versa.

Let’s dissect this well-known business case to identify a few principles of “self-fueling partnerships”:

Principle #1   “Partner when the impact of a threat or opportunity is high, and your ability to respond is weak.” 

Apple had an innovative product that needed to be deployed rapidly in order to grab the top spot in the emerging smartphone market. The opportunity was huge, but the carriers controlled access to the customers. AT&T, on the other hand, wanted to grow its data services revenue, and a killer product would help to capture more subscribers.

Principle #2   “Develop a compelling approach before approaching the other party.” 

Apple based their approach to AT&T on its need to capture new subscribers by raiding other carriers. Since people are reluctant to change carriers, AT&T could afford to heavily subsidize the iPhone in exchange for the long-term annuity they’d build from people who switched to their network.

Principle #3   “Be willing to provide exclusivity if you can limit the time and geography.” 

While Apple wanted to grab the #1 spot with rapid deployment, they knew they’d later have to extend distribution through other carriers after significantly penetrating AT&T’s base.  A good bet is that Apple agreed to extend exclusive access to iPhone for as long as AT&T continued to meet aggressive growth goals, then at a later date, Apple would be free to sell through other carriers.

If you have other interesting partnership examples, let us know!.  

 

Acquisition: Result of the Original 20/20 Outlook Process

The original 20/20 outlook process evolved while I was CMO at Infoglide a few years ago. In early April the company was acquired by FICO (Fair Isaac Corp.), one of the top potential acquirers identified during the process in 2009. The acquisition resulted from a partnership formed between the two companies as suggested by the analysis.

In early 2010, I founded 20/20 Outlook LLC. The original 20/20 Outlook process is now the second of four processes used to identify and create conditions that lead to growth and acquisition:

  1. CLARIFY:  create bulletproof Strategic Positioning
  2. COMPREHEND:  develop a Valuation Framework
  3. CONNECT:  engage in Self-Fueling Partnerships
  4. COMPLETE:  develop Mutual Accountability to move from strategy to execution

At our upcoming RISE Austin session on May 17, we will focus on how to develop self-fueling partnerships built upon a solid valuation framework. (RISE session locations can be fluid, so please make a note to double check this link a day or so in advance.)

Hope to meet you there!

UPDATE: The Self-Fueling Partnerships session for RISE Austin (4pm, 5/17) will take place on the second floor at the LBJ School of Public Affairs, 2300 Red River Street. You may want to arrive early to find parking. 

 

Register Early for RISE Week Austin!

Registration is now open for RISE Week Austin to be held May 13-17. Named a “Must-Attend 2013 Conferences for Entrepreneurs” by John Hall at Forbes, the event “offers a variety of events, including fast pitch competitions, funding forums, and talks from well-known keynote speakers.”

In a session called “Self-Fueling Partnerships” on Friday, May 17, we’ll discuss how to grow revenue and profits by leveraging the marketing clout, technology, and customer base of larger companies.

To ensure quality interactions, only 25 people are can attend each session, and savvy attenders sign up early.

See you there!

What You Think You Know May Blind You To Growth Opportunities

TexasCEO magazine just published my latest thoughts about partnerships. In addition to correcting myths about partnerships in general, it describes major types of self-fueling partnerships and the series of steps you can employ to accelerate the growth of your business.

As always, let’s hear your feedback, either below or the TexasCEO web site.

 

How Infoglide Enhanced Its Acquisition Options

How does a company get acquired? FICO’s acquisition of Infoglide provides an excellent example of applying deliberate steps to increase the odds and accelerate the process.

CEO Mike Shultz graciously allowed us to describe the backstory in a short case study. Read it to discover what you can do to attract potential acquirers. 

 

>> CASE STUDY: How Infoglide Enhanced Its Acquisition Options

 

 

Is Your Company Geared Up for Growth?

“Gear up” means “to prepare for something that you have to do” or “to prepare someone else for something” (source: Cambridge Dictionary). To assess whether your company is prepared to grow, ask whether your management team has clear answers to 4 questions:

1. Does the company offer something special enough to compel customers to spend money?

The instinctive answer is “of course it does.” After all, a customer base exists and the company is stable, even if growth is slow. But can the management team relate a shared, crystal clear vision of the company, its category, and its primary benefit? The kinds of companies it sells to? The roles of people within those companies that are involved in purchasing? Other unique qualities that differentiate you from competitors? Answers to these questions comprise a company’s strategic positioning, and a lack of team alignment on it leads to huge inefficiencies.

2. How does the company fit into the bigger picture of the market served?

Understanding which companies are competitors and which are potential allies is essential for sales success. Companies often assume competition exists when there may be a chance to partner effectively instead. Understanding the needs of other key companies leads to a clearer understanding of current opportunities, where value exists in your market space, and the potential to leverage the success of potential partners to provide better customer solutions.

3. What relationships with other companies can accelerate growth?

Most CEOs are skeptical about partnering with another company because it’s perceived as too difficult to be successful. While most partnerships fail because of poor analysis, poor planning, and poor management, a well-planned partnership can enable a company to leapfrog its competitors.

4. How can the company operate more effectively to bring the CEO’s vision to reality?

Having the right growth strategy is important, but execution ultimately determines success. Once a company reaches a certain size, growth can be limited by having outmoded or inappropriate processes in place. “We’ve always done it this way” is not an acceptable answer. Outside help may be required to drive the strategy into successful execution.

The chart below illustrates three levels of “gearing up” that a company can find itself in: stalled, moving, and accelerating.




 

 

 

 

 

 

 

Learning how to accelerate your vision and take your company from “stalled” to “accelerating” will be the topic of a subsequent post.

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