In the world of mergers and acquisitions, an activity that appears to be going through its cyclical upswing currently, there is much discussion regarding revenue synergies, expense synergies, and to an (unfortunately) far lesser extent, market and cultural synergies.
What is often overlooked are the dis-synergies* inherent in each proposed merger or acquisition. With 70% of M&A failing to reach the top-line synergies promised, and 25% missing the expense reduction mark by 25% or more, perhaps it is wise to give more weight in diligence to potential disruptions - dis-synergies - than the oh-so-appealing potential synergies. While they vary from industry to industry, some of these dis-synergies include:
- Not understanding customer motivations for loyalty, resulting in more customer loss than anticipated.
- Loss of employee productivity during the period of diligence
- Underestimation of the impact of 'onetime costs'
- Loss of quality employees to competitors seeming to offer more stability
- Underestimating the amount of time to address both the external and internal requirements of a merger, including information systems, branding, reporting structures, and all related processes
*Scott Christofferson, McKinsey and Company
For more information on this, contact Strategy180 (www.strategy180.com) for the McKinsey brief.
Monday, July 31, 2006
Wednesday, July 19, 2006
Channel Surfer
Of the constantly refined and now largely modified "4Ps of marketing", the one that most often is outside the narrowed authority of a business-to-business marketer is "place" (which addresses channels - distribution... the other Ps, of course, are product, price and promotion).
The new business models introduced in the past decade that have revolutionized the way businesses are managed and products marketed forces companies to change many of their long-held beliefs about the role and influence of marketing, particularly as it impacts decisions regarding distribution and margin management.
The requirement for marketing's involvement in distribution is driven by marketing's understanding of the customer. The role of 'place' in creating differentiation cannot be overlooked strategically, as distribution methods are often difficult to mirror by the competition and can be associated by customers with actual product or service offerings. (Dell, for example, is known more for its website, kiosks and direct to customer model as for its products.)
Customers remain the primary concern, but the way these customers' needs are met have already changed manufacturing practices... today, it changes distribution practices... not only will the products be developed as part of "mass customization", so, in a sense, will the manner in which these customers actually get the product. It is now important to identify and promote the most profitable available customer segments (and with the greatest potential) and to serve them with the most efficient delivery model, be it direct sales, catalog, internet, or any other of the numerous hybrids.
Re-evaluating channels is just one of the challenges that the proliferation of segments, brands, messages, media, and channels poses for marketers. You can uncover unserved markets, lower costs, and increase per customer revenue by guiding customers to the most efficient channels. To do so, companies should try to get a clear understanding of their channels and plan proactively with their channels and channel partners. The expanded role for marketing in distribution strategy has never been more important.
The new business models introduced in the past decade that have revolutionized the way businesses are managed and products marketed forces companies to change many of their long-held beliefs about the role and influence of marketing, particularly as it impacts decisions regarding distribution and margin management.
The requirement for marketing's involvement in distribution is driven by marketing's understanding of the customer. The role of 'place' in creating differentiation cannot be overlooked strategically, as distribution methods are often difficult to mirror by the competition and can be associated by customers with actual product or service offerings. (Dell, for example, is known more for its website, kiosks and direct to customer model as for its products.)
Customers remain the primary concern, but the way these customers' needs are met have already changed manufacturing practices... today, it changes distribution practices... not only will the products be developed as part of "mass customization", so, in a sense, will the manner in which these customers actually get the product. It is now important to identify and promote the most profitable available customer segments (and with the greatest potential) and to serve them with the most efficient delivery model, be it direct sales, catalog, internet, or any other of the numerous hybrids.
Re-evaluating channels is just one of the challenges that the proliferation of segments, brands, messages, media, and channels poses for marketers. You can uncover unserved markets, lower costs, and increase per customer revenue by guiding customers to the most efficient channels. To do so, companies should try to get a clear understanding of their channels and plan proactively with their channels and channel partners. The expanded role for marketing in distribution strategy has never been more important.
Monday, July 03, 2006
Theodore Levitt, RIP
We lost a marketing icon last week, as Theodore Levitt died at age 81. A thought leader and past editor of the Harvard Business Review, Ted Levitt revolutionized the way marketing was researched, taught and conducted.
His 1960 article for Harvard Business Review, called "Marketing Myopia", is the source of the oft-repeated comment that firms that define themselves too narrowly do so at their peril - the example being railroads defining themselves as in the railroad industry and not transporation industry allowed them to be overtaken by upstart airlines, air cargo, and trucking firms.
Globalization is also a term first coined by Levitt as early as 1983, with an equally influential article "The Globalization of Markets," which addressed the new world markets for standardized consumer products and started today's debates regarding globalization.
It is a giant passing and all of us in the industry who work to improve marketing's effectiveness, influence and credibility owe Theodore Levitt a great debt of gratitude.
His 1960 article for Harvard Business Review, called "Marketing Myopia", is the source of the oft-repeated comment that firms that define themselves too narrowly do so at their peril - the example being railroads defining themselves as in the railroad industry and not transporation industry allowed them to be overtaken by upstart airlines, air cargo, and trucking firms.
Globalization is also a term first coined by Levitt as early as 1983, with an equally influential article "The Globalization of Markets," which addressed the new world markets for standardized consumer products and started today's debates regarding globalization.
It is a giant passing and all of us in the industry who work to improve marketing's effectiveness, influence and credibility owe Theodore Levitt a great debt of gratitude.
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