Dis-synergy

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.

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.

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.

Big Ben Learns A Lesson

Ben Roethlisberger, the youngest quarterback ever to win a Super Bowl was not wearing a helmet when he crashed into a car that was turning left in front of his motorcycle. But today Roethlisberger said in a statement that if he ever rides a motorcycle again “it certainly will be with a helmet.”

I would have laid odds that a young man like Roethlisberger would have gone the route of so many others, cursing luck through broken teeth while vowing to continue the behavior, defending what clearly was an error in judgement. So congratulations to Ben for doing what so few of today's business leaders seem to be able to do: Admit a mistake, take responsibility, and change direction. Such responsibility saves careers and saves companies.

In this particular case, it may save a life as well.

Good Effort

The boys run off the field after the last out and after allowing four more runs. "Good effort, guys!" shout the coaches.

That's the way you manage boys. Six, seven, eight year olds. Effort is important. Instilling the team effort, good sportsmanship, putting forth your best effort.

But when it comes to marketing efforts, a 'good effort' is never enough. It is too easy today to measure, refine and improve. Too often, 'a good effort' is all that expected of marketing. And far too often, that is all marketing professionals expect of themselves.

No more 'visibility', no more 'mindshare', no more intangible measurements that only serve to give credence to management biases against marketing. Measure marketing performance with home-grown or commercially available marketing dashboard software. Then you can build the credibility that is required for marketing to get a seat in the boardroom and leave the 'keychain and brochure people' characterization long behind.

Related articles

• How CMOs Can Measure Return on Ad Spend with Better Modeling and Conversion Attribution
• Five Questions Every CEO Should ask Marketing
• Why You Need Marketing Analytics, Not Web Analytics

Analysis Paralysis

Inasmuch as I just defended 'process' in my earlier post, at the urging of a reader email (use the 'comment' button, folks, email is so 2002!) I thought I ought to also clarify that the bane of my existence is 'analysis paralysis'.

Analysis paralysis differs from effective process in that my concept of the latter adds value by directing and supporting common efforts in an organization. Analysis paralysis is the polar opposite of this; it represents unnecessary expense as real and opportunity costs are incurred for repetitive, redundant analysis continually applied to a problem (or its proposed solution) without adding any additional relevant data. This can be intentional (as is found in politics as committees are formed for 'further study' in order to shelve controversial issues) or unintentional (lack of confidence in one's ability to reach a decision).

Here's excellent reading on a related subject: Blink by Malcolm Gladwell

Process is not a four letter word.

In the popular cult favorite, The Hitchhikers Guide to the Galaxy by the late Douglas Adams, Vogons are creatures described as "extremely ugly, extremely officious, and generally not much fun to be around... only their stubbornness allowed them to survive. They generally become bureaucrats in the galactic government and their unpleasant demeanour makes them ideally suited to such employment".

Now there's an unappealing profile that you won't find in any Myers-Briggs personality profile, however this caricature rings true due to our generally accepted opposition to useless red tape.

I'll admit that as much as I oppose useless red tape, I am a fan of process. But only those processes that are designed to expedite, measure, and improve actions, not slow and needlessly monitor and approve actions. Too often extremes are found in corporate America - either too many controls, or in order to avoid such lumbering processes, too few. The former processes result in disengaged employees and an organization unable to change quickly; the latter, an organization lacking common understanding and duplicating or negating efforts of others.

Processes are not poison. They simply need to be developed and followed in a way that keeps the end goal in mind, be it customer satisfaction, margin support, or new product development. Processes are meant to free people to do their jobs make decisions and act quickly, not constrain their ability to contribute.

Of plaster and planning

So my bride and I finally decided to start a major remodel last week; the master bath is being turned upside down, with virtually everything new except the ceiling, and even that was repainted.

But it was going to be quick and easy, this remodel, because we researched, we shopped, we planned. We knew precisely what we were going to do.

Of course, we thought there may be a delay in getting the tile, an unexpected foundation problem around the tub, or a mismatched color between the countertops and cabinets. Or something.

We foresaw the unforseeable, and that's not an oxymoron.

Just because you can't see trouble ahead doesn't mean it won't come. Its not enough to have a Plan B or Plan C. Alternate plans only allow for a complete re-boot, and today's competitive environment doesn't allow the time or cost in starting over. It requires that you be able to plan well enough that the best plan is a flexible one. One plan, not alternative ones.

So now we have different tile than we first spec'd, we are painting the existing cabinets, and the closet doors are different than we first envisioned. It's over-budget and a week delayed according to the promises initially offered by the contractor. But its under-budget and currently ahead of schedule from what we had expected, and its still going to be exactly what we wanted.

Now that's a plan.

The check is in the mail...

Here's an oldie but a goodie from the Fast Company archives. The Five Most Common Lies In Business reveals nothing that we didn't already suspect, and for those who have told them, nothing they didn't already know. I'll add another:

Lie #6: "We are investing more into marketing."

Truth: "We hope to have more left over for marketing when we finish our other planning."

B.S. Detector: Until marketing is involved at the outset of planning, consulting on promotional spending and market messages, product launches and the like, sales cannot plan their quotas with any certainty.

I know of a firm where the Sales VP, frustrated at the CFO's apparently arbitrary reverse budgeting and quota-setting (working from a target EPS backward) simply threw up his hands and said, "Make the quota whatever you want it to be. There's no way we can make it with the current product mix, and I have no idea what you are going to give to marketing to support us, but go ahead." This exasperated outburst was mistaken for agreement, and the unrealistic quotas were set, and no doubt marketing blamed when they were not met.

Rule #3: Have sex.

"The speaker wore his usual uniform of a faded black Timberland sweatshirt and jeans; his London audience was all tailored suits and double-cuffed shirts. But as James Montier finished explaining why money shouldn't be equated with happiness, the equity and bond traders rose to their feet in applause. "I don't think they heard much beyond rule 3," Montier quipped afterward. Rule 3 of his 10 for achieving sustainable happiness is, 'Have sex.'"

An article in this month's Fast Company details maverick financial analyst James Montier's rules for investing. I liked these so much I'm listing several here with my corollaries regarding how they address transformational marketing and change management as well.

1. Leaving the trees could have been our first mistake. Our minds are suited to solving problems related to our survival rather than being optimized for investment decisions. My corollary: Buying decisions - even those regarding matching specifications to features as in fulfilling design specs - are made in the self-interest, not the objective fact. Market to the emotion, not the intellect.

2. Why does meeting companies hold such an important place in the investment process of many fund managers? Because we need to fill our time with something that makes us look busy. My corollary: As with investment decisions, many buying decisions are made before we ever review, or complete reviewing, the sponsor's 'factual' message. The access to information is so pervasive today, it must be consistently presented across all communication outlets from mass media to watercooler conversations.

3. Our minds are not supercomputers and not even good filing cabinets. They bear more resemblance to Post-it Notes that have been thrown into a bin and covered in coffee. The ease with which we can recall information is likely to be influenced by the impact that information made when it went in. My corollary: Brevity is good.

4. Don't equate happiness with money. Materialistic pursuits are not a path to sustainable happiness. My corollary: In life as in business, make the process the pursuit. Because until you are 'there', you'll never be satisfied, and if you do get 'there', you've often nowhere to go but back again.

5. People adapt to income shifts relatively quickly; the long-lasting benefits are essentially zero... One of my recommendations is to stop, take note, and give thanks--not necessarily to God but just to reflect on what you've achieved and what you've got. You need to stop and think, "Actually, I'm damn fortunate." My collorary: Really, I can't top that one. (Damn, I'm fortunate.)

Big Search v Big Brand

According to a Harvest Digital study highlighted in a recent article in IT Week, a brand's influence on directing internet traffic pales in comparison to the influence of search engines. 43% of users are likely to click on links simply because they are on the first page of results, now culled not from one or two words but from three or four word search terms. The same UK study indicated a coming fracture in Google's dominance of search. As marketers, the time has passed when we could manage SEO activities with static metatags and homespun tracking tools. Search Engine Optimization is very much front and center of the marketing mix.

Recommended Reading

I just finished reading Bossidy and Charan's latest, Confronting Reality.

Like their last book, Execution, I found the content to be straightforward, intuitive for most. Yet perhaps the authors were told after the success of Execution that leadership was still more about PowerPoint and politics than actual execution - after all, if you don't know where to start you tend to be hamstrung. The message is to start with (get this) a business plan; one consisting of a hard look at internal, external and financial realities. Using many case studies from Allied Signal to Home Depot, the authors illustatrate how an unbiased view of these forces can shape a workable strategy and a thriving - I would say surthriving - organization. The book gets a bit repetitive but perhaps if I confront my own reality - that today's leadership requires this sort of basic business refresher - then it will have an impact on the leaders for whom it is directed who will take the time to read it.