Online Edition - January 2000
Highlight - Y2K,
Can't Beat 'Em, Join 'Em
---After years of concentrating on efficiency, streamlining and process improvement, companies now recognize that being truly innovative is the only way to survive. In the never-ending quest for corporate growth, mergers appear to be the answer. But are mergers the key to a successful future?
---Global corporate merger mania is a desperate bid by outdated 'dinosaur' firms to scrape the cost-savings barrel without addressing the realities of the new business world.
---According to Gary Hamel, lecturer at Harvard University and the London Business School, "We have been busy for a decade with corporate liposuction but now we are down to the heart, kidneys and lungs and there is not much left. All this merger activity is the last gasp of the cost-cutter."
---Eighty percent of CEOs believe alliances will be a principal means of corporate growth, according to the Wall Street Journal. However, they also report "a staggering 61 percent of alliances have failed or are plagued by under-performance." Rick Lamprecht of ExperTeam's points out, "That's a 39 percent chance of success. With those odds, I'd rather bet in Las Vegas."
Preparation and Education-Keys to
--- "Experience is the only teacher in merger mending. Each situation is different. No standard checklist or prescribed formulas from workbooks apply here," adds Jesus Romero, CPA and ExperTeam colleague.
--- In addition to the high-failure rate, there are other drawbacks and negative implications associated with mergers. According to Stan Lepeak of the Reengineering Resource Center, concerns among employees include a fear of being 'rightsized' as a result of a business process reengineering effort, angst over job loss/degradation due to outsourcing and the likelihood of going through a consolidation as a part of a restructuring or merger/acquisition.
---According to Hamel, companies that choose a totally new business strategy demonstrate what the new era of revolution and ideas is about. To stay in the game and get ahead, successful future companies will reshape their industry rather than themselves. The reshaping emerges through focus and action that recognize and use a company's core competencies instead of its current product line.
--- "For example, if Disney perceived itself as just running theme parks and making animated feature films, it would be the end of the road for them because that market is only so big. As soon as they ask what else they can do with their capabilities, they get to Broadway shows, etc. You have a wealth of new opportunities if you stop defining a company by what it does and start defining it in terms of its competencies," Hamel explains.
---Gone are the days of merging with a competitor to stay on top. For a healthy future, your best asset is found within your company through innovation.