Transformation Management

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The digital economy has fueled executive appetite for transformation. This blog highlights the challenges and opportunities of orchestrating digital business transformation successfully. It covers a broad range of transformation topics—from digital business models and innovation, through to transformation mindsets and value creation.

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Harnessing Collective Intelligence [Podcast]

The Rise of Transformation Professionals

The Outcome of Fake Transformation

Change is Constant - and Everyone's Business [Podcast]

Transformation Through Acquisition

Harnessing Collective Intelligence [Podcast]

When the past is a proxy for the future, business leaders can look backwards to forecast the future and build a strategy. But what happens when the past is no longer a proxy for the future?

Rod Collins highlights some of the innovative tools and practices used by a new breed of business leader.

 

PMI Ascent - Digital Business Transformation Management Course

Posted on: November 08, 2019 11:59 AM | Permalink | Comments (1)

The Rise of Transformation Professionals

How has the transformation of business using digital technologies become such a common topic inside so many organisations so quickly?

Well, actually it took a while, for transformation to go mainstream - as an aspiration at least. 

For decades we saw thousands of companies attempt to implement new technology with little if any consideration for the business and the outcomes were very messy, with failed ERP projects and programmes being high on the list of culprits.

Thankfully a lot of lessons learned have been shared since then and although there are still a lot of struggling technology initiatives out there, at least now there are plenty of people who know what it takes to be more successful - even if some companies still try their luck without them.

Over the last decade we've seen mobile, social, and cloud technologies breeze through the consumer sector and we now live in a very different world as a result.

Most companies have invested in these technologies, but to a large extent, many have simply implemented new technology but continued to run their business in the same old way.

To use ERP as an example that will resonate with a lot of people, many organisations spent tens and even hundreds of millions buying ERP solutions from the likes of SAP and Oracle, but instead of seizing the opportunity to use the technology to adopt new ways of working, managers and leaders insisted that those systems accommodated existing business processes.

To a large extent, this happened because these efforts weren't led by the business. They were IT system-led and there was a complete breakdown in both communication and collaboration. Well, a similar pattern is unfolding with the implementation of cloud, analytics and IoT, etc. 

But the economic situation is different from how it was a decade ago. Because significantly more companies are being started, and new business and operating models are threatening to make traditional operating and business models look as appealing as a Nokia 5110 against the latest iPhone. 

Those old enough to remember will know that many things that were important to us in the past are now irrelevant because we don't need them. And that made the offerings of many companies irrelevant - along with the supply chains that those companies relied upon.

So, most companies at least now accept that they need to use digital to transform their business. And while some - like Ocado and Netflix have enjoyed huge success from doing so, most companies have repeated the old ERP mistake. Meaning, they've implemented new technology, created some KPIs, thrown in some change management for good measure, but changed nothing fundamental about their operating or business models.

And of course, they label this as digital transformation because there's now a naive assumption that the words digital and transformation should be joined at the hip when anything is being done with modern-day technology.

So, while five years ago the challenge was to get companies to accept that disruption is something real and that transformation is a prerequisite for survival, now the challenge is to get companies to understand the difference between transformation and change. Because while transformation creates a new future, change only creates a better version of the past.

Fortunately, there's a growing number of professionals available to help companies understand all of this. To guide and advise leaders who know about their business and technology, but who aren't transformation experts.

These people are transformation management professionals, and as with any other profession, they've chosen to take the practice of transformation seriously.

Think about this …

While most of us know a little about finance, organisations want certified finance professionals with experience managing that part of the business.

While most of us know a little about technology, the CIO wants certified subject matter experts with experience taking care of their infrastructure.

While most of us know a little about social media, the Chief Marketing Officer wants certified subject matter experts with experience managing their social media channels.

Because while we all know a little about a lot of things, most of us are only a professional expert at a few. And often we don't know what we don't know about areas in which we don't practice on a day to day basis.

And the same applies to transformation management. Because while many people talk about digital and transformation, an increasing number of companies are beginning to realise that they need authentic transformation managers with experience to help them transform both legitimately and successfully.

If you happen to be a transformation professional, you likely want to work with companies that have a CEO who has the desire and resources to undertake legitimate transformation. And you probably don't want to be somewhere with a leadership team that is firmly stuck in the past.

Consider the scenario where you're already in a transformation management role with a forward-thinking innovative company, and of course, you'll need to perform at your best - as a transformation professional - in that role.

You know you're going to face your fair share of transformation challenges because they come with the territory. Because no one charged with managing or leading transformation will escape the hurdles that transformation puts in front of them. But how we clear those hurdles in the way an athlete does on a track, is what separates the skilled transformation practitioner from the one that keeps falling at every hurdle. Not because of lack of passion, effort or a desire to succeed - but because of lack of experience and knowledge.

Let's face it, most large firms are bursting with operational expertise, but this is made up from an entirely different set of skills found in a transformation management professional. And in the way that firms are diligent when it comes to hiring for key finance, IT or HR roles, leaders shouldn't make the false assumption that anyone can become an overnight transformation master.

Transformation management responsibilities need a safe pair of hands, and so it's vital that people charged with leading transformation are equipped with the expertise they need to perform at their best and deliver what leaders expect.

If you're someone with the desire, knowledge and experience to play a key role in transformation, you also need the right company for that aspiration to become a reality. The truth is, some older companies are being led by antiquated leaders who aren't equipped to lead their company towards digital economy success. And while some of them eventually get removed by the Chairman of the board, others will steer their companies into bankruptcy.

If you're working at that kind of company, but you have ambitions to undertake a meaningful transformation role, you should take things into your own hands and move on. This is where you need to think and act like a leader, creating a vision for where you want your career to be, then building and executing a plan to get yourself to where you want to be.

Because if you don't, and you allow yourself to get stuck with an antiquated organisation, you'll gradually lose touch with the outside world, get held back by old mindsets and ways of working, and you'll never get to practice transformation management.

Your field of vision will narrow, and your focus will be on internal priorities, and less on the world outside your firm's walls. You'll read about transformation, but you won't get involved in it because you're constrained by an antiquated organisation.

As in many of the best professions, three things you need to succeed as a transformation manager are knowledge, experience and certification. Let me say a little about each of them - starting with knowledge.

New knowledge is vital to orchestrating successful transformation, and no one, regardless of their role in an organisation, can afford to rely entirely on what they learned from the frameworks, best practices and operational models of the past.

Technology and business now need to be tightly integrated, digital needs to be at the very core of new business models, and technology and innovation are vital to achieving transformation. Competitive intelligence, business value creation and so much more, is all part of the transformation challenge. So new knowledge is vital for anyone with ambitions of leading transformation which creates new competitive advantage.

The challenge for transformation professionals is to be selective about what they learn and to know how to put new knowledge to practical use in the real world. Reading the latest book or blog post is one thing but putting its content to work is where many struggle. 

So, by selecting a framework such as THRIVE or BTM², transformation management practitioners can acquire a solid 360-degree view of transformation so they're equipped to help envisage, enable and orchestrate legitimate transformation.

The next thing you need as a transformation professional is experience.

While new ways of working and thinking are core to successful transformation, the ability to operate in complex and political environments can only be acquired through experience. So blending real-world experience with new knowledge is essential for anyone wanting to be successful in transformation management.

If you've never worked inside a large corporation or undertaken a real transformation management role, the chances of suddenly being asked to advise a multi-national CEO on transformation are slim. But in the way that all organisations need to begin their transformation journey somewhere, transformation management professionals need to do the same. 

With a bit of initiative, there are ways you can accelerate your progress if you're prepared to do more than just turn up for work each day and do what's expected of you. 

Start helping people without them asking for your help, and start creating your own rich content about transformation online. 

In a world where everyone from McKinsey and Harvard to teenage YouTubers and Instagram stars know the power of online content, you must understand how your own content will determine how others think of you as a transformation expert. 

Online content is one of the most fundamental digital advantages any professional or company should be investing their time in these days.

You need to be a content creator and a giver of value to stand out from the crowd these days. Because even a 10-year-old can be a content clicker and commentator, which is no longer enough to stand out.

Similarly, sending out hundreds of CVs is now as ineffective and old-fashion as the antiquated business models that will take many companies to an early grave.

So if you're looking for new opportunities as a transformation professional, think like a digital economy leader and let go of what worked well in the past. You need to leverage the power of digital yourself and demonstrate your expertise online.

And the third success factor in the transformation management profession is certification.

A growing number of career fields require professional certification, from finance and HR through to IT and Project Management. If you don't have the appropriate certification, chances are you'll be left to fill the less-well paid roles with companies that either don't have the budgets to pay for the best people, or that operate with low standards.

While transformation management certification isn't obligatory, a professional certificate that validates your knowledge of transformation and assures hiring managers in exactly the same way they seek assurance from other types of certification, such as PMP.

Professional certifications remain one of the most effective mechanisms to assess the knowledge and skills needed to perform a specific role. And as even more people now exaggerate their knowledge and experience online, hiring managers turn to certification as a means to better decision making. While certification offers no guarantee of a great hire, it certainly increases the odds.

After all, would you want a certified surgeon to operate on your nearest and dearest? Or one that claims to know what to do but who doesn't have the right certification?

Certification can also improve your earning potential and a number of studies show that those with relevant credentials earn higher salaries than those who don't. Oracle University, for example, compared the average salary of individuals who held Oracle certifications versus those who didn't and found that certified professionals earn 13.7 percent more than their non-certified colleagues.

The most successful transformation professionals don't wait for their managers to help them. The high performers take the initiative and take things into their own hands. 

They take steps to acquire new knowledge about a transformation framework such as THRIVE or BTM²

They take an online course to get certified in that body of knowledge.

And they take advantage of basic digital tools and techniques to become known as a transformation practitioner worth paying for.

They own their personal career transformation in the way a CEO owns their company's transformation.

PMI Ascent - Digital Business Transformation Management Course

Posted on: November 06, 2019 10:07 AM | Permalink | Comments (3)

The Outcome of Fake Transformation

In the early years after 2010 I remember writing about transformation and, aside from a small number of peers and the people I learned from, few were talking about the transformation of business. But now the words "digital" and "transformation" appear joined at the hip as together they've become an over-used and misused term. 

If you walked into ten organisations tomorrow that claim to have digital transformation underway and asked to see evidence of their innovation process, how their operating model is being re-engineered and what their new business model looks like, you'll discover that some of what's claimed to be transformation is rather fake.

Most companies take finance, HR and IT, and other core functions very seriously in terms of investment, processes and the trained people that are running those departments. But when you ask to see how innovation and transformation are being treated with similar importance, you'll discover that often they're not. Because investment in real innovation and real transformation is grossly undermined.

Of course, no one likes to be told that their organisation has fake transformation underway - or that they're not taking transformation seriously. Because the truth hurts doesn't it. The important question is, whether managers and leaders have the courage to face up to reality. To snap themselves out of any delusions they're under and steer their organisations into the world of legitimate transformation.

Instead of continuing to tinker with digital projects, deluding themselves that they're transforming their company when all they're doing is installing some new technology and making small changes to how things have been done in the past. 

Remember that change fixes the past, while transformation creates a new future. You might have already come across George Westerman's quote which suggests; “When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”

While some people recognise fake transformation when they see it, it takes courage to help the CEO and their leadership team understand the risks associated with allowing fake transformation to continue at the expense of legitimate transformation - which could create a new future for the company they're responsible for steering towards digital economy success.

So as some of the world has been sucked into fake news, now some companies have fallen prey to fake transformation, as they've become lost in the hype around the word digital and the meaning of business transformation.

Leaders need to clarify to their workforces, the difference between change and transformation, and the difference between digital sugar coating and digital transformation. They need to cleanse their company of ambiguity, then create and communicate a clear and legitimate transformation vision. Because if they don't, there's a risk that their companies will become increasingly vulnerable.

And for those that remain vulnerable, it'll only be a matter of time before new business models impact their industry, and customers opt for alternative products and services.

On the one hand, it's understandable that some leaders want to stick to what they know their company does well. After all, that’s what got them to where they are today. But in the same way we as individuals know we need to step outside of our comfort zone to become better people, companies also need to do the same - instead of getting stuck in the comfortable and complacent safety of their own comfort zone.

Because the digital economy won't be sympathetic to those who simply want to hang on to the past - regardless of their reputation and previous achievements. And an increasing number of business models that have been successful in the past, are becoming less relevant to the world we live in, and therefore less profitable for the companies that rely on them.

The problem for many companies is that when they're caught up in the day-to-day challenges and hopes of success, with their eye on the next quarter's profits, it's easy for leaders to lose sight of what could happen to their business model in the longer term if they fail to truly transform.

We only have to look at the media to see the consequences of fake transformation. In April 2019 the British retailer Debenhams went into administration and into the hands of its lenders. It's quite sad to see a company that was founded in London's West End in 1778 selling expensive fabrics, bonnets, gloves and parasols, become a victim of the new economy we live in.

But in 2018 Debenhams' leaders were boldly speaking of the transformation their company was undergoing. This is an example of fake transformation. It's almost like telling your family and friends that you're undergoing a personal transformation by going to the gym, when all you do is put your kit on, eat a protein bar and shake your arms and legs around.

You'll spend your money and time, and even fool your family and friends for a while, but eventually, it'll be clear that you were never really doing anything to transform yourself. And a similar delusion exists for many companies that talk about transformation.

It's where the fashionable use of the words "digital" and "transformation" results in nothing in the way of business success. And this delusion of transformation and failure to undergo legitimate transformation is what's seen a company that by 1950 had become the largest department store group in the UK, owning 84 companies and 110 stores - finally enter administration.

But if you read the press you'll see that just seven months before, Debenhams leaders were telling the world that they had redesigned strategy to reinvent the shopping experience for customers. Not to mention the so-called digital transformation consultants that were supposedly helping Debenhams write their digital economy success story.

Six months before going into administration the company's preliminary results and strategic update was headlined with "Transformation gaining traction in volatile markets, taking decisive action to strengthen base". The 33-page document continued its up-beat tone with statements such as; "we have seen the first positive signs of results in our Debenhams Redesigned strategy that show our transformation is gaining traction" and "new strategy designed to drive more choice and digital innovation".

Then an example of digital sugar coating with Debenhams statement; "Our 1.3m BeautyClub members and 0.5m beauty followers across Instagram and Facebook are highly engaged with social media and the Community will transform our relationship with customers and demonstrate digital leadership in the category."

Two years before going into administration, the company was announcing; "digitisation is key for Debenhams in its new strategy, as a mobile-first approach aims to broaden the reach both in the UK and internationally." This is exactly the kind of cliche talk that so many companies are being lulled into a false sense of transformation security by. Deluding themselves that they're transforming, when the reality is that they're not.

Regardless of who believed the Debenhams so-called transformation would achieve very much, despite the labels of "digital" and "transformation" all over it, the effort did nothing to secure the future of a British institution that had been in existence for over 240 years.

I've got no reason to pick on Debenhams - heck I enjoyed shopping there for years. But it serves as a good example in the here and now, of how fake transformation and digital sugar coating are very real, and how thousands of other companies are currently under a very similar delusion.

This is also an example of how brutal the digital economy can be, and that it couldn't care less about what any company has achieved in the past.

Then there was Britain's entire chain of Toys "R" Us stores which collapsed into administration in early 2018. A year earlier its leaders were announcing that they expected a positive impact on their marketing programs and an ability to connect with today’s consumers.

Toys "R" Us was another global brand - founded in 1948 - that sugar-coated itself with cool-sounding initiatives such as "experiential elements", technology initiatives and digital ads. And its “TRU Transformation” strategy was designed to address the known shift in shopper experience expectation. While all this made the workforce and stakeholders feel they were part of something transformational - something digital - all it achieved was a place on the growing list of digital economy victims.

In the United States, jeans company Diesel USA filed for Chapter 11 protection in the U.S. Bankruptcy Court in March 2019 and Italian luxury house Roberto Cavalli also filed for Chapter 7 bankruptcy in April 2019. 

And they're not the only ones losing sleep as more traditional companies hang on to old business models, because American producers of bedding have been living a nightmare of disruption. Much of the industry has been losing out to innovative start-ups like Casper, which completely undermine the tired old business models of traditional store-based mattress companies.

Of course, all the people involved in Debenhams, Toys "R" Us, and so many other companies mean well. They have good intentions, but often they don't know what they don't know, and they remain naive about transformation. The trouble is, the past success in business is no guarantee of success in the digital economy. Because while the world is now a very different place, many companies are still relying on business and operating models that were developed long before our digital economy was born.

Meanwhile, companies such as Netflix in America, Ocado in the UK and Bosche in Germany serve as great examples of what legitimate transformation really looks like.

So what companies do you know that informing their workforce and stakeholders how they are proud to be transforming their business and that they are leaders in their industry in using digital to do this? But in reality, are simply making faster caterpillars?

And who in your company has the courage to speak up and expose any digital sugar coating and fake transformation that could be putting the business at risk?

While some in your firm might be talking about emerging technologies, who are actually using them to reinvent the business model?

Because that's what will determine success in the digital economy. Not a pretty mobile app. Not a five percent reduction in costs. Not bean bags and flexible working time. Not a million Facebook likes. Not a fancy new logo. Not a ton of data. And certainly not another technology system.

Then there's the operating model, which also needs to be fit for running a very different kind of organisation. Because the one that was built 20 years ago or more is almost certainly incompatible with what's required to thrive in the digital economy.

So what's happening in your company to create new business models and to reinvent the operating model?

What safe pair of hands is responsible for managing that?

How is the workforce being engaged in those projects and programmes?

To what extent has the board made the CEO accountable for creating the new future their company needs?

Let me close by saying that while fast caterpillars might increase efficiencies, cut costs, and be necessary, there are often no butterflies being created and no sign of transformation taking place. And there are some dangerous downsides to being seduced into the transformation illusion while being caught up with digital sugar coating and fake transformation. Three of them include:

1. The fact that companies become so busy and preoccupied with creating fast caterpillars, that they stand still in the transformation stakes and increasingly vulnerable to the disruption that they can't see coming. 

2. Companies devote their limited time, effort and resources to creating fast caterpillars, because key “change” initiatives have become their priority. They have no time or resources to do anything else, other than create their fast caterpillars and maintain business-as-usual.

3. Companies are lulled into a false sense of security, because they have fallen prey to the digital transformation illusion. They might be doing extremely well creating with multiple digital solutions, but there's often no vision of a butterfly in sight.

Leaders need to remove any illusion their companies might be under about their transformation because no industry or company is immune from disruption. They need to remove all ambiguity that exists between transformation and change, then envision, enable and orchestrate legitimate business transformation.

They need to ask questions such as:

  • How is our transformation going to disrupt the market or protect against disruption?
  • Will our transformation eliminate our industry’s customer pain-points and complexity?
  • Will is cut our prices by at least 70 percent and still enable us to make money?
  • Will it make our dumb products and services smart?
  • Will introduce a platform where buyers, sellers and innovators (including our competitors) can do business together?
  • Will it transform our physical products and services into digital offerings?

And for every answer of “yes” you need to ask Why? When? and How?

If the CEO can't get the right answers to those questions, that's a good sign that their leadership team either needs help or some new blood.

There's nothing wrong at all with digital change projects because they bring about much needed small change, which is enabled by technology. They often save some cash and introduce improvements, so companies really need these projects. But don't mislead people into believing that all digital projects represent transformation.

PMI Ascent - Digital Business Transformation Management Course

 

Posted on: October 30, 2019 11:59 AM | Permalink | Comments (3)

Change is Constant - and Everyone's Business [Podcast]

There’s never been a need for organisational change management and a focus on the people side of change more than today, but a lot of organisations still struggle with it.

Karen Ferris is the author of several books about Organisational Change Management and she helps organisations thrive in the face of volatile, uncertain, complex and ambiguous change, providing new tools and approaches for a new age in organisational change management. Effectively, breaking the mould!

 

PMI Ascent - Digital Business Transformation Management Course

Posted on: October 25, 2019 12:00 PM | Permalink | Comments (1)

Transformation Through Acquisition

Every corporate leader hopes they're not going to be the next in line to face up to new competition that can render what their company does either inferior or obsolete. 

While for many years there was resistance to the notion of disruption, most leaders have now accepted that no organisation can remain the same and that they need to quickly deploy effective countermeasures that can rival the new kids on the block, and protect their position in the market.

But often the changes that companies are being confronted with are happening far too quickly for many of them to respond effectively, with the assets and capabilities they already have. The theory of responding effectively and the reality of doing is successfully are two very different things. 

Most companies talk about transforming, but aren't really doing it. Many talk about innovation, but aren't really doing it. And often transformation is easier said than done, particularly when many organisations don't have people that are professional innovators or orchestrators of transformation with a proven track-record. And just as with any other area of business, to be successful, you need experts and processes. Because while a good heart and good intentions are noble, it's simply not enough.

An increasing number of executives are also recognising that transformation is so much more than digital marketing, cutting costs and new technology. They understand that to transform, their organisation needs to innovate. But when innovation has never been a core part of the organisation, they realise that they're missing a vital prerequisite for transformation. 

And while some companies attempt to set up Innovation Labs, many eventually learn that there's more to innovation than multi-coloured post-it notes, whiteboards, bean bags, pizza and enthusiastic staff.

Companies often lack a clear framework for managing innovation. So even though there's a focus on cool new products and services, there's no consideration for process-driven innovation or an underlying business model.

Another problem with some of these innovation labs is that what comes out of them often fails to see the light of day because of resistance from leaders that are still stuck in the past and don't want to see their old products or services put under any threat - especially by their own company.

More CEOs are also coming to terms with the fact that while they have a CIO with an IT department, it's typically staffed with traditional IT folk who are skilled at keeping the lights on.

Coupled with the fact that many companies have struggled for years with executing basic change projects, it makes the odds of stepping up to the transformation challenge quite unrealistic for many. The truth is, most organisations aren't prepared for transformation.

So what's a CEO to do when the board is expecting them to transform? But they don't have an organisation that's up to it.

One way is to transform the organisation so that it's prepared to undergo transformation. And another is through acquisition. Because if you can't build it, you can often buy it. 

You can buy great innovation, great capabilities, and great new products and services, and an increasing number of CEOs are recognising that their best chance of transforming their business is to look outside their own four walls.

There's a growing trend to acquire start-ups for product or service innovation, that are predicated on a strategy of building new capabilities or business models. Because buying an existing business can be a much more appealing option for a CEO.

We only need to look at the behaviours of some of the most successful companies of our time to see that there's a lot to be gained from acquisition. Because when some of the most forward thinking companies on the planet know that they need to look outside for new capabilities, that's a good sign to others that they might consider thinking the same way.

Digital native companies, such as Amazon, Facebook and Alibaba are constantly buying other digital companies to expand their capabilities.

Often these acquisitions aren't the traditional deals aimed at building market power. Instead they're deals that enable them to acquire capabilities that accelerate growth, or enter faster-growing product or service segments or geographies.

Manufacturing, technology, or human knowledge – whatever the capability, acquisitions are a way to acquire it.

It can take years to build distribution networks or gain a foothold in a particular market. While acquisitions, can accomplish that for a company much faster. 

Amazon acquired PillPack to get a foothold in the online pharmacy space, with their sights set firmly upon disrupting that industry's incumbents. Salesforce acquired MuleSoft which connects data, devices and applications, and Microsoft acquired GitHub.

If you can look across industries you'll see that both old-traditional companies and digital natives are acquiring start-ups. Which are often tech start-ups, but not always.

Remember what Unilever did to compete with Gillette? They paid $1 billion for the Dollar Shave Club, which was a new market disruptor in the shaving market. The Dollar Shave Club was hardly a tech firm, but it had a disruptive business model that Unilever wanted.

These and countless other acquisitions were to enhance capabilities and open up new markets. Because they create a fundamental shift in a company’s ability to win in its chosen markets or change the dynamics of an industry. Businesses aren’t acquiring other businesses simply to expand what they’re already doing. They’re doing it because, strategically, they have to – if they want to survive and thrive in the medium to long term.

Acquisitions are very challenging, but when we see their importance to the continued growth of the world's most prolific companies, we see that they are seen by many as a way to stay relevant during this period of economic change.

For the past two decades, Google and its parent company Alphabet have spent tens of billions of dollars buying new products and ideas. The firm’s smartest acquisitions have been in areas where it had no special expertise, but were still close fits with the company’s core search business. 

Google acquired Android for $50 million in 2005 because it wasn't strong in mobile operating system development, but it saw mobile search as the future. They were right and now a large proportion of the world’s smartphones are powered by Android. Then Google acquired YouTube 2006 after it had failed at its own attempt at Google Videos. Again, this was great foresight on the part of Google's leaders.

Similarly Facebook is regularly buying start-ups, many of which most of us have never heard of, such as Parse, which was developed to follow other apps and their analytics to see how they are growing, or dying. This was a capability that Facebook lacked but wanted. So instead of trying to build it they bought it for $85 million and absorbed it into its ecosystem.

Meanwhile other acquisitions by Facebook such as WhatsApp, Instagram and Oculus Rift are more well-known to us. But most of their acquisitions are of small unknown start-ups created by brilliant young people with no corporate background. Often the words digital and transformation don't even exist in their vocabulary of the people that create these start-up.

These are just some examples of how important acquisition is for even the best companies.

Digitally advanced start-ups are disrupting the norm in a way that doesn't happen naturally in controlled corporate environments. The people in these start-ups couldn't care less about how things have been done in the past or what is an industry norm.

The 20th EY Global Capital Confidence Barometer was published in April 2019, which gauges corporate confidence in the economic outlook. It revealed the sentiment of 2,900 executives in 47 countries and 14 sectors; 68 percent of whom were CEOs, CFOs and other C-level executives. 

25 percent came from companies generating annual global revenues of less than US$500m, while 24 percent were from companies with up to a billion dollars in revenue. And the remaining 50 percent enjoyed upwards of that.

59 percent of the 2,900 execs said they expect to acquire in the next 12 months, many of whom intend to use M&A as an accelerated route to reshape their portfolios. And 59 percent also aim to add new markets, customers and intellectual property in their effort to reinvent their business models.

The report clearly showed that for the majority of the 2,900 respondents, the fastest way to achieve transformation is through M&A.

The changing economic landscape has led to a growth in buy-to-transform business thinking, and it's not just the tech giants that have developed an acquisition mindset and a keen eye for promising start-ups. Because an increasing number of CEOs from non-tech industries are beginning to appreciate that their continued success could well be determined by their ability to acquire the right start-ups.

And those with deep pockets are happy to pay large premiums to get access to new or disruptive technologies, and the people who know how to exploit those technologies. Big companies sometimes make offers that small companies find hard to refuse. After all money's a great motivator. 

While every acquisition is different, those doing the spending are normally after the talent, technology, platform, brand, market, or business model.

But there's a lot for a CEO to consider when buying a start-up, and I don't just mean the due diligence, profits, and revenue. Because successful start-ups have often been built by people who have no corporate experience and no desire to conform. Their success is often built on having complete contempt for how many corporations operate - and for how some of their managers and leaders think and behave.

Some of the most successful start-ups look crazy from the outside. Their cultures are often complete opposites to what we see in an established corporate environment. So it's extremely important to consider how two polar opposite cultures could work well together.

It's also easier than ever to acquire a start-up because there are so many of them. And while around 90% of start-ups fail in their early days - despite their great ideas - there's still plenty of choice left on the table for executives to consider buying. 

Because while it might have cost $1 million to launch a start-up ten years ago, now it can be done for just a few thousand - thanks to the affordable access to new technology, which enables entrepreneurs to build new products and services and go to market extremely quickly and inexpensively. This also makes start-up failure quite affordable, because trying again needn't be expensive for persistent founders.

Creating start-ups is no longer about finding investors. Or at least it needn't be. All you need is a problem big enough to be worth solving, and the entrepreneurial spirit and mindset that can be found inside every successful founder these days.

Business leaders also need to consider the process they’ll use to capture sought-after strategic benefits once they conclude an acquisition. Because that's when the real hard work begins. 

The last thing that should be allowed to happen is for old cultures and mindsets from the established organisation to kill the characteristics that made the start-up such an attractive proposition in the first place. 

So after acquiring a start-up, one of the first activities for a CEO to consider drawing up a plan which describes the first 100 days of ownership, and how they'll communicate their vision to both the old and new workforces.

PMI Ascent - Digital Business Transformation Management Course

Posted on: October 23, 2019 10:14 AM | Permalink | Comments (1)
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