Case Study

Mapping the Organizational DNA:
Living System Approach to MERGERS & ACQUISITIONS - PART I

This chapter focuses on a systems view of leadership, strategy, structure and culture and the dynamic nature of the relationships between them and how these relationships could impact the outcomes in mergers, acquisitions and joint ventures.

By Prasad Kaipa, Ph. D.

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The human aspect of the system (in this case an organization) is at the heart of this chapter. As such, market and technical analysts, financial strategists, the local and global nature of the products or services involved, and myriad other critical features involved with merger and acquisition will not be considered here. It is important to see the larger picture of which all these elements are parts and the system is alive because of the human element. The greatest financial strategy combined with market readiness and the technical expertise to deliver can languish for lack of the human side of the equation. It is just that side of the equation that will be considered in the following pages.

The chapter will begin with a case in which one of the authors was the consultant (PK). Many aspects of the systems model that will be outlined later are represented in the case. Following the case will be the explanation of the model including a description of how one's perceptions of the model evolve with experience.

The goal of the chapter is to introduce a process for assessing the human aspects of the organization such that the outcome will contribute in a very real and meaningful way to the consideration of a corporate merger or acquisition.

The Case

Company X –- A large technology company made the decision to grow rapidly. The leadership decided that the strategy for growth was through acquisition of Company Y with the technology that they wanted to grow into. At the time, Company X did not feel that it had the time to internally develop the technology. It did not want to create a joint venture partnership with another company because the returns appeared to be greater by outright acquiring a company with appropriate technology.

Company X bought the Company Y, focusing primarily on technology and not on people (though they all became part of Company X). Company X incorporated the technology into new products that could be sold to its market (through its ecosystem partners). The Company X organization was structured in partnership with external implementation companies and their structure led to win-win-win situation for the company, partners and customers so far.

When the Company X presented the new technology and new strategic direction to its external partners, there was unusually low interest (less than 20%). The external partners did not see Company X to be a credible leader in this new domain. As a result, the partners rejected the invitation to become advance partners investing in the growth of this new market with Company X.

Then Company X then hired external consultants to work with problems that had emerged. At the initial meeting, the consultants and Company X revisited the goals of the company, its reasons for acquisition, and its vision. Out of that meeting, all agreed that creating a new knowledge business model consistent with the “"genetic code"” of Company X would be the outcome of the consulting project. The list of goals enumerated at this meeting included:

  • Developing widespread use of this business model across the company to help catalyze  cross-functional efforts
  • Accelerating new technology absorption inside and among the ecosystem partners
  • Reducing cycle time to competency
  • Supporting partner strategies
  • Influencing new business directions
  • Fostering improved customer value
  • Advancing the Company X goal of leading the industry

In establishing the process for creating the new business model, the consultants took into account the difficulties Company X was having internally in integrating both the technology and working styles of different divisions within the company including the new division. These internal difficulties as well as the external challenges in communicating and convincing the ecosystem partners are examples of cultural and structural issues that can be critical to the success of any merger or acquisition. The consultants paid attention to other acquisitions that worked well for Company X and looked for understand what is different in the current scenario. Schein advises that culture be taken seriously; that knowledge allows the company to work with a more complete picture of the consequences of its proposed actions. In this case, by paying attention to culture, we understand the assumptions, reward structures and people motivations behind what works and what does not in the partner model that Company X works with.

Once the potential outcomes were identified, the team identified different functions and people who need to become part of the consulting effort. The consultants identified heads of product development, channels marketing, IT, customer relations, and technical support divisions connected with this product/technology. They met with each of the heads one at a time sharing the vision and goals for the project and validating the assumptions and understanding different perspectives. Enrollment in the project was extremely important as many of the executives were very busy; and they were unavailable unless what was being offered directly relieved their pain or added to their successes. The consultants gave the leaders a choice regarding participation: they themselves could become part of this team or nominate a person in their division who could represent them and make the decisions for that division. Through these meetings, it was possible to get some understanding of how the leadership functions in Company X, the structures that facilitate collaboration and prevent working together, the cultural enablers and impediments that could potentially affect the project. In addition, the strategy that Company X uses in developing, marketing, selling, supporting its products was partially elaborated by some of the executives.

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