Why Half of All Mergers Fail After the Honeymoon Ends



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Marriages and corporate mergers in America have at least one thing in common, more than 50 percent end up on the rocks. In fact, according to a McKinsey study, only 23 percent ever recover the costs of walking down the corporate aisle. Another study showed that over 40 percent actually lose shareholder value.

These statistics should quell the corporate urge to merge, but, like young lovers, logic seldom gets in the way of romance.

A merger between families illustrates the difficulty of creating an ideal marriage. Two single parents, each with their own children, pets, and old habits, decide to marry and join their families into one.

Because mom and dad are so in love, they fail to see that the kids don’t get along, the cat hates the dog, and their single TV can only handle one show at a time. Reality slowly begins to creep into paradise.

The cover of the February 7, 2005 issue of Fortune reads “Why Carly’s Big Bet is Failing, referring to Hewlett Packers acquisition of Compaq. And the list goes on:

Take Bell Atlantic and Nynex. They are already experiencing resistance to change from some of their family. The Communications Workers of America have voiced concerns about this merger. Both companies appear to have different approaches to unions. Bell Atlantic appears more confrontational, while Nynex in recent years has tried to build stronger ties to the CWA. How this gets handled, might be the first test of who holds the remote control during prime time in this new family. Will the telecommunications giants work together to develop a strategy for working with the union? Or, will they leave things to chance?

Bell Atlantic and Nynex, was not the only engagement announced recently. Time Warner and Turner, Aetna and US Healthcare, SBC Communications and Pacific Telesis Group have promised to join hands as well. In each instance, the decision to merge makes good business sense. Bright people using sound data, keeping the interests of shareholders in mind, made these decisions. Unfortunately most of the attention will be on regulatory issue, finances, and grand organizational designs. The subtle and seemingly soft issues like how decisions get made may be left to chance. If so, this could be disastrous.

The betrothed companies will need to pay attention to the fact that they are attempting to blend different ways of working. I urge these companies to consider the following as they work on their wedding vows.

  • How are decisions made? Do they come down from on high like lightning bolts from Zeus, or do people engage in a more democratic and slower process?
  • How do people get things done? When an accountant needs to talk with her counterpart in marketing, must she go to her boss, who in turn talks to his peer, who in turn relays the message to her subordinate? Or do people just move freely in and out of departments with little formal regard for rank?
  • What do communications systems look like? Does one company have an integrated management information system complete with e-mail and sophisticated intranet linkages, while its counterpart relies on pneumatic tubes, bulletin boards, and face-to-face contact?
  • How are people rewarded in the two companies? Who gets bonuses, promotions, and coveted assignments? Does one company applaud risk taking and initiative while the other reveres people who play by the rules?
  • What’s punished? Is telling the truth like the child in the emperor’s new clothes appreciated or does the speaker find he has just become a pariah?

Since each company believes that its way of operating is how God intended life to be in corporate America, major differences in culture could be difficult issues to face. It will important to persist. Typically, the more powerful partner prevails, but only at a cost. The “weaker” partner resists being told to change and this leads to subtle or profound resistance that hinders or stops efforts to merge operations. AT&T’s purchase of National Cash Register was a disaster, in large part, because the far-larger parent company tried to inflict its culture on a company that was proud of its rich heritage.

There is a choice. The two companies can identify these differences. Recognize what’s good about each culture and then determine jointly how they will face the future as a unified force. All these proposed mergers will face many tests to their cultures over the coming months. They can use these incidents as opportunities to examine differences and consciously select a way of working that fits the challenges they will face in coming years, or they can just hope they will live happily ever after.



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I very much enjoyed my discussion with Roy and I know you will too. For some background: the ACM, which is the world’s largest educational, scientific and professional non-profit association recently released their ACM Tech Pack on Mobility, edited and annotated by Roy Want, Chair of ACM SIGMOBILE, and his Mobility Tech Pack Committee. “The Tech Pack includes original work, must-read texts, and the latest research from the ACM Digital Library and beyond. Mobile Computing is the fastest growing area in computer science, fuelled by the explosive growth of the smart phone and cell phone market, expected to reach 1.7 billion units shipped this year. [2011] The Mobility Tech Pack looks at Visions and Challenges, Mobile Applications and Middleware, and Wireless and Mobile Technologies. The resource taxonomy includes Survey/Overview, System, Experience, Theory, and General topics. Additional materials include valuable community resources and events, as well as supplementary videos, tutorials, podcasts, websites, newsletters and blogs.”

Dr. Roy WantRoy Want is a highly respected research scientist at Google. Prior roles include Senior Principal Engineer at Intel, EIC at IEEE Pervasive Computing, and Principal Scientist at the Palo Alto Research Center (PARC).

For Want's significant contributions to Mobile and Ubiquitous Computing he was awarded the status of IEEE and ACM Fellow in 2005. Some of his best known projects are: Active Badge, an in-building location system; ParcTab, the world's first context aware computer system; Personal Server, wireless mobile computer interaction through larger nearby infrastructure and computers; and Dynamic Composable Computing (DCC), sharing resources wirelessly to build a logical computer on the fly. With over 65 issued patents, Roy is a recognized top international authority with research interests in: mobile computing, ubiquitous & pervasive computing, hardware design, electronic commerce, smart cards, distributed systems, multimedia systems, location-based services, mobile user-interfaces, MEMS and electronic tagging (RFID).

Roy is the ACM SIGMOBILE Chair and Chair [ACM] Mobility Tech Pack Committee. (http://www.roywant.com/cs and http://techpack.acm.org/)

Roy received his Ph.D from Cambridge University in 1988.

For a complete profile, go to http://www.roywant.com/cs/. You can find out more about Roy's research interests, professional awards, education, experience, skill set, projects, publications (conferences, journals, periodicals, books, book chapters, published reports, articles, editorials, workshop papers, and EIC introductions), professional activities (professional memberships, committees, conference program chairs, conference technical program committee service, selected invited presentations, editorial posts, PhD thesis committees, industry technical awards, and grants), patents, and media coverage.

To listen to the interview, click on this MP3 file link

DISCUSSION:

Interview Time Index (MM:SS) and Topic

:00:44:
Roy, can you profile your extensive research history and valuable lessons you wish to share from each of your top research areas?
"....Active Badge System: (a telephone system built on top of a local area network)....Lessons learned: You have to treat privacy very seriously....You can build excitement very easily, but for a lasting effect you really do need value....ParcTab: (this is the very first context-aware computer)....Lessons learned: Although for the majority of a day you might find there is no problem with the bandwidth, you've really got to design the whole system for the worst case of use....Only when you build something can you really explore its full potential....In order to explore its full potential you really need a set of tools which will allow developers to go in there and build things for themselves....Personal Server project at Intel: (a recognition of trends in technology)....Lessons learned: It's hard to get this concept into people's heads for them to understand the advantages until you marry it with a concept like the cell phone....If you have anything that is at all controversial be prepared for long debates and learn from those debates....Dynamic Composable Computing: (the notion that the design of any particular mobile device or a static device is limited in some way)....Lessons learned: In today's environment which is very creative and innovative you have to be prepared to defend any issues....Respect existing standards....If you are building a demonstration system to show the value of an idea like this you have to deploy it and create a certain amount of infrastructure...."

:18:41:
What would you say is the ratio between an innovative idea where you get some funding and budget to take it forward but it really doesn't realize itself in a broader scale out in the community and society in some way and those that do?
"....There are few projects in a research environment which take off and change the world, but it doesn't mean that you can't have point effect with something. There are lots of ideas which have come out of research which eventually through some route made it into products and incorporated into big systems...."

:21:00:
Can you profile your current research, and what you hope to achieve, and the value to the broader audience?
"....Dynamic Composable Computing project. The value to the larger audience is that you have devices which tend, as products, to be islands of innovation....The value to the consumer is basically that the sum of the parts is greater than the value of the individual components put together....More recent work, I've become interested in the potential for Near Field Communication (NFC) on telephones (the ability for phones to communicate with other phones through near field proximity)....Like a lot of new ideas it opens up another set of ideas and we'll see a lot of innovation around that in the near future...."

:26:18:
What are your goals as Chair of SIGMOBILE and what specific events and areas do you wish to spotlight?
"....One of the key aspects of SIGMOBILE, (which is basically representing the mobile research community), is that we create a set of top-tier conferences and workshops which supports the community. We have five sponsored conferences which are MobiCom, MobiSys, MobiHoc, Ubicomp and SenSys and one annual sponsored workshop which is ACM HotMobile....We also want to encourage the next generation of mobile researchers....The final thing on our agenda right now is to complete the Mobility Tech Pack which will go out in the next couple of months into the community. The Tech Pack is basically an annotated reading list which covers all of the major areas (and sub-areas) in mobile computing and to provide extended abstracts for particular papers...."

:29:46:
What do you see as the value to the non-researcher (that is the practitioner), in the ACM Mobility Tech Pack?
"....The practitioner is probably not aware of some of the newest ideas. We try to make sure that the Tech Pack has a spectrum of papers from perhaps an original publication in a particular sub-area which everybody should know about, but also some of the latest, breaking results...."

:32:30:
What is the total penetration of mobile: total mobile, shipped this year, predicted shipped next year, smartphone growth, regional differences?
"....Approximately 1.4 billion phones had been shipped in the last year (2010). I recently checked some of those numbers and now the prediction for 2011 is 1.7 billion to be shipped in the year (not all of them are smartphones)....In 2010 about 360 million were smartphones. Going forward we are seeing something like a 70% growth year to year...."

:34:34:
I guess there is even a relationship (especially in developing countries) between mobile use and an increase in GDP?
"....It seems that countries that don't have great infrastructure (the developing countries), are really making use of smartphones in ways that we don't need to in the West....We are seeing people who are building their entire business around their cell phone and that is how they stay in touch with their clients and how they interact with the rest of the world....It's very clear that this a "game-changer" for lots of those regions...."

:38:12:
Can you profile the visions of Mobile Computing?
"....Let me pick a couple of visions which have been very powerful. One of them was Mark Weiser's (Xerox PARC) vision. He wrote a famous article in September, 1991 for Scientific American, "The Computer for the 21st Century". In that he described what has become known as the vision of Ubiquitous Computing....Another area which has a lot of press and something that has not seen its day yet is the Vision of the Internet of Things...."

:45:48:
What are the current challenges for mobile and for 2012?
"....One of the things with mobile phones and mobile apps is that you've opened up the security hole....Another of the big challenges is power consumption...."

:49:51:
Please overview your views on mobile applications and middleware?
"....We're in an interesting time in the development of mobile applications. We're seeing a large number of apps … that are being created using toolkits for a particular operating system....The other alternative to mobile apps is the whole notion of web apps, web services....It's going to be an interesting battle over the next few years as to which one wins out and whether in fact there's been this huge push into design of mobile applications right now. You might see that pendulum swing back to web applications as the tools get better and people enjoy the flexibility of it...."

:52:56:
What is the status of wireless and mobile technologies?
"....All wireless technologies are improving....There's a lot of growth to go and as we're experienced in this kind of growth, applications adapt to take advantage of the additional bandwidth....In terms of mobile technologies, almost all technologies have opportunities for improvement. The processor technologies are becoming multi-processor systems, storage we are seeing more and more exponentially growing flash memory incorporated into the devices....The local wireless technologies on these devices are also increasing in speed...."

:57:01:
Where specifically can one find the best resources for mobility?
"....As an academic the best resources are the premiere conferences and the proceedings for those conferences (Mobicom, MobiSys, MobiHoc, SenSys, Ubicomp)....ACM and IEEE digital libraries...."

:58:49:
When is the ACM Mobility TechPack going to be released? [Editor’s note: Q4 2011]
"....We expect by the end of Q4 that it should be online...."

:01:00:32:
What are the top best practices in mobility that you wish to share?
"....In terms of best practices here I think the key thing is you've got to really respect the privacy of the people using it....It's very key that you let anyone who is using it know what you're logging and how you are going to use that data, and if possible design in a way which it's anonymized...."

:01:03:27:
You touched on some of this earlier but do you have some additional comments you want to make about the security challenges in mobility?
"....Security, as in all computer systems, is a moving target and there are well known techniques for looking for signatures of viruses etc. and these techniques are being applied to mobile phones, but as soon as we find solutions for some of these problems we will find new attacks. We have to accept that this is an on-going challenge. Going forward we'll get smarter at building detection mechanisms...."

:01:05:33:
Describe some areas of controversy or much discussion in the areas that you research.
"....How technologies will be used and whether they will be used for good or evil purposes...."

:01:07:21:
In your research, what are the top ways of measuring success?
"....The gold standard for success is that you somehow get your application or technology out into the hands of users and if the user community explodes then you have a success. There's no doubt that it's purely determined by adoption...."

:01:08:55:
In your current research, what are your top challenges and top opportunities? How will the challenges be solved and the opportunities be actioned?
"....Top challenges with security and power etc....There's motivation to solve these problems and it's going to be a long road, but we're going to make continuous progress because there's so much feedback that's happening, and there are so many things that are being tried on a weekly basis to solve these problems...."

:01:10:21:
What specific technologies should IT practitioners be embracing today and in two years, five years?
"....My first advice to any practitioner is if you don't have a mobile strategy yet you should certainly think about how you are going to create one. Secondly, if you have a mobile strategy for today's phones, that may not be appropriate strategy for tomorrow's phones....The important thing for the IT professional is to realize that it's a continuous process of innovation in the smartphone and mobile arena and you've got to track the technologies that are feeding into the phones and the capabilities...."

:01:12:40:
What specific technologies should businesses be embracing today and into the future? I guess the answer to the previous question applies also to the businesses. Or do you have any additional comments to make?
"....I think it's the same areas. No matter where you stand, technology innovation is very rapid....I think if you want to be educated about where things are going you have to take the broader picture and try and track not just the developer conferences, but some of the academic areas as well...."

:01:13:43:
Can you make predictions for the future in a more general sense, their implications, and how we can best prepare?
"....There's one area of technology I think is going to be very important and that's the ability to move computation around as a single unit. This is something that we really haven't seen yet...."

:01:18:30:
What are your thoughts on computing as a recognized profession like medicine and law, with demonstrated professional development, adherence to a code of ethics, and recognized credentials? [See www.ipthree.org and the Global Industry Council, http://www.ipthree.org/about-ip3/global-advisory-council]
"....We are now at a point and have been for many years where computer science has the chops to be one of these highly respected disciplines. One of the problems that we see is that it's not treated very well in schools. There aren't many Advanced Placement (AP) courses in high school that have any real value that students would want to sign on to....We need to address that. It's really a question of improving the quality of those courses, getting the universities on board and making sure that they know what the expectations are if people take those exams...."

:01:20:43:
From your extensive travels and work, please share a story (something amusing, surprising, unexpected or amazing).
"....I have one from a period of my life when I worked on the Active Badge Allocation technology....The lesson here is always be very careful about talking to the press when technology is involved...."

:01:23:41:
If you were conducting this interview, are there any questions you would ask, and then what would be your answers?
"....Might we move away from credit cards completely and just use our mobile phones for payment?...."



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