[Paul Leuck and Elizabeth Tse were co-authors of this article.]
Technology has accelerated companies’ ability to accumulate market share through scalable, platform-based ecosystems of integrated digital products and services. This digital arms race has pressured companies across industries to acquire or merge with competitors in pursuit of economies of scale (more of the same) or economies of scope (symbiotic and adjacent offerings).
Whether it is the AT&T-Time Warner deal or TD Ameritrade’s acquisition of Scottrade, merged companies need to create seamless digital experiences and capabilities for customers, partners, and employees. Depending on the business model, “digital” integration activities may include:
- Developing and commercializing revenue-generating products and services
- Enabling or enhancing interactions and interfaces across a customer experience
- Automating, integrating, and accelerating business operations
The merging companies must develop a cohesive strategy that combines their digital organizational structures, digital assets and properties, technology infrastructure, and products in a way that realizes the value of the merger. Done well, this process prepares the merged entity to launch new or enhanced digital products and services. Integration missteps, however, can negatively affect customer perceptions, company reputation, and business outcomes such as revenue. It also can create significant resource inefficiencies for the newly combined company.
Before integration activities begin, companies should take into account four key steps:
- Define an end-state digital business model and associated technology vision
- Manage human resource capacity demand, not just budget
- Create clear accountability to speed decision-making
- Keep customers engaged and informed about the impact of the merger
Addressing these four points will allow companies to plan effectively, stay productive, and communicate clearly with customers throughout the integration process.
1. Know where you’re going and the biggest risks to getting there
Digital merger strategy begins with corporate merger strategy. M&A activity is risky and therefore only undertaken if there is a significant benefit: expanded market share, entry into a new market, synergy of complementary product offerings, an enhanced platform effect, or the elimination of a competitor, to name a few.
Use your company’s overall business objectives for the integration as a north star to articulate the end-state goals for the digital experience. Do you want to build a stickier customer platform with a diverse product portfolio? Bring all of the acquired brands and channels under one roof with a unified customer experience. Are you acquiring assets in a new strategic global region? Prioritize relevant digital localization efforts. Did the CEO commit to synergy-related cost savings? Identify duplicative systems to sunset.
Digital experience objectives should drive technology decisions. It is important for the team overseeing the integration, including senior leadership, to get a clear picture of the current technology landscape and define the desired future state. The team should inventory existing applications and supporting technologies and assess which ones need to be migrated, integrated, or retired. For example, if two companies want to merge their customer-facing mobile applications, they might consolidate redundant content management systems to enable the development of a single mobile app experience. Firms may also take this opportunity to upgrade infrastructure, as Southern Wine & Spirits did during its merger with Glazer’s in 2016. Western Digital, when merging three companies, went so far as to migrate all three to a new ERP platform.
Knowing the desired outcome can help companies create a smoother integration process for all involved. One Metis Strategy client, for example, found the idea of migrating the acquired company’s branded website and app all at once to be too risky to its consumer experience, and thus decided to retire some digital assets using a phased approach. Only after the back-end IT systems were consolidated did the client combine all of its legacy sites and apps into a single branded experience. The phased approach ensured that consumers did not have to adjust to a new user experience until the platform was stable.
Organizations should also conduct assessments to identify the people, process, technology, cultural, cybersecurity, and regulatory risks that could impact the ability to successfully execute an integration. Of these dimensions, cultural risks are especially critical during an integration. Firms should examine differences in organizational culture (e.g. “move fast and break things” vs. staid and consistent) and ways of working (e.g. distributed, flexible work schedules vs. more traditional setups). Reconciling such differences is never easy, and there is no silver-bullet solution, but having a clear-eyed understanding of them can facilitate more effective communication throughout the integration process.
Once the risk assessment is complete, the most critical risks — be they financial, technology or otherwise — should be flagged for executive attention. The integration team should then create mitigation plans and assign ownership for managing those risks.
2. Assess the merger’s impact on people needs
Many organizations know to secure appropriate financial and technology resources for complex, one-off projects while accounting for contingencies. However, planning to secure sufficient human resources — the people and time needed to get the job done — is often overlooked. If you already feel resource constrained, this shortcoming will be magnified 10-fold during a merger, particularly when deadlines are written into contracts or announced publicly. Since customers use your digital products every day, the potential revenue impacts from delays and poor quality will be magnified as well.
To mitigate this risk, invest time up front to create a resource inventory for each department or division. This will help provide visibility into the demand for specific teams and subject matter experts over time. Based on this analysis, proactively plan to staff up for periods of high demand, either by reallocating internal teams to high-priority work or by tapping flexible temporary staffing models. It is important for teams to have a clear prioritization framework that will help them know what to focus on and keep critical activities humming. Keep in mind that parameters driving resource needs will likely change throughout the integration, so the resource plan should be reassessed and refreshed as needed.
3. Establish clear decision-making responsibilities
Effective decision-making processes are critical to success. The integration team should establish a clear and shared understanding of which stakeholders need to provide input on certain decisions versus those who simply need to be informed. If these roles are ambiguous, necessary decisions on issues with less executive attention are prone to go unresolved.
Creating an accountability framework can help. For one client undergoing organizational restructuring, we assigned key objectives, change activities, and associated accountabilities to senior leaders. Those leaders were able to cascade the objectives and activities to the rest of the organization. Such a framework creates a clear vision for how issues will be prioritized and triaged throughout the process. When applied to M&A, it can speed up decision-making and allow the integration team to flexibly manage trade-offs.
4. Keep your customers engaged and informed on the impact of the merger
One purpose of M&A is often to enhance customer value. To make sure customers are prepared for new offerings, companies should communicate with them throughout the integration process. Doing so requires firms to coordinate marketing, communications, and technical support efforts from the start to help manage customer expectations, deal with issues that arise during transition, and ultimately drive adoption of the new digital products. It also requires standing up ongoing operational support for new products or services. For example, call center representatives may require training on new digital services and products that will be launched. As part of resource planning for the merger, organizations
should consider whether both companies’ call center organizations should be combined, or one of the two should be sunset.
A customer-focused communications plan should be developed alongside internal implementation efforts. Will system cutovers impact performance or cause key functionality be offline for a period of time? Will customers experience major changes to the user experience once the integration is complete? If so, let customers know. It’s particularly important to ensure marketing and digital product teams are aligned so that marketing’s excitement-generating messages and product teams’ service interruption warnings are in concert rather than conflict. To bridge marketing and product teams, consider mapping communication points on a shared timeline. This allows teams to identify instances when planned marketing messages may risk driving traffic at a time when product teams anticipate disruption to the customer experience.
Pulling off a large integration is never easy, and few go exactly as planned. Adopting the approaches outlined here will help a company prepare for the unexpected and adapt to inevitable changes along the way.