CEO advisory Leadership and strategy in the news Craig Henry Craig Henry, Strategy & Avoiding acquisition pitfalls you to risks identified in due Leadership’s intrepid media diligence .... We’ve looked back over the last explorer, collected these examples thirty years of M&A to identify the 5. Gluttony: Just another wafer thin of novel strategic management root causes of the more epic mint? concepts and practices and disasters. These are the Seven impending environmental Beware the deal to end all Deadly Sins of M&A: the warning discontinuity from various news deals! signs that boards, CEOs and media. A marketing and strategy advisors can and must look out for 6. Wrath: “Anger is never without a consultant based in Carlisle, in the year ahead . reason, but seldom with a good Pennsylvania, he welcomes your one.” contributions and suggestions 1. Envy: The grass is always ([email protected]). greener. Great businesses have been destroyed by getting caught up Make sure that you do what is in the moment – by letting anger right for you, rather than simply take hold when the deck is mimicking what others have stacked against them .... done . 7. Sloth: Make the hard decisions 2. Pride: The final step before you now. fall. Don’t get too excited about Don’t believe too much in your closing the deal. own infallibility! Many, many serial acquirers have eventually “The Seven Deadly Sins of M&A”, come unstuck through Pottinger Perspectives, June 2016 remaining loyal to strategic www.pottinger.com thinking that didn’t evolve or simply believing they had the Cascading disruption and the magic touch when it came to Internet of Things choosing targets and closing transactions .... We are living in an era of bundling. The big five consumer tech 3. Greed: The long term starts companies – Google, Apple, tomorrow. Facebook, Amazon, and Microsoft – Don’t pursue a goal solely for have moved far beyond their original short term ends . product lines into all sorts of hardware, software and services 4. Lust: If it walks like a duck. that overlap and compete with one Pay attention to the due another. But their revenues and diligence. No matter how profits still depend heavily on enamored you are with a external technologies that are particular target, don’t allow outside of their control. One way to enthusiasm for the deal to blind visualize these external PAGE 52 STRATEGY & LEADERSHIP VOL. 44 NO. 4 2016, pp. 52-56, © Emerald Group Publishing Limited, ISSN 1087-8572 DOI 10.1108/SL-06-2016-0053 dependencies is to consider the interfaces – could become the numbers (the new, seemingly infinite path of a typical internet session, master routers of the internet numbers the internet and social from the user to some revenue- economic loop, rendering many of media provides) what we couldn’t generating action, and then . the other layers interchangeable or solve with attention. And with every back again to the user: irrelevant. new set of eyeballs (or clicks, or views) we added, we diminished the When evaluating an internet Chris Dixon, “The Internet merit of what we made. And company’s strategic position (the Economy”, Medium, 29 April 2016 advertisers asked for more, because defensibility of its profit moat), you https://medium.com/@cdixon/the- those eyes were worth less. And we need to consider: 1) how the internet-economy-fc43f3eff58a#. made more. And it was less company generates revenue and j87tj4y2x valuable. profits, 2) the loop in its entirety, not just the layers in which the company Digital disruption and media Joshua Topolsky, “Your Media has products. vicious cycle Business Will Not Be Saved”, Medium, 25 April 2016, https:// Video will not save your media For example, it might seem medium.com/@joshuatopolsky/your- business. Nor will bots, newsletters, counterintuitive that Amazon is a media-business-will-not-be-saved- a “morning briefing” app, a “lean major threat to Google’s core search 1b0716b5010c#.x7v5qbaug business. But you can see this by back” iPad experience, Slack following the money through the integration, a Snapchat channel, or loop: a significant portion of a great partnership with Twitter. All Microsoft, LinkedIn, and the Google’s revenue comes from of these things together might help, future of work search queries for things that can but even then, you will not be saved by the magical New Thing that LinkedIn, the business-oriented be bought on Amazon, and the social-networking company that buying experience on Amazon (from everyone else in the media community is convinced will be the Microsoft acquired, this week, for initial purchasing intent to answer to The Problem. $26.2 billion, was founded on two consumption/unboxing) is premises. The first was that, even in significantly better than the buying I can tell you from personal the winner-take-all world of Internet experience on most non-Amazon experience . in the media world businesses, there would still be e-commerce sites you find via that there is a desperate belief that room for a niche company Google searches. After a while, The Problem can be solved with the (meaning, in this case, only four shoppers learn to skip Google and New Thing .... hundred million registered users, go straight to Amazon . The Problem is that we used to have and a hundred million users per Amazon’s vision here is the most a really neat and tidy version of a month). The second was that what it ambitious: to embed voice services media business ....Putsimply, means to work in a business is now in every possible device, thereby there were far fewer players in the profoundly different from what it was reducing the importance of the game with far fewer outlets for their in the Organization Man era. device, OS, and application layers content, so audiences were easy to White-collar employees . (it’s no coincidence that those are sell to and easy to come by. self-manage their careers, in part by maintaining online personal also the layers in which Amazon is Then digital . And all of a sudden networks .... the weakest). But all the big tech all those old, fixed channels started companies are investing heavily in falling apart .... Microsoft, which in its early days voice and AI. As Google CEO thought of itself as a A second thing happened Sundar Pichai recently said: consumer-facing company, seems alongside those foundational to be turning into the The next big step will be for the very publishing challenges: this industry business-to-business player among concept of the “device” to fade . began to cede its power in the the Big Five. With this acquisition, it away. Over time, the computer delivery and distribution process to is betting on the idea that millions of itself? – whatever its form factor – other people ....People who told people who work in business will will be an intelligent assistant them the answer wasn’t the best of pour personal information into the helping you through your day. We something, it was the most of network, in ways that are will move from mobile first to an AI something. economically useful to Microsoft. On first world. So over time, we built up scale in LinkedIn, people do these things This would mean that AI interfaces – digital to replace user value. We because they believe that it’s a which in most cases will mean voice thought we could solve with better career strategy . in the new VOL. 44 NO. 4 2016 STRATEGY & LEADERSHIP PAGE 53 economy . A recent study by two outcomes. As the tale goes, “I don’t in its demo for Home, a forthcoming leading economists, Lawrence Katz have to outrun the bear . I just voice assistant device meant to rival and Alan Krueger, shows an have to outrun you.” Except when it Amazon’s Echo, seemed to be able increase of nearly fifty per cent over comes to disruption, that strategy to handle such questions. Two the past decade in what they call merely buys time. If the bear keeps start-ups – Viv, which was founded “alternative work arrangements” – running, it will get to you, too .... by members of the team that freelancing, temping, and so on. created the original Siri app that One notable exception was former The increase has been especially Apple bought in 2010, and digital laggard Axel Springer. The large in fields like transportation, SoundHound have also unveiled German media company was “a education, the arts, and, counter systems that can tackle such mere Internet midget,” according to intuitively, government. A bet on the complex queries. Financial Times Deutschland, until it future of LinkedIn is, to some extent, leapt into action in 2005. It went on To handle these questions, an a bet on the continued expansion of a shopping spree, acquiring 67 assistant would need to pull that kind of work. digital properties and launching 90 information from multiple online Nicholas Lemann, “LinkedIn’s initiatives of its own by 2013.13 Like services ....Andthat would be Complicated Bet on the Future of Schibsted, it saw the value pools very useful .... Work”, New Yorker, 17 June 2016. moving to online classifieds and Voice interfaces could usher in a made the leap. The lesson is that new paradigm in computing, one incumbents can win even with a late that would break free of the tyranny Surviving disruption start, provided that they throw of apps on devices. They could get themselves in wholly. Today, digital As company performance starts to a lot done for us without much media contributes 70 percent of suffer, tightening up budgets, tapping and switching. Google, Axel Springer’s earnings .