$5 Billion Publicly Traded Company, Seeking Growth Via Smart Acquisitions
Business Challenge
Our client is a $5B publicly traded company, looking for growth via smart acquisitions. The company has been successfully transforming itself from a commodities business into a differentiated consumer products manufacturer with a deeply loyal customer base. To meet growth goals, the company will need to enter new adjacent product categories. While experienced in M&A, the company realizes that with ever-increasing competition, the successful buyer needs to proactively identify acquisition targets with strategic intent, ideally avoiding an auction process. Given over 300 defined categories in the industry, not to mention many emerging categories lacking established definitions, the challenge is to align the team (plus the Board) around the most attractive categories (and from there, potential acquisition targets) which represents the best opportunity for the client. Supporting information is incomplete, stakeholders are numerous, the stakes are high and the clock is ticking.
What to Expect with a Conventional Decision-Making Approach
Companies rely on high-caliber analytics to tackle increasingly nuanced challenges created by increasingly competitive markets. While analytics have become more sophisticated, the overriding decision-making process itself remains fundamentally unchanged, leading to several common errors. For one, conventional decision-making approaches tend to focus too much on the “size of the prize”, while not giving enough consideration to determining if there is a legitimate “right to succeed.” Moreover, they lack the structure and process needed to eliminate information blind spots, and to secure true buy-in among stakeholders. As any leader knows, authentic buy-in is essential for effective execution.
The conventional process fails to facilitate enough constructive debate (which requires balanced input from all team members) around what’s most important, to achieve a common point of view.
Instead, companies often rely on a communication plan, after the fact, to “sell-in” their decisions. Employees politely listen and nod their heads. Expected failure rate = 50%.1
Failure manifests itself as decisions that: simply get ignored; are “slow-walked” to death; decisions that are revisited again and again; or the proliferation of shadow projects unrelated to the agreed-upon initiative. The result is that 60% of decisions that do launch fail to achieve projected results,3 while one-third of decisions that never get executed at all. 1
The SIMPLIMENTAL Approach
SIMPLIMENTAL fit seamlessly into the client’s existing business development process, and we completed our work within 90 days, while consuming little management time despite some daunting challenges. Stakeholders spanned thirteen executives across multiple functions, divisions, and time zones.
Beginning with a high-level screen, we help identify the dozen most promising categories for more comprehensive analysis. Once identified, we began facilitating a structured process that generated authentic buy-in among all team members as to the most attractive and promising categories.
We first worked with the cross-functional team to refine their objectives, and secure agreement around the factors most important to their decision. Then each team member individually assessed and scored the factors for each opportunity, so that all participants influence the outcomes. We analyzed and synthesized the individual scores into an aggregate score, while measuring and mitigating effects of individual biases. This allowed us to identify the most important areas of misalignment, to focus the team on constructively debating the underlying assumptions for those factors, rather than spending time where there was already common ground. This attention to “outliers” serves to unlock valuable insights that already reside within the organization, resolve conflicts, and ensures that the entire team is working from the same set of facts.
Through our specialized facilitation, we helped the team define and address specific actions to increase confidence in their scores. This way, rather than the second-guessing that often occurs following a decision, confidence in SIMPLIMENTAL decisions actually increases over time.
We also focused the team on solving for “Flat Tires”, which are areas where the client lacks the capabilities to execute successfully. SIMPLIMENTAL is unique in the way it considers Execution Risk upfront to avoid surprises down the road.
The team quickly (and without angst) de-prioritized lower ranking opportunities, to focus efforts on the most promising choices. Throughout the process each team member had opportunities to influence the team, and to be influenced by the team… This is indispensable for achieving buy-in.
Because we measure it, we could show our client actual improvements in team alignment, the impact of unlocking new information, and the individual biases we helped mitigate. Validating the effectiveness of the SIMPLIMENTAL process, in turn fosters even more confidence of the team in their decisions.
The Outcome
Upon completion of our engagement, the client team leader took our recommendation (actually, the team’s recommendation!) to the Board of Directors. The work leading-up to the Board meeting was swift and without controversy or anxiety. The team was clear and united in their proposal. Everyone operated from “one version of the truth.” When asked to clarify or defend their findings, the rationale and assumptions were easily accessible from the SIMPLIMENTAL toolkit, which continually serves as an easy reference to maintain alignment among the team. Additionally, our toolkit allows new information to be easily incorporated into the full context of the decision, leaving little room for revisionist history and alleviating the work required by the team leader to reinforce or renegotiate team alignment over time.
The recommended categories were approved by the Board, and the organization moved immediately into deeper due diligence, acting quickly to identify targets and begin negotiations. Better still, with potential acquisition targets identified in the proposal, the Board effectively granted pre-approvals, thus allowing the team to negotiate and execute deals faster than ever. When it comes to acquisitions, speed matters.
SOURCES: 1. Why Decisions Fail, book by Paul Nutt, professor Ohio State University | 2. Lock Step LLC | 3. Harvard Business Review, Jim Whitehurst