Since I don’t believe in accidents, I wasn’t surprised when a recent spate of vendor acquisitions in the insurance industry coincided with my finding a related, 10-year-old article while rummaging through the bowels of The Chautauqua Center for Synchronous Occurrences. I was surprised, however, to find we’re still vigorously engaged in activities, the outcomes of which have been dubious, at best, historically. Why I find that surprising, I have no idea.
The article I found is called, “The Innovation-through-Acquisition Strategy: Why the Pay-off Isn’t Always There“. It points out the perennial truth that, the more things change, the more we remain human — incorrigibly immune to learning, perpetually in search of the next shortcut, unfailingly prone to idealism, and ever hopeful for The Next Big Thing that’s never been found:
While some purchases helped acquirers reap benefits, many failed to create the intended value.
Let’s start with innovation. I challenged the very notion of it – or at least the definition of it — in this post. If we can’t figure out how to define it, why do we persist in thinking we can buy it? Do we think the companies we acquire have defined it, perfected it, packaged it, and managed to keep it a secret? (Here’s a hint: they haven’t.)
Companies tend to give attention to those innovation acquisitions which are complex, but underestimate, or are unsure how to handle, those deals surrounded by uncertainty.
Let’s take strategy next. If strategy is defined as skillful use of a stratagem (it is) — and if stratagem is defined as any artifice, ruse, or trick devised or used to attain a goal or to gain an advantage over an adversary or competitor (it is) — then who’s coming up on the short end of the strategy? Why do we continue to be content to fool ourselves?
Acquiring an older, more mature firm can offer stocks of proven competencies as well as optimized processes, but poses greater integration challenges due to entrenched work routines and cultures and more cumbersome task reallocations.
And then there’s the pay-off. Most companies don’t acquire smaller companies because they want to purchase innovation. They acquire smaller companies because they want to purchase — as opposed to earn — market share. So, like sharks at the scent of blood, they go into feeding frenzies, gobbling up customer bases voraciously until they’re so stuffed they’re no longer fit to swim. In such cases, there are two losers: The big fish that overate and the customers of the little fish that got eaten.
Companies who [sic] once were acquisition-crazy … soon realized that while buying technologies was easy, making them pay off was not.
Nevertheless, we continue to ignore George Santayana, even as we let the decades roll by without notice.
As Grandpa O’Brien loved to say, “Go ahead. Back up.”
— Image by Ben_Kerckx, courtesly of pixabay.com.