Global CIO: Mergers & Acquisitions Offer Huge Opportunities For CIOs
Here's how CIOs can help optimize M&A outcomes via skills in business-process optimization, strategy, and leadership, says the Center for CIO Leadership.
Mergers and acquisitions have been significant enablers of commercial, industrial and economic growth since before there was an economy, yet roughly 60% of all mergers fail to achieve their goals.
Why do so many of these transactions fall short of their mark, and what can be done to improve M&A results? One solution is greater involvement from CIOs, who are particularly well-positioned to understand the complex technical and operational dynamics involved in mergers and apply their experience and skills to optimize the outcomes. Here at the Center for CIO Leadership, we’ve just completed a research study that reveals just how that can happen.
In general, the closer in size and market stature the M&A partners are at the beginning of the program, the larger the impact (change required) will be during the formation of the new enterprise. Independent of size and market stature, most mergers and acquisitions cause significant changes across the most fundamental enterprise resources: business processes, organization, and technology. Let’s look at some real-world examples of how CIOs are positioned to lead the new enterprise through these changes.
At the core of any enterprise are the business processes that connect sales with customers, manufacturing with raw materials, procurement with supply-chain partners, human resources with employees, legal and compliance with regulators, etc. It is not unusual for a company to have more than one business process to enact the same unit of work: for example, multiple ways to open an account, procure assets or post cash to the general ledger.
Imagine that, for a variety of reasons, ABC Bank has four ways (business processes) to open a checking account. ABC Bank is now merging with Bank Z which, based upon its own unique history, has five ways to open a checking account. The short-term expedient would be to merge the two banks into ABCZ Bank which now has nine ways to open a checking account. This approach clearly sounds awkward, expensive, error-prone and non-sustainable over time. Furthermore, it is certainly not consistent with the vision of the newly formed ABCZ Bank to be the premier provider of banking products and services in the region.
Yet when the Operations and Technology people are around the table with the Product Management people, everyone has good reasons for why "their" version of the business process is the quickest, the cheapest, the most scalable, the most flexible, etc. Companies that follow this path to managing mergers and acquisitions most often find themselves falling significantly short of their goals. The results are typically quite disappointing in terms of achieving anticipated cost savings, maintaining customer satisfaction and therefore retention, and maintaining or growing revenue in the combined organization.
Here is a perfect opportunity for CIOs to step up into a leadership position and work with their partners in the business to not just combine but truly integrate the best parts of each of the legacy processes into a new and innovative best-of-breed process: in effect, a better way of doing business for the newly merged enterprise.
At a CIO roundtable conversation hosted by the Center for CIO Leadership, Karl Salnoske, CIO of Schering-Plough, spoke about this very issue in the context of the recent merger of Schering-Plough and Organon BioSciences.
"By looking at the systems and the technologies that both companies had and by using a 'best-of-best' approach, we found opportunities to leverage technologies from both companies to the benefit of the new organization," Salnoske said. "This thinking helped drive new capabilities and innovation in the company. It also made employees feel more enthusiastic about becoming part of one organization because they saw the investments and hard work they had done were paying off and being leveraged across a much larger company."
Karl's remarks serve as an eloquent example of the how the key components of the new CIO Competency Model developed at the Center for CIO Leadership provide the framework for creating significant opportunity for CIOs and the enterprises which they serve. Here are some thoughts on the four key components of Leadership, Business Strategy and Process, Innovation and Growth, and Organization and Talent:
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