Black swan is probably the best way to describe what the world is now going through. Like everything else in the 21st century, this crisis hit hard and fast and required all of us the adapt at astonishing speed to a new virtual reality. Business processes that would have taken years to adopt are now being implemented weeks or months. Whoever put on hold their digital transformation is now playing catch up. Who ever wondered if remote working is an effective model is now experiencing first hand that it is.
Many wonder if the virtual world is just the new reality. Others believe it’s a matter of time before we all go back to where we were. Truth is no one can predict the future and can tell how long exactly it takes for the world to find a vaccine.
A few months into the crisis, what have we learned?first, the world did not end, so those prepping for a Mad Max reality, should wait for the sequel. Second, that the human spirit is strong and adaptable and humans find a new way to be effective always.
Same business objective, new ways. The fundamental of business have no changed. Objectives of top leaders via front office to back office – all stayed the same. But the way to get there needs to be more creative.
How to manage your strategy and revenues sources through volatile markets and a recession?
How to identify new segments, markets and opportunities?
How to go to market? How to sell virtually? Increase your reach? maintain your existing relationships?
How to manage costs thoughtfully through minimizing impact on key resources?
How to manage supply chain in a global world that suddenly isn’t so global ?
We are learning to challenge most business processes these days and finding experimenting new methodologies in high frequency.
The nine to five, in-person days, with all their benefits, are over.
This work from home (WFH) global experiment proved to be successful. Video proved to be as effective as in-person for many objectives. Time is not wasted on communing back and forth from home to the office. We are even free from the previous failed trend of open-space office design which had a counter result and instead of increasing productivity, it actually proved to reduce it as we had no privacy and felt uncomfortable to engage in conversations with our colleagues so we don’t interrupt others. We even have better ability to mix work with our family life and get small breaks to take care of house chores or have a quick chat mid-day to our significant other. Real estate cost are usually of the highest cost bucket of corporations next to headcount and development. Corporation are learning to appreciate the real estate cost savings of the WFH model.
With time passing, we are starting to see the flaws of the WFH model. It is mentally taxing as we get no breaks. No 2-3 min walks between meeting rooms or floors, not even a walk to get coffee. Everything is too accessible resulting in longer focus time which is mentally hard. Parents to young kids are the clear losers of the WFH model with reduced to no ability to focus and a real struggle to get anything done at all. Initiating new project or sales process is proving to be very hard as physical human interaction is proving to be critical to build trust. Creative teams are also suffering as the group casual setting and in-person coffee breaks is many time where the creative magic happens.
The post COVID office will look different.
Offices may not be going away but the 19th century industrial manufacturing line like office is gone forever (and good riddance!). The new office will be a place to come together, build relationships, have personal space from the kids, a place to get inspired and creative, and a place to start new initiatives. The new office will need more space per person to respect the need for sterility and high cleanliness. It will need even more spaces to meet others. We will come in if we need to and will WFH if we don’t. We will WANT to come in so we can see our colleagues and friends, and know we are not there because we have to show are faces to our boss. The days of walking in the office and seeing sports or shopping on people’s screens are up. The days of true collaboration are finally starting.
Merger Integration in a fast pace world
Published August 2019
In today’s super-fast changing world, keeping up with the newest technological development is harder than ever for global corporation which with all the resources still tend to be slower to market. The result is M&A activity is once again on the rise. But 90% of M&A still fail. The reasons are many but we can split it to two: bad fit and bad integration. Bad fit is the outcome of flawed due diligence, which should be looked at with caution and the highest sensitivity. Most corporation understand that and work hard to make a good decision.
Second is the integration: getting that one right sounds easy, right? most underestimate its complexity, cost and time of integrations. Getting the integration wrong can result with a very lengthy process, loss of talent, loss of market position and at its worst – a total fail.
How do you get integration right then? Good question.
Let’s start with why it’s so hard. People don’t like change. Both sides of the integration usually prefer to delay the project as much as possible and avoid it, for different reasons. On the acquired side, there is fear of loss of control as well as loss of jobs. On the acquirer side, well, everybody already have their day job which they master, no one has the patience for the “CEO’s new pet project” as its commonly referred to, and, they don’t like change too.
Basically, it is easy to make the decision that pleases both teams: "let’s keep everything as is for now” and the temporary become permanent and precious time is lost in achieving synergies, or leveraging the new asset. When integration is delayed, the risk of losing talent increases and de facto, the potential of the combined assets is not realized. Creating an integration office, which is focused on pushing the integration through has become the industry standard for successful integrations. The integration office will define clear financial and strategic goals, a clear overall timeline, defined governance model, a workstream and escalation structure, clear roles and responsibilities, budget and timeline per workstream. The office’s core principles should include balancing maximum impact with minimum business disruption during transition, which can be achieved with close oversight and the right level of agility.
The transition period come with risks such as loss of talent, overload of work hurting the day to day operations and tensions between the acquirer and acquiree. All should be closely managed. When managed right, the negative impacts can be brought to a minimum. An integration can make or break an acquisition’s success, putting in place specialized support will do the trick.
Integration's hidden costs
Published September 2019
M&A includes indirect costs associated with the integration which are hard to assess and in many cases are either under estimated or even fully ignored. These costs can be meaningful and should be considered during the due-diligence phase to avoid surprises post close and to best assess the ROI on the acquisition. The hidden indirect costs of integration are mainly, but not exclusively, in the back office functions: IT, finance, HR and compliance.
Information Technology:
IT refers to both the basic IT infrastructure (internet, email and phone system) as well as enterprise management system to run the firm (ERP, HR, sales, finance, supply chain etc). each company has its preferred way to run IT:
1. with its own in-house built systems or licensed/acquired industry standard systems
2. on premise or off premise
Once merged, IT should be one of the first functions to be merged in order to:
1. Smoothen the basic operations as one firm by having both side’s employees on one email system, one active directory and one file system
2. Increase the sense of unity between the two firms
3. For regulatory reasons such as GDPR
Merging basic infrastructure will have costs as either an in-house our external provider will need to map the acquired IT, put a plan in place and manage the merge.
The enterprise management systems integration can be more complex if the system used are different and even more complex if they were built in-house. An analysis should be conducted and decision should be made on the system integration cost, time and a plan should be created.
Postponing IT integration means maintaining dual systems and processes which means an ongoing fixed costs and a risk that with natural attrition over time the company will be exposed to a risk that no in-house team will know how to run these systems.
Human Resources:
HR system, compensations, holiday and benefits standardization workforce structure and leveling, titles standardization – all are tasks on the HR function that could require an external expert support and could take internal resources.
Benefits and compensation standardization is not a must. The advantages are: 1. helping merge the team culturally and 2) avoiding a two benefits system situation which could create tensions. It does come with a cost as the standardization is likely to be to the higher paying side (or risk losing talent).
Finance:
The finance function is critical to merge early in order to be able to report the performance and run the business. That also means merging the systems and processes, standardizing reporting databases and classification – a process that could be timely and costly.
Compliance:
With the regulatory environment constantly changing, not all companies brought themselves to comply with all the regulations coming out and bringing the acquired company to compliance in a timely manner (and minimizing the risk of taking the acquirer out of compliance) could be costly.
Nobody likes surprises post acquisition, especially from the kind that hurts the ROI. Bringing the right specialized support will help identify the hidden costs during the diligence phase, creating a more accurate valuation, improving decision making and improving the integration itself.
Corporate Transformation in the 21st century
Published January 2019
The 21st century is characterized by massive changes.
We have started the transition to a new order, which we still don't know exactly how it would look. The pace of technological development has quadruple vs what is used to be and in current pace, many Hollywood futuristic fictions will come to life in our lifetime. A new generation of millennials is soon to be the leader of the workforce, with its unique characteristics and values. The combination of political, generational and technological changes is shifting the world of global corporations.
Yesterday's winner, may be gone today, and today's winner may be gone tomorrow. Managing global business has become harder than ever and requires a new set of tools and perspective. Transformation, which used to be a process of companies in distress before they go under, is now a process healthy companies are taking on as part of their business operations to make sure they constantly evolve and are not left behind.
What does transforming a 21st century company look like?
It like the corporate version of taking a life coacher. It involves self reflection, goals setting, and hitting milestones. It is recommended to create a corporate function to focus on the transformation alone. Making sure the business model is effective and challenging it. Challenging the revenues side: challenging the product vision, go to market model, pricing and distribution. The function makes sure the corporate is evolving with the newest trends and is constantly sensitive to the new players in the market, challenging the corporate on its market position, potential collaborations and M&A.
On the expense side, the transformation function helps design the most effective org structure, working with the leadership and HR and taking into account current workforce trends such as flexible full-time/part-time working. Constantly challenging the operation model and balances the right fixed vs flexible cost centers, in house vs outsourced areas, centralized vs decentralized structure, flat vs hierarchical.
There is no clear one fit all answer.
Corporate history shows corporate management, like other fields, has trends. Some evolve with time, some come back. In reality, close examination of each organization results in a tailored specific solution. Even though we still have some absolute business truths (buy low-sell high, reduce fixed cost, maintain control of IP, differentiate etc.) we find that due to today’s multi-dimensional complex world, the corporate magic sauce is unique, and changes by the market’s fresh ingredients daily. The corporate CEO today is like a great chef who only cooks with the best ingredients, and each day is a new challenge, and agility is key to success.