M&A

That’s “mergers & acquisitions,” my least favorite topic when I was in graduate school.  I can understand the buzz enjoyed by the people who do the negotiations, but the usual and high rate of failures (70%) after the deals are sealed leave a bad taste in my mouth.  More so for those whose lives got messed up as a result of M&A!

Robert Townsend had some choice words for M&A as well, such as, “someone always ends up being screwed.”  In principle, Townsend was very much against the whole practice.  (see his “Up the Organization”)

Recently, I came across an interesting article on Gizmodo, titled “How Yahoo Killed Flickr and Lost the Internet.”   The key points the article makes are:  1.  Yahoo wasn’t and still isn’t a great innovator in internet technology.  It basically sets itself up as a directory of links, and sells spaces for ads.  What’s the core of the business?  2.  After acquiring Flickr, the corporate development favored integration over innovation.  What are the old and new cultures?  3.  Yahoo never really understood the customers’ needs and what’s behind a website’s, any site’s, community.  Who are your customers?  It’s always “customers first, stupid!” 

The author put the failure of the Flickr acquisition squarely and totally on Yahoo’s shoulders.  I have one reservation:  Why did Flickr owners agree to the deal?  They thought they’d be a better fit with Yahoo than the other potential partner, Google.  So, at that stage of courtship, I’d put the responsibility on both sides.   But once acquired, it is Yahoo’s responsibility to find ways to help nurture Flickr to expand, and it should allow Flickr to be the driver on that front.  Instead, Yahoo forced Flickr’s users to have to deal with one extra layer, Yahoo.  For instance, when a Flickr’s user opened her file, she’d be immediately bounced to the Yahoo homepage for sign-in.  If she didn’t have a Yahoo account, she had to sign up with Yahoo first.  After the Flickr’s old community revolted, loudly, Yahoo had to change back to Flickr’s old ways.

While Yahoo pressured Flickr to work with Yahoo’s corporate development, meaning finding ways to be integrated into the Yahoo services, Flickr missed many opportunities to potentially lead some of the nascent online services and cultures.  Before the acquisition, Flickr could have advanced its service to become the new (and perhaps better) “Facebook;” after all, its photo sharing was a huge component of social networking.  Or, it might have grasped the emerging smartphone culture and assumed the “Instagram” role.  It might also have the potential to do video sharing as well.  Could’ve, should’ve, would’ve…

As for “integration vs. innovation” in an M&A case, I feel ambivalent about it.  A significant portion of M&A failure is rooted in botched integration, a task that’s just so much less sexy and more onerous to execute than the high-rolling negotiation.  However, when an organization has made an acquisition and then has to choose between the two goals, given limited resources, I personally would always go for innovation, particularly where technology is concerned.

I think the bottom line is that when businesses put the bottom line as their major focus, they lose in the long run.  A business, any business, is built upon a product or a service, paid for by customers.  Back to Townsend’s simple assertion:  Focus on what your business is about, and do the best for the customers.  How complicated is that?!  Of course, the details in the operations are always far more complicated than first realized.  But that’s why it’s all the more important to focus on the fundamental what and for whom.

Welcome, June…  Till next time,

Staying Sane and Charging Ahead.

Direct Contact:  taso100@gmail.com

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