COMMON CORE OF UNITY
There has to be a 'common
culture' or at least a 'cultural affinity.'
Successful diversification by
acquisition, like all successful diversification, requires a common core
of unity. The two businesses must have in common either markets or
technology, though occasionally a comparable production process has also
provided sufficient unity of experience and expertise, as well as a
common language, to bring companies together. Without such a core of
unity, diversification, especially by acquisition, never works;
financial ties alone are insufficient.
One example is a big French
company that has been built by acquiring producers of all kinds of
luxury goods: champagne and high-fashion designers, very expensive
watches and perfumes and handmade shoes. It looks like the worst kind of
conglomerate. The products have seemingly nothing in common. But all of
them are being bought by customers for the same reason, which of course,
is not utility or price. Instead people buy them because they are
'status'. What all the acquisitions of this successful acquirer have in
common is their customers' values. Champagne is being sold quite
differently from high fashion. But it is being bought for much the same
ACTION POINT: In any
acquisition, make sure there is a common culture or a cultural affinity
between the two entities.
THE FRONTIERS OF MANAGEMENT
RESPECT FOR THE BUSINESS AND
The acquisition must be a
No acquisition works unless the
people in the acquiring company have respect for the product, the
markets, and the customers of the company they acquire. Though many
large pharmaceutical companies have acquired cosmetic firms, none has
made a great success of it. Pharmacologists and biochemists are
'serious' people concerned with health and disease. Lipsticks and
lipstick users are frivolous to them. By the same token, few of the big
television networks and other entertainment companies have made a go of
the book publishers they bought. Books are not 'media', and neither book
buyers nor authors- a book publisher's two customers-bear any
resemblance to what the Nielsen rating means by 'audience'. Sooner or
later, usually sooner, a business requires a decision. People who do not
respect or feel comfortable with the business, its products, and its
users in variably make the wrong decision.
ACTION POINT: Take an
acquisition with which you are familiar. Was there a temperamental fit
between the two companies? How did the companies respect, or fail to
respect, each other's business?
THE FRONTIERS OF MANAGEMENT
Position the product clearly and competitively.
Reflect the character of the product.
Appeal to both heart and head.
with one voice."
USP NEEDHAM, Australian advertising
"Ambition is a hard
"The greatest compliment a
writer can have; to know that he has a written a thing so truly that
people not only believe that it happened but that it happened to
A.B. 'BANJO' PATERSON, Australian
journalist and editor.
"The knowledge of courtesy
and good manners is a very necessary study."
MICHEL DE MONTAIGNE, French essayist.
signified status. Today creativity drives status."
DENIS WAITLEY, Lecturer and author.
"Only the customers and
customers alone will pay our costs and provide our profits. So, we have
to conduct all business planning from customer's point of view."
JAN CARLZON, Swedish business leader.
"If in doubt, leave it
"Nothing is more
difficult, and therefore more precious, than to be able to decide."
NAPOLEON BONAPARTE, Emperor of
"The majority of those who
fail and come to grief do so through neglecting the apparently
JAMES ALLEN, American theologian and
"Patience is a necessary
ingredient of genius."
BENJAMIN DISRAELI, British statesman.