08 Jun Ten tips for putting the customer at the centre of the Merger and Acquisition process
Why is that M&A success rates continue to hover around or below the 50% mark year on year? What distinguishes those companies with a track record of M&A success?
It’s a quest of mine to get to the very heart of M&A; understanding what makes some organisations successful and others less so.
BTD frequently writes on the many factors that will help improve M&A performance. However, one factor that hasn’t been fully addressed, and it’s to do with the most important stakeholder of all: the customer.
Customers determine whether companies thrive and profit or struggle and fade. So in this post, I’d like to share a few thoughts on how the customer can be made the centrepiece of the M&A process.
Unlike business assets, customers cannot be bought or sold in the same way. The hope is that when an acquisition is made, customers come along too. It just can’t be taken for granted. Far from it. With barriers to entry collapsing in so many industries, allowing new entrants to the market, customers have become a keen and hotly contested focus of attention.
We are in the Age of the Customer
It was Forrester who coined the term ‘Age of the Customer’ as “A customer-obsessed enterprise focuses its strategy, its energy, and its budget on processes that enhance knowledge of and engagement with customers and prioritizes these over maintaining traditional competitive barriers”
The ‘Age of the Customer’ calls for a realignment of the firms operating model so that people, products, processes and technology deliver upon a compelling and unified customer experience.
While it may sound difficult, many firms have got the message and recognise customer experience as a serious business discipline – and a profitable one too.
So when it comes to M&A, we also need to take this customer centric approach with a strong focus on what customers value most. With this in mind, I’ve put some thoughts together on how this can be practically achieved.
Ten Tips for putting the customer at the centre of your M&A process
- Include a person who can play the customer advocate role in the M&A team. Give this person responsibility for customer due diligence pre-deal and experience management during integration.
- Ensure a broader assessment of the target is made beyond financial considerations. Use business and operating model analysis as a lens to help match targets to the strategic purpose of the deal.
- Perform a gap analysis between the current and target customer experience capabilities, and determine what needs to be bridged, should the deal go ahead. This should include customer service, value propositions, channel, brand promise and engagement.
- Drill further into the current operating model to provide a holistic understanding how each of the various capabilities of the target, from culture to IT, can be combined to deliver additional value to the customer. The objective is to understand what the business drivers are and how they are linked.
- Consider also running workshops with various team members to help uncover opportunities and new sources of value to the customer. Far more can be achieved this way than an analytical spreadsheet exercise ever will.
- Go further and actually talk to customers on what they most value, and whether or not they believe a valued and unified customer experience is being delivered. Run the workshop findings with them and validate whether the internal hypothesis for delivering customer value is correct or not.
- Build the business drivers and respective links into the business case. Identify the chain of value drivers that deliver upon the customer experience. Make sure there’s a clear linkage between customer experience measures and deal performance.
- Engineer the delivery of customer value, as described in the business case, into the integration plans. This involves right-to-left integration planning rather than the common left-to-right approach that so commonly prevails. Begin with the desired business outcomes from the deal, in particular the customer value propositions, and work back through the value drivers that would deliver upon those outcomes.
- Structure the integration so that people resources, skills, attributes are aligned with the rhythm of work and delivery of deal value. This will be different in each case. In my experience, there are typically three key streams running in close sequence:
- Quick wins. Immediate delivery of value requiring only minimal effort post-deal. The team involved can be soon disbanded once the value has been delivered. The ‘Nike’ ‘Just do it’ approach is most appropriate.
- Transition. Usually related to hard cost savings achieved through the combining of systems, business functions and processes. These can be achieved with minimal impact to the customer. This is ostensibly a project management exercise.
- Transformation. Changes to the customer experience whether it’s through new markets, geographies, products, services, brands or channels. The leadership style is more inspired and eclectic in approach where a number of business disciplines intersect with each other -it’s more than just a project management exercise.
- Expand the M&A integration scorecard to include engagement measures at each of the customer touchpoints to ensure continued focus on customer experience during integration.
A few final words…
Customer experience is something that is fundamental to the success of every business. However, M&A can easily alienate those treasured customers and kill off value in the process. With the benefit of strong customer advocacy and the practical steps suggested here, post-merger success can be more readily secured.
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