The parenting bias is usually accompanied by the skills bias —the assumption that whatever know-how is required to achieve synergy will be available within the organization. Finally, executives fall victim to the upside bias, which causes them to concentrate so hard on the potential benefits of synergy that they overlook the downsides. In combination, these four biases make synergy seem more attractive and more easily achievable than it truly is.
Most corporate executives, whether or not they have any special insight into synergy opportunities or aptitude for nurturing collaboration, feel they ought to be creating synergy. The achievement of synergy among their businesses is inextricably linked to their sense of their work and their worth.
In part, it reflects their desire to make the different businesses feel that they are part of a single family. The synergy bias becomes an obsession for some executives.
Desperately seeking synergy, they make unwise decisions and investments. Pressured by the CEO, the category managers launched a succession of high-profile synergy initiatives.
The results were dismal. A leading U. It promptly flopped. A pasta promotion that had worked well in Germany was rolled out in Italy and Spain. It backfired, eroding both margins and market shares. An attempt was made to standardize ingredients across Europe for some confectionery products in order to achieve economies of scale in purchasing and manufacturing.
Consumers balked at buying the reformulated products. Rather than encouraging interunit cooperation, the initiatives ended up discouraging it. As the failures mounted, the management teams in each country became more convinced than ever that their local markets were unique, requiring different products and marketing programs.
After a year of largely fruitless efforts, with few tangible benefits and a significant deterioration in the relationship between the corporate center and the units, the chief executive began to retreat, curtailing the synergy initiatives.
A similar problem arose in a professional services firm. Created through a series of acquisitions, this firm had three consulting practices—organization development, employee benefits, and corporate strategy—as well as an executive search business. The centerpiece of this policy was the adoption of a coordinated approach to key accounts. The approach proved disastrous. Most of the big clients resented the imposition of a gatekeeper between themselves and the actual providers of the specialist services they were buying.
Faced with an uproar from the consulting staff, the CEO was forced to eliminate the client-manager positions. For both these chief executives, synergy had become an emotional imperative rather than a rational one. Spurred by a desire to find and express the logic that held their portfolio of businesses together, they simply assumed that synergies did exist and could be achieved.
Like wanderers in a desert who see oases where there is only sand, they became so entranced by the idea of synergy that they led their companies to pursue mirages.
Corporate managers afflicted with the synergy bias are prone to other biases as well. If they believe that opportunities for synergy exist, they feel compelled to get involved themselves. They assume that the unit managers, overly focused on their own businesses and overly protective of their own authority, disregard or undervalue opportunities to collaborate with one another. Assuming that unit managers are naturally resistant to cooperation, executives conclude that synergy can be achieved only through the intervention of the parent.
The parent, in our terminology, can be a holding company, a corporate center, a division, or any other body that oversees more than one business unit. In most cases, however, both the assumption and the conclusion are wrong. Business managers have every reason to forge links with other units when those links will make their own business more successful. In the music industry, to take just one example, the four leading companies will often share the same CD-manufacturing plant in countries with insufficient sales to support four separate plants.
Believing unit managers to be naturally resistant to cooperation, parent executives often feel compelled to intervene. If business-unit managers choose not to cooperate, they usually have good reasons. If business-unit managers choose not to cooperate in a synergy initiative, they usually have good reasons. At Worldwide Foods, for example, one of the corporate category managers attempted to create an advertising campaign that could be used throughout Europe.
The single campaign seemed logical: It would promote a unified brand and would be cheaper to produce than a series of country-specific campaigns. And, because the campaign would be funded at the corporate level, the presumed it would be attractive to the local managers, who would not have to dip into their own budgets. But several local managers rejected the corporate advertisements, cases choosing to produce their own ads with their own money. The category manager, rejection as evidence of local-manager intransigence, asked the chief executive to impose the corporate advertising as a matter of policy.
But discussions with the local managers revealed that their rejection of the corporate campaign was neither reactionary nor irrational. They believed that the corporate campaign ignored real differences in local markets, cultures, and customs.
The pan-European advertising campaign would simply not have worked in countries such as Germany, Sweden, and Denmark. If, for example, unit managers believe that the opportunity costs of a synergy program outweigh its benefits, forcing them to cooperate will make them even more skeptical of synergy.
Although headquarters sometimes needs to push units to cooperate—when, for instance, some units are unaware of promising technical or operational innovations in another unit—it should consider intervention a last resort, not a first priority.
Corporate executives who believe they should intervene are also likely to assume that they have the skills to intervene effectively. The members of the management team may lack the operating knowledge, personal relationships, or facilitative skills required to achieve meaningful collaboration, or they may simply lack the patience and force of character needed to follow through.
In combination with the parenting bias, the skills bias dooms many synergy programs. In one large retailing group, the chief executive was convinced, rightly, that there were big benefits to be had from improving and sharing logistics skills across the company. Knowing that competitors were gaining advantages from faster, cheaper distribution, he felt, again rightly, that his businesses were not giving this function sufficient attention. The whole initiative quickly fell apart. The skills bias is a natural corollary to the parenting bias.
If you are convinced that you need to intervene to make synergies happen, you are likely to overlook skills gaps—or at least assume that they can be filled when necessary. Professional pride, moreover, can make it difficult for senior managers to recognize that they and their colleagues lack certain capabilities. But a lack of the right skills can fatally undermine the implementation of any synergy initiative, however big the opportunity. Whether or not the intended benefits of a synergy initiative materialize, the initiative can have other, often unforeseen consequences—what we call knock-on effects.
Knock-on effects can be either beneficial or harmful, and they can take many forms. A corporate-led synergy program may, for example, help or harm an effort to instill employees with greater personal accountability for business performance. It may reinforce or impede an organizational change.
It may increase or reduce employee motivation and innovation. Or it may alter the way unit managers think about their businesses and their roles, for better or for worse. In evaluating the potential for synergy, corporate executives tend to focus too much on positive knock-on effects while overlooking the downsides.
In large part, this upside bias is a natural accompaniment to the synergy bias: if parent managers are inclined to think the best of synergy, they will look for evidence that backs up their position while avoiding evidence to the contrary. The upside bias is also reinforced by the general belief that cooperation, sharing, and teamwork are intrinsically good for organizations. In fact, collaboration is not always good for organizations.
In one consulting company, for example, two business units decided to form a joint team to market and deliver a new service for a client. One of the business units did information technology consulting, the other did strategy consulting. One evening, when the team was working late, the strategy consultants suggested that they order in some pizza and charge it to the client.
The IT consultants were surprised, since their terms of employment did not allow them to charge such items to client accounts. Yet here they were working together doing similar kinds of tasks. An attempt to resolve the problem by moving some IT consultants into the strategy business only made matters worse.
As the pizza problem shows, viewing cooperation as an unalloyed good often blinds corporate executives to the negative knock-on effects that may arise from synergy programs. They rush to promote cooperative efforts as examples to be emulated throughout the company.
The downsides of synergy are every bit as real as the upsides; they are just not seen as clearly. The best antidotes for these four biases, as for all biases, are awareness and discipline. Simply by acknowledging the tendency to overstate the benefits and feasibility of synergy, executives can better spot distortions in their thinking.
They can then put their ideas to the test, posing hard questions to themselves and to their colleagues: What exactly are we trying to achieve, and how big is the benefit? Is there anything to be gained by intervening at the corporate level? What are the possible downsides? The answers to these questions tell them whether and how to act. It also tends to undermine implementation, leading to scattershot, unfocused efforts as different parties impose their own views about what needs to be done to reach the imprecisely stated goals.
Executives should strive to be as precise as possible about both the type of synergy being sought and its ultimate payoff for the company. Overarching goals should be disaggregated into discrete, well-defined benefits, and then each benefit should be subjected to hard-nosed financial analysis.
Clarifying the objectives and benefits of a potential synergy initiative is the first and most important discipline in making sound decisions on synergy. Dismissing the idea, he tried to shift the discussion. Everywhere she went, the category manager found herself mired in similarly fruitless debates. There was no common ground on which to build. Finally, the category manager stepped back and tried to think more clearly about the synergy opportunities.
She saw that the broad goal—leveraging international brands—could be broken down into three separate components: making the brand recognizable across borders, reducing duplicated effort, and increasing the flow of marketing know-how. Each of these components could, in turn, be disaggregated further. Making the brand recognizable, for instance, might involve a number of different efforts affecting such areas as brand positioning, pricing, packaging, ingredients, and advertising. Each of these efforts could then be evaluated separately on its own merits.
All too often, executives set overly broad goals for their synergy programs—goals that make good slogans but provide little guidance to managers in the field. By disaggregating a broad goal into more precisely defined objectives, managers will be better able to evaluate costs and benefits and, when appropriate, create concrete implementation plans.
The exercise proved extremely useful. The category manager was able to go back to the local managers and systematically discuss each possible synergy effort, identifying in precise terms its ramifications for each local unit. In some cases, she found she had to take the disaggregation even further. Each item required a separate evaluation of costs and benefits. The type of cap, for example, had a big impact on manufacturing costs—and thus was an attractive candidate for standardization—but some local managers argued that changes in cap design could hinder their marketing efforts.
What is synergy? Synergy means that when two companies join together, they will be able to achieve higher levels of success than they would have on their own. This means the combined companies will be able to generate better results in addition to creating increased value. However just because two companies might seem to present an ideal opportunity for a merger, it does not mean that things will actually play out that way.
For example, if two companies attempt to merge but their cultures are incompatible, it could mean the goal is not obtained. Companies can create synergies by combining products or markets. For example, toothpaste manufacturers offer toothbrush products to capture a higher value.
Cooperation between a developer with a marketer in developing a web is another example. The marketer develops communicative and exciting messages, while the developer translates them into programs.
As a result, they not only create creative content but are also communicative. It makes more and more web visitors. Synergy is the basis of mergers, acquisitions, or strategic alliances.
Take an example of a merger between a carmaker and a car distributor.
0コメント