In a previous blog, I noted how incredibly rare it is for a company to give an honest assessment of how things panned out after an acquisition, both positively and negatively. In the heady first days, there is always talk of synergies, new markets, revenue growth, combined talents, etc. But we all know that things very rarely go exactly as planned, which means that there are surprises (of both the positive and negative variety) to learn from. If only those lessons were routinely and widely shared.
I’d certainly love it if other leaders would open up to discuss their assumptions, both correct and incorrect, and pass on what they have learned. That kind of honest sharing would help avoid so much of the waste that occurs with many acquisitions.
I suppose if I want to ask for that kind of openness from others, I need to “walk the walk” myself, as I did in my earlier blogs about our acquisition of an Adobe business unit. (See “How’d that Adobe Acquisition Work Out?” and “Was the Adobe Acquisition Worth It?”)
In December 2013, we acquired a former reseller partner, Tetra4D, which oversaw the global distribution of our 3D PDF Converter product. This acquisition broke new ground for us. We were now in the business of providing software directly to end users, as opposed to our previous sole focus on providing software development tools to ISVs. We had a lot to learn about how to deliver, support, market, price and transact in a high-volume, lower-price market (vs. SDKs), selling mostly through VAR and CAR channels.
As I think back on the experience of the last 18 months, here are some of my observations that could prove useful to others.
Retain your culture. Only keep the people from the new organization that fit in with your culture. You can always rebuild expertise, but you can’t correct a poor cultural fit. If you have a strong company culture, and leaders who really understand it, you can quickly build up a great new team. We believe this was an important part of the success of our last two acquisitions. There was no difference between the culture of the newly built “Tetra4D team” and the rest of the organization. I attribute that to having a culture that could be clearly communicated, leaders who “got it” and a selection process for retaining people who fit the culture.
Think of Yourself as One. Be aware that it takes a while for your team, including upper management, to recalibrate how they think about the whole of the business. We now essentially have two distinct business units with different products, customers, processes, etc. The strong bias is to see the “original” portion of the company as the “real” company, with this new group as an appendage. We had been through this once before, but it was still a challenging mental shift, despite our motivation, to think of the company as a unified whole. One thing that helps is to quickly get people mixing with one another from different parts of the organization and also to be highly disciplined about how you talk about the organization. You need to aggressively eradicate the language of “us” and “them.” There is only “us.”
Manage the Merge. It often makes sense to fold the new organization into the larger organization over time. So rather than have parallel marketing, sales and finance teams, you merge them into a single organization. That made sense to us, too, so that’s what we did. Based on our experience, I would give two cautions here:
First, do not underestimate what you lose when you merge. You are purposefully dismantling a team that is tightly bound together, productive and focused on common goals. That's an important and powerful thing, so tread carefully. Yes, there are gains to be had in the longer-term by creating a more unified, efficient structure, but be careful to minimize the loss from disrupting a functioning team. Frankly, we underestimated the impact, particularly the sense of loss from the people who were part of the team dedicated solely to Tetra4D. Based on what we learned, I would recommend that you make 100% sure that everyone knows exactly what new team they will be a part of and promote team bonding right away. People want to feel they belong, with clarity on where they fit in, what the common goals are, etc.
Second, be extra careful about maintaining coordination and clarity of roles and responsibilities. A small team is usually tightly coordinated. Everyone knows what everyone else is doing and they all know where they fit in. When you disrupt that, responsibility gets muddled. The next time around, I would put mechanisms in place to ensure a high degree of coordination during the transition to a new structure. I also would carefully cross-check roles and responsibilities to ensure every single activity was covered and everyone knew by whom. We learned the hard way that assuming people will “figure it out” is a bit naive. The process, and the people involved, deserve this attention to get through an uncomfortable transition. Role clarity and communication make people happy and productive; lack of it leaves them confused and demotivated.
Understand a New Customer Base. We’ve always developed SDKs for developers, but now we were building products for designers, engineers, and/or creative professionals. We knew there would be adjustments, and it’s not easy or instantaneous to make this shift. Everything from sales, marketing, product development and support needed to be re-examined in a new light. We’re getting the hang of it, but the process has been challenging. Anytime you’re undergoing a radical shift in your business model, expect that the process will be quite bumpy at first.
Adjust to a New Sales Channel. We had not worked through VARs before, so we had much to learn. We found out the adage “build it and they will come” doesn’t work when it comes to building a channel. First of all, just any VAR won’t do. You need to put in the extra time and work to build relationships with the right partners who are the right fit for your products. You have to start with what qualities you are looking for in a partner and relentlessly pursue those that align. They should be focused on the right vertical markets/industries as well as organizations of the right size. They should have a business model that makes sense with yours. And they should be willing to fully engage with you to help you improve. Also, channel-building is its own skill, so it is usually a mistake to use a pure sales person to do this. Being successful with partners like these is very similar to being successful with our toolkit partners in that it requires that we wish at least as much success for our partner as we do for ourselves.
My next blog will discuss the upsides we discovered from our acquisition. In the meantime, let me know what you think about these five lessons and if you have encountered anything similar. The more we all share, the more we all learn.