Are Acquisitions Making You Soft?

Are you buying your customers or truly winning them over?  Whether you grow organically or by acquisition can matter a great deal to long-term performance.  This is not always obvious in the way we evaluate managers — growth is growth inside the culture of many organizations, and so managers on a buying spree often experience a false sense of achievement.  And if you look closely at service businesses on an acquisition binge, a clear pattern emerges:  many are delivering an increasingly inconsistent service experience.  It turns out you can get lazy if you don’t have to earn the business of individual customers.

Acquiring another company can make a lot of strategic sense, but it doesn’t mean that you’re performing better.  I’ve watched the confidence of executives soar as they manage larger and larger companies (not to mention personal wealth, which often reinforces this confidence).  That confidence should be a narrow reflection of deal-making ability, but I rarely see confidence parsed in that way.  Instead, unearned operating confidence gets in the way of realizing that service is actually deteriorating.  And this can spell real trouble when you run out of companies to buy.

Oh, and add this to the challenge — executives with a taste for consumption also tend to leave once a company runs out of acquisition targets.  This can make diagnosing and fixing a service model even harder.

In my experience, organizations fare much better when they think carefully about the impact of acquisitions on their core customer experience.  Acquired customers often have different needs from existing customers.  It’s important to understand these differences,  along with the service model that was built to address these needs.  And then some difficult choices must be made.  Will you operate two service models?  Will you pick one model (typically your own) and hope the adjustment isn’t too unpleasant for your newly acquired customers?  They used to be #1 in the hearts of their service provider, and now they have to compete for the company’s attention. This transition is rarely seamless.  Acquisitions have a reputation for being painful for customers, which can often be traced back to neglect.  This is almost never a deliberate choice, but rather a lack of careful planning and choice-making on the part of management.

My advice?  Don’t wait too long to win over your new customers.  There is only so much they’re willing to endure.  At some point, even though they look like they’re still your customers, they’re really waiting for the chance to jump to a company that will retain them the old-fashioned way:  by earning their business.

3 Responses to Are Acquisitions Making You Soft?

  1. PJ says:

    Wise as always!

  2. Vikram Singh says:

    buying your customers Vs truly winning them over?? It seems challenging in every business when we look for buying business. A company process may match exactly but not the environment, not the culture, not the responce of the customers.
    “Leaders make their own path by their own way.” A lot has to be changed in the internal cutural enviornment as well as in the external environment of the acuired organisation. Those who do it smartly, WIN THEM OVER.. Always remember, CUSTOMERS ALSO LIKE CHANGES SOMETIME.

  3. Ken Bowen says:

    As summarized in “Small Giants; Companies That Choose To Be Great Instead of Big”; intimately knowing your values, mission and purpose seem to help mitigate some of the risks associated with growth by acquisition. Demonstrating a short term bump in revenues, which is the main focus of the typical profit worshiper, seems like a hollow victory to me. Isn’t growth for the sake of growth the big culprit in many failed growth strategies? I think Buffett called it Di-worsification??

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