Key Success Factors for Integrating Innovation Acquisitions
In my first post on this topic, I discussed the importance of successful integration of innovation acquisitions. It's a timely topic because, increasingly, open innovation is being expanded from simply acquiring/licensing technologies to more situations of aquiring small companies as a platform for innovation-driven growth.
I'm differentiating here between M&A for traditional purposes (synergies, new market expansions, new categories, etc.) and acquisitions driven from the strategic goals of 'open innovation' which are more about acquiring a technology or product platform that can be married with the large companies' brands and distribution for rapid, innovation-driven growth.
More and more start-ups are recognizing the value of selling directly to these large companies versus pursuing venture capital money and/or IPOs to take the business to another level. Here's a link to an interesting article from last year in Fortune Small Business on that topic (I'm quoted in the article).
In my prior post on this topic, I used the example of Black & Decker and Vector Products as something that represented what I see as an unsuccessful integration. In the post, I discuss how what looked like a smart acquisition turned out to have apparently destroyed the innovation that was acquired.
So what's it take to make for a successful integration?
Here's my list of key success factors:
- A recognition upfront of the cultural differences and sensitivity (especially on the large company's part) to those differences
- An integration strategy that deals with not just the first 90 days (this is the part most companies do well), but also the first 900 days (meaning that companies need to recognize the integration process is a 3-year process, not a 3-month process)
- A willingness to allow exceptions to the rules -- successful integrations allow these smaller, entrepreneurial entities to sometimes play by different rules when it comes to financial reporting, bonus/incentive structure and even reporting relationships
- Senior leadership's ability to accept and support ambiguity and dual systems, at least for a period of time -- I use the analogy of China and Hong Kong (somehow the People's Republic of China has thus far been able to govern successfully under two vastly different approaches without destroying the success of Hong Kong's openness)
- Most of all, the selection of a strong leader (who has credibility with and strong support of the parent company CEO) for the acquired business who understands and can relate to both the parent company's culture, systems and approaches, and the acquired company's unique entrepreneurial style. Often this will turn out not to be the original founder/CEO, but rather someone who has had experience in both startups and the large corporate environments (likely the parent company).
In the next post, I'll provide a few examples of companies doing this well.