Appeasing Internal Silos Concerned About An Acquisition or a Decision to Enter New Markets can be Costly
It may just be too expensive to buy the support of internal silos for a planned acquisition of a direct competitor, or a decision to enter new markets. We recently wrote about a recent experience sourcing a hard cover copy of a best selling novel. We considered buying the book from Barnes & Noble, rather than our normal process of simply ordering the book from Amazon dot com. Amazon usually charges us a fee for shipping books. Barnes & Noble has a brick and mortar location within a 5 minute drive from our office. But when we priced the book for pickup at the local store, we decided to stick with Amazon. A $17.00 purchase became a $35.00 purchase should we pick up the book at the local Barnes & Noble.
So Barnes & Noble lost our order as the result on an inability to meet or exceed a competitor’s price advantage. The tariff required to appease an internal Line of Business (LoB), in this case the brick and mortar store, was too high for us to handle.
We think the activity inside Microsoft around its recent acquisition of Yammer might produce the same type of very dangerous handicap, should LoB silo warfare spill over into the public marketplace.
This same kind of occurrence arose in the late 1990s, when the Wall Street Journal entered the online market with the online edition of the daily paper. Ditto for Conde Nast when the decision was made to enter online markets with electronic versions of its set of print magazines. When business plans require controversial strategies capable of shocking otherwise powerful internal sales teams, plan on an expensive effort to buy their support. Quantifying this anticipated cost against the likely costs of either status quo, dismantling the competitor, or permitting public competition between two offers soon to be owned by the same parent must be an absolutely mandatory step in the process of deciding whether or not it makes sense to acquire a competitor.
If you could use some help working through a range of scenarios, any of which may be triggered by an acquisition you are considering, please contact us. We offer services you can use to formalize your planning while making a best effort to consider your notion from all angles before you take a step forward on it.
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