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The Corporate Digest
Dear David,
Some summertime reading.
Change Fatigue?

'Back in the 70s and 80s things never changed as much, it was like the world stayed the same for longer, you know!' 


If we are honest with ourselves, change is here to stay.  Eric Hofner said, 'In times of change the learners shall inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.'  Hofner reminds us that change waits for no one and that we have to be equipped with the tools to manage an environment where change will accelerate exponentially.


Here are two different experiences with change.


Dr. Edward Miller a cardiologist at Johns Hopkins University took 100 patients who had bypass surgery and gave them reading material on how to live more healthy lives.  He showed them that their bad habits were death traps.  He warned them that they would probably die within four years if they did not change their ways.  If you knew your life was dependant on change, would you change?


Dr. Miller kept monitoring his 100 patients through the four years.  Guess how many were still alive after four years?  After all of the warnings, only nine out of the 100 survived.  Ninety one were so stuck in their habits that it cost them their lives.

Contrast that story with one involving Dr. Dean Ornish from University of California, San Francisco.  He had read of Dr. Miller's work and he took 100 patients with heart disease and monitored them for four years.  His results were dramatically different.  Of his 100 patients, seventy seven were still alive after four years.  What did he do that was different?


His approach to change had three fundamental differences. First, he did not threaten his patients with death, but helped them focus on reasons they wanted to stay alive.  Second, he helped his patients change immediately.  He did not allow months to pass but within the first 30 days he changed their eating, sleeping and exercising habits drastically. Third, his patients were divided into support groups.  We need support to change.


How can we apply these principles?  If we want to change, understand the purpose of the change and the picture of the future that promises a better quality of life.  The same applies to introducing change in business.  People want to understand why change is taking place and are less reluctant to change if they understand how it will benefit the business and themselves.


Second, if you need to change, do so immediately and drastically.  Stop pondering the change and get on with it.  This principle is more controversial and cannot always be applied, but is definitely the most effective way to change.


Third, if you want to change as an individual, get accountability and support.  We all need help to change.  In business, a proper change management process will provide the best results.  A good idea would be to have discussion groups about the change, especially for more dramatic change. Some businesses have change workshops for their employees while others provide coaching to support them through the change.


Learning how to cope with change is a key to success.

Preparing for the M&A Upturn

We know that Merger & Acquisition activity will pick up as soon as business confidence does.  This may give us an opportunity to form some new insights as to why they so often fail and better prepare ourselves for the next upswing.


Studies on M&A successes and failures often conclude that the majority of M&A deals either destroy shareholder value or fail to create incremental value that could have been generated in some other way, such as through organic growth.


The reporting is so gloomy that the popularity of M&A, particularly in economic upswings, sometimes seems to be more a tribute to human resilience and obstinacy rather that the product of carefully thought out strategy.


Professor Robert Bruner of Darden Graduate School of Business provides some additional insights in his book Deals from Hell, where he points out that the thinking around M&A failures can be badly flawed.  He points out that:


  • The risk of M&A failures is no greater than the risk of failure of any major capital project.  Risk is an inherent part of business and knowing how to manage it, rather than eradicate it, is a key challenge of management.


  • Our perceptions can be skewed by a few high-profile failures.  Bruner points out that between 1980 and 2001 most of the losses from M&A activities were generated by 87 out of 12,023 deals.


  • M&A failure is often reported out of context.  He points out that in a deal such as Time Warner/AOL a great deal of shareholder value was lost.  However, the acquisition was made immediately before a major economic downturn and some portion of that shareholder value would have been wiped out even if the acquisition had not taken place.


While that analysis may be correct, there are certainly some well-founded reasons for M&A failure including:


  • Key talent leaves.  The acquired company's employees often do not relate to the acquiring company's way of doing things and key employees leave.


  • Ignoring the culture fit.  Culture comprises assumptions, norms, shared values and practices that define a company - 'how we do things around here.'


  • Overpaying for the company.  There is no one right price for a company.  The notion of 'strategic value' can be a trap for the unwary.


  • Not paying enough attention to implementation.  Companies that are most successful at M&As understand the need to commit senior resources for ensuring that the deal achieves the objectives for which it is intended by managing the implementation process.


  • Ignoring existing customers while the acquisition is going on.  A great deal of work goes into the implementation aspects of the acquisition.  This may spread management pretty thin.  Existing customers notice the lack of attention very quickly and they will move on to a competitor.


  • A joint venture or alliance might have been a better option. When the objective is to acquire skills and talent, an alliance may be a better option so to avoid culture clashes that will lead to people leaving the combined entity. 


Maintaining a strategic perspective on mergers and acquisitions is vital for success.


Consult Levy has worked with many business teams to improve their effectiveness. We help with the tough decisions and help businesses, and their people, grow. To discuss how we can help you with any of these matters, please call 858-453-3778.  Learn More

July 2010

Picture of David Levy 
David Levy
Principal - Consult Levy
In This Issue
Change Fatigue?

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