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COVID-19 is shaping a “New Normal”—a Low Touch Economy that requires a strategic response.pic 1 Strategy Development Responding to COVID 19

The world is changing. Forced isolation and social distancing restrictions have been put into place with the advent of the COVID-19 health crisis. This is not expected to end soon but is expected to have a lasting effect on the world. In fact, a new generation of consumer behaviors is already being shaped.

The new world will not be better off or worse. It will be different. During this period of influx, some businesses will thrive in this change and reach accelerated success, while others will struggle to find their footing in all of the chaos. The Low Touch Economy is here.

The New Normal

The post-COVID-19 era will have an economy shaped by new habits and regulations based on reduced close contact interaction, tighter travel, and hygiene restrictions. While managing the current health crisis is the first priority, companies must start adapting its strategic response to the mid and long-term ripple effects of COVID-19.

Businesses, to survive, must learn how to effectively respond to COVID-19 that is marked with plenty of ups and downs and economic uncertainty. There will be fundamental shifts that are here to stay and there will be industries that will be turned upside down. Until there is a vaccine or herd immunity, the base case scenario will be continuous up and down of disruptions for the coming 2 years. Strategy Development now calls for business to make the right strategic approach.

The 3-phase Approach to Strategic Planning

During turbulent times, businesses must have the agility to switch from defense to offense. Taking the 3-phase approach to Strategic Planning will prepare organizations for the Low Touch Economy.

Phase 1: Protect

The first phase is focused on acting now to protect and run the business today. It is basically responding to the crisis and protecting the business. The primary objective of Phase 1 is to ensure the continuity and stability of the business despite the ongoing crisis.
This is best undertaken when employees and customers are grappling with one basic emotion and that is fear. The organization is faced with a declining revenue with prospects of liquidity freeze. Unfortunately, time horizons at this phase also remain uncertain.

When these scenarios are happening, the organization must strive to undertake strategies that will both protect the business, as well as ensure its continuity and stability. One strategy that must be undertaken is to put the safety of employees and customers first. With the advent of COVID-19, this is considered the most urgent thing to do and the most important. Once this has been taken care of, senior leaders can set up a war room where they can tackle immediate challenges.

The war room discussions must shift from just being reactive to being proactive when it comes to crisis management. At this point, model scenarios that are developed must be more aggressive than any of the team can think of. It has to be aggressive in the sense that it is capable of protecting the business from the disruption that COVID-19 is greatly inflicting on the organization.

At this time, during this phase, this is the best time too to invest in Innovation Management and R&D. While others are stalling, the most innovative companies spend more on R&D during the recession. The other 2 phases are Recover and Grow. Phase 2, Recover is focused on accelerating through the recovery and Phase 3, Grow is focused on achieving growth in the Low Touch Economy.

In what phase is your organization now? Are you Protecting? Recovering? or Growing?

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Supply Chain Resiliency is the capability of the Supply Chain to be prepared for unexpected risk events. It is the Supply Chain’s ability to respond and recover pic 1 Supply Chain Resiliencyquickly to potential disruptions. It can return to its original situation or grow by moving to a new, more desirable state in order to increase customer service, market share, and financial performance.

Resilience is currently an increasing concern in the Supply Chain caused by globalization. The Supply Chain is globally being subject to diverse types of disturbances. The largest disruption so far in the global Supply Chain in modern history was the earthquake and tsunami in Japan in March 2011. With the rising level of logistical complexity, the resiliency of the Supply Chain has not kept pace. These disturbances need to be handled in the right way, compelling the use of tools and approaches that can support resilient Supply Chain decisions.

With the onset of the COVID-19 pandemic, resiliency in the Supply Chain is further emphasized.

Understanding Supply Chain Resilience 

The risk of Supply Chain disruption is increasing.  A recent study by Aon Risk Solutions showed that the percentage of global companies reporting a loss of income due to a Supply Chain disruption increased from 28% in 2011 to 42% in 2013.  The MIT Scale Network Study further showed that many large companies are unable to create contingency rules and procedures for operations during a complex, high-risk event.

According to the MIT study, approximately 60% of surveyed managers either do not actively work on Supply Chain risk management or do not consider their company’s risk management practice effective. Managers have been found to be lacking in a framework that will guide them in the deployment of risk management practices. In fact, it has been noted that there is little understanding of risks resulting in a lack of knowledge of what kind of framework fits a particular Supply Chain dynamics.

For Supply Chain Management to keep up with the increasing level of logistical complexity, there is a need to reconfigure the Supply Chain.

The 5-phase Approach to Supply Chain Resilience

In 2005, Cisco had difficulty coping when Hurricane Katrina struck. The Supply Chain performance level was not maintained to cope with the sudden surge in orders for new equipment to replace damaged telecommunication infrastructure.  The Cisco teams cannot locate all products in the Supply Chain or understand the financial impact of emergency sales. However, in 2011, that was a turning point for Cisco. Cisco had deployed a very solid Supply Chain resiliency program that addressed the impact of external vulnerabilities and the aftereffects it caused to the Supply Chain.

Cisco has succeeded by executing a 5-phase approach to Supply Chain Resiliency.

In reconfiguring its Supply Chain to make it more resilient, Cisco first identified its strategic objectives.

Phase 1: Identify Strategic Objectives. The first phase is focused on identifying competitive priorities for particular product categories. It matches priorities with Supply Chain capabilities.

Through Strategic Planning, Cisco was able to build its competitive advantage which depended on its ability to match global opportunities to outsource production with global market opportunities. This is known as the Cisco Lean Model.

Phase 2: Mapping Supply Chain Vulnerabilities. This focused on understanding the company’s vulnerabilities. Supply Chains are vulnerable on many fronts—political upheavals, regulatory compliance mandates, increasing economic uncertainty, natural disasters, etc.  Being aware of the vulnerabilities will enable the organization to come up with the appropriate design to achieve Supply Chain Resiliency.

In undertaking the second phase, Cisco focused on supporting a responsible global Supply Chain characterized by product differentiation, high value, and high margins. Mitigation measures were also implemented to make a resilient Supply Chain.

With the 5-phase approach, Cisco was able to achieve a resilient Supply Chain capable of effectively managing disruptions. It has also prepared them in addressing risk management warning signs and deploying the appropriate reactive tools to every kind of significantly disruptive event.

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Nowadays, sales reps who get to close the sale are those sales reps who get to discover the customer’s real problems. With life getting more hectic and people always pic1 Problem-centric Sellingon the rush, customers only prefer to spend more on the phone with sales teams whogets it.” These are the sales reps who do not only get to discover the customer’s real problem but also get to help them problem-solve in new ways.

Yet, a great number of salespersons miss closing the sale and reaching their quotas. In fact, in 2018, Salesforce found that more than 57% of sales representatives are expected to miss quotas for the year. This can be a challenge more so with organizations developing resolutions that revolve around increasing sales metrics and implementing new technologies.

The traditional method of selling is not enough anymore today. The first thing a client needs or wants does not necessarily solve the core problem. A new method is now necessary that will require salespeople to first diagnose the real problem before coming up with the solution. This comes with a new Customer-centric Design.

The Future of Sales: The Upcoming Trends Salespeople Must Watch Out For

A survey was conducted on more than 2,900 sales professionals worldwide. As a result of the survey, 5 Top Trends were revealed that are shaping up the world of sales. Two of these Top 5 Trends are changing sales mandate and the emergence of a Data-driven Sales Playbook.

  • Trend 1: As sales mandate change, teams are falling short of rising customer expectations. Technology is changing expectations on how companies should interact with consumers. It is now the salespeople who are on the frontline who are carrying the onus to deliver when customers demand more personalized consultative engagement. As a result, customer satisfaction has become the most-tracked sales Key Performance Indicator.
  • Trend 2: A Data-driven Sales Playbook is emerging. The ingenuity of salespeople with data-driven insights have been amplified. With the richness of data available, this has led to more effective methods of lead prioritization and forecasting.  There is now an increasing need for sales reps to prioritize leads based on data analysis rather than on intuition.

The effect of these Top 5 Trends has further been amplified with the increasing number of missed sales. Today, the traditional method of selling just does not work anymore.

A New Approach  to Selling: A Problem-centric Selling

The traditional method of selling is focused on determining the prospects’ needs. This does not work anymore as the first thing a client needs or wants does not necessarily solve their core problems. There is now the need to shift to Problem-centric Selling.

Problem-centric Selling is an approach that diagnoses problems with as much specificity as possible. Often, the real problem is not well articulated by the potential buyer. With Problem-centric Selling, the specific customer needs are well identified thus enabling salespeople to better offer the right product or service.  It is thus important to integrating the philosophy of Problem-centric Selling into your Sales Management approach.

The Problem-centric Selling is anchored on 5 core elements.

Problem diagnosis starts with knowing and understanding your customer and their problems. This is where the first core element is centered on: Know the key facts about the customer.

Salespeople must be able to get a description of the environment of which the buyer works, the processes they use, the structure of the organization, the tools they have, the current goals of the business, and other information about the buyer and the business. The facts gathered must go beyond the basic name, size of the company, and the industry the business is in. This way, the salesperson can get to establish the context for where the customers’ problems lie.

The other 4 Core Elements are essentially important in guiding every salesperson to master the Problem-centric Approach and hit that sale with a successful deal.

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For Post-merger Integration (PMI) to be successful, it is critical that we have clearly defined, appropriate, and comprehensive roles and responsibilities.pic 1 Roles & Responsibilities

Post-merger Integration is a highly complex process. It requires swift action as well as running the core business activities simultaneously.  There is no one-size-fits-all approach to a successful PMI Process. However, careful planning focusing on the strategic objectives of the deal and the identification and capturing of synergies will help maximize deal value.

While it may be a highly complex project, a successful PMI may be achieved and greater deal value can be expected. Right from Day One of PMI, it is already important that the Buyer and Target have the right people in place.  The success of the integration project depends on leadership, project management capabilities, and selection of the right personnel to the work in teams/streams.

Roles & Responsibilities in PMI: Why the Need for Emphasis

So, what are the requisite PMI roles and responsibilities?  Clearly defined roles and responsibilities are a fundamental factor that can make a big difference between gaining deal success or failure.

The Integration owner, together with the Integration Steering Group plays a critical role in defining the integration path of the organization. In Leadership Development, their role in the First 100 Days is a fundamental factor in achieving success or failure.

  1. Integration Owner. The Integration Owner is a member of the Buyer’s management team. He/she is basically the owner of the integration phase. It is the responsibility of the Integration Owner to oversee the integration phase, as well as the transaction/purchase phase.
  1. Integration Steering Group. The Integration Steering Group is the governing body of the integration phase. The specific role of the Integration Steering Group is to supervise the work of the Integration Project Manager and the Integration Team.
  1. Integration Manager. The Integration Manager is the Project Manager. He/she is the one in charge of the day-to-day management of the integration. If the Integration Manager has little or no project management experience then active hands-on support is required from the M&A Project owner.
  1. Integration Team/Stream. The Integration Team/Stream consists of an Integration Manager and its members. Streams are areas of the organization split into district parts but which are aligned to the overall strategy. Integration streams are often decided after the first appointment of the Integration Manager. Each stream is often headed by the Integration Stream Manager.

The Critical Role of the Integration Stream Manager

The Integration Stream Managers are selected from among the Buyer’s managers. They play a vital role as they are responsible for the development and implementation of detailed plans.

The Integration Stream Managers act as the team builder and introduce the team members to each other.  They ensure that the team members have all the information and tools needed for the task. They clarify goals, targets, timetables, reporting, and other important matters relative to the integration.  As Integration Stream Managers, they are expected to ensure that everyone in the team understands the goals the same way and is committed to making it happen.

In certain circumstances, it is possible that the Integration Stream Manager may also be Target’s manager.  This happens when Target’s manager has specialized knowledge or attributes necessary for the integration.

Undertaking the Post-merger Integration Process the right way can maximize deal value. On the other hand, it can result in the greatest potential loss of value when not done right. Being able to select the right people is the key.

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Our framework Post-merger Integration (PMI): Financial integration is every organization’s guide to achieving the financial alignment of both Buyer and Target.pic 1 Financial Integration

Post-merger Integration is a highly complex process. It requires swift action as well as running the core business activities simultaneously. There is no one-size-fits-all approach to a successful PMI Process. However, careful planning focusing on the strategic objectives of the deal and the identification and capturing of synergies will help maximize deal value.

Another critical factor in PMI is pursuing Financial Integration. Financial Integration is the alignment of the finance functions of the Buyer and Target.

Why Financial Integration?

Immediately from the start of the deal, the new organization gets to be dependent on the Finance function to ensure a successful integration process. Synergies must be captured in order to maximize deal value and provide combined organizations with the flexibility to grow.

When pursuing Financial Integration, there must be an integration of business operations, streamlining of the internal control environment, provision of accurate and consistent financial reporting, ensuring tax compliance jurisdictions if the deal is cross-border, and the founding of interim legal structure and business processes. When setting the right direction for a streamlined finance function, it is important that the organizations must already tackle critical matters while still in the early stages of a deal.

The establishment of clear reporting lines must already be agreed upon and set up. Accountability for financial operations, management reporting, control of expenses, and accounting closing procedures must already be established and clear between the Buyer and the Target. These play a vital role when the organization undertakes a Strategic Planning geared towards the development of a Financial Integration Strategy and Plan.

The Financial Integration Strategy: What We Need to Know

The Financial Integration Strategy can only be defined and crafted only when immediate areas that require action have already been identified. The Strategy must be developed based on 8 key areas of focus.

  1. Overall Organization. As the first key area, this focuses on the overall set up of the Financial Integration processes. This starts with establishing the reporting lines from Day One of the PMI process. This also includes the establishment of a transition plan that is aligned with the process and systems migration plan.
  1.  Internal Controls Environment. Once the overall organization has been set up, it is important that the internal controls environment is established. This will entail setting up the control procedure from Day One. It is of importance that the controls environment is established since this will mitigate risks and ensure regulatory compliance.
  1. Cash/Treasury. This is the third key area that looks into the cash position of the organization. It is at this point wherein the organization must be able to plan out its cash flow requirements and be able to gain assurance over adequate funding. This key area is very critical when it comes to the financial sustainability of the organization as it ensures that treasury policies are aligned, cash controls are established, cash forecasting and cash management have commenced, and there is an alignment of investments, foreign currency, and any hedging arrangements.

Aside from the 3 focus areas, the development of the PMI Financial Integration Strategic Plan must also give serious consideration on Financial Statements, Procurement, Financial Planning, Cash Controls, and Tax. These 5 focus areas are essentially important as it ensures that Financial Integration essentials are met.

When this is achieved and the 8 key areas of focus are integrated into the Financial Integration Plan, the new organization gets to prepare itself towards a larger scale Business Transformation in the future.

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Post-merger Integration (PMI) can be complex, time-pressured, and unfamiliar for most organizations. It is a highly complex process. It requires swift action as well pic 1 PMI process1as running the core business activities simultaneously.  There is no one-size-fits-all approach to a successful PMI Process. However, careful planning focusing on the strategic objectives of the deal and the identification and capturing of synergies will help maximize deal value.

It is inevitable that some elements of information will be withheld from a Buyer pre-deal. Further, not all the synergy benefits originally identified in the deal will prove to be achievable. The foremost challenge for management at the onset of the PMI process is to identify how value can be captured from the newly combined organization via synergies and cost savings.

Hence, undertaking the PMI Process requires a clear roadmap that will take the post-merger integration journey toward a more strategic and effective direction. This is where Strategy Development comes in.

The 5 Core Components of the PMI Process

Organizations must have a good understanding of the integration process to ensure that target results are achieved and that expectations are met. There are 5 core components of the PMI Process organizations must follow to make the process more successful where the deal value is achieved and realized.

  1. PMI Structure. This is the first component of the PMI Process that establishes the stages of the integration process. It consists of sub-projects that take place before and after the closing or change of ownership.
  1. Management Alignment. The second core component, Management Alignment is focused on aligning top managers of both Buyer and Target. For the first time, top managers of the Buyer and Target become part of the same organization. It is at this stage wherein there is a change of priorities and commitment of top managers. The new management team must be aligned and committed to the same goal.  This way, they convey the same message to the new organization.
  1. First 100 Days. The First 100 Days is where the PMI Process starts focusing on making changes. The First 100 Days is the maximum period people can live with the uncertainty regarding the new organizational structure and decision on redundancy. This core component is highly critical as this paves the way towards a smooth transition to a new organization.
  1. PMI Project Management. The fourth component is focused on budget planning and management. It is at this stage wherein the preparation of the first estimates of integration costs during the transaction or purchase phase is undertaken.
  1. Kick-off Meeting. The fifth or final core component is the Kick-off Meeting. Starting teamwork is its main focus. Participants are brought up to speed on events in both predecessor entities and the joint strategy.  This is the avenue to provide instructions, guidelines, and templates. A Kick-off Meeting is typically a 2-day session including the time to socialize.

The Red Flag Warning in Post-merger Integration

When going through Post-merger Integration, we can expect some red flag warnings.  These are disturbances that may warrant such a red flag warning.  As organizations go through the deal, there will be critical issues on personnel and customers that will arise.

One critical issue that may raise the concern of the Integration team is the possibility of losing your key personnel. Losing your key personnel can cause a dent in any organization. At this point wherein integration is happening, the more the support of the key personnel is of utmost importance. Losing them would be a great loss.

Aside from red flag warnings, there will also be key considerations organizations must take note of during integration. Being aware of these will prepare them as they move on forwards to achieving a successful deal.

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When organizations go through a Post-merger Integration, often management realizes that it is never a simple undertaking. It is a highly complex process. Swift pic 1 Tips for successaction is required as well as being able to run the core business activities simultaneously.  There is no one-size-fits-all approach to a successful PMI Process. However, to maximize deal value, there is a need for careful planning focused on the strategic objectives of the deal and the identification and capturing of synergies.

The PMI Process requires a Strategy Development approach geared towards unifying 2 organizations into one new organization with a common culture, equipped with the right people and good leadership in place. It is a challenging journey where organizations, both the Buyer and the Target, must take on the appropriate approach to be able to start off the process and close the deal with the expected results in place.

New organizations often benchmark Post-merger Integration Process leaders to guide them through the process. By following best practices, new organizations will have a better understanding of how to approach the PMI process in a more strategic manner.

Achieving PMI Success: The Top 10 Tips

There are top 10 tips that can help organizations conquer what could be a complex integration process.  Following the top 10 tips will enable organizations to successfully traverse through the process.

Let us discuss here 4 of the top 10 tips to achieve PMI success.

  1. Focus on Key Sources of Value. In focusing on key sources of value, we need to be able to communicate how the value of the deal will be captured. Success organizations often structure integration teams based on key sources of value. They make teams understand the value for which they are accountable and how this will be unlocked via the PMI process.
  2. Clearly Define Nature of the Deal. Often successful integrations are achieved when the nature of the deal is clear. Organizations need to be able to determine what is to be integrated and what is to remain as stand-alone.  They need to have a good idea of what the adopted culture will be and which people are to be retained. This way, organizations can easily jumpstart the PMI process in the right direction.
  3. Have the Right People in Placed. Needless delays in the implementation of the PMI process can exacerbate anxieties amongst staff. This can cause speculative conversations or result in staff insecurities. To address, organizations focus on the immediate mobilization of the integration process. One way of doing this is having the right people in placed.  Selecting people who are enthusiastic about the new vision and are happy to contribute it will facilitate a good start for the integration process.  However, there is a need to maintain balance. People from both the Buyer and Target must be selected and appointed.
  4. Get the Buyer up-to-speed. This is one important tip that will jumpstart the process. Get the Buyer up-to-speed. This can be done by encouraging the Buyer to begin planning the integration process even before the deal is announced. It is of great advantage if the Buyer will identify everything that must be done prior to closing. Active participation of the buyer is essential to keep the PMI process on high gear.

Aside from the 4 top tips, the other 6 top tips are equally effective in guiding organizations to achieve deal maximization. These top 10 tips can be of great help to organizations when faced with challenging obstacles as they go through the process of integration. The PMI Process is a very complex undertaking but it can be achieved and be conquered with just the right approach and guide.

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“A problem well framed is a problem half-solved.” — Jay Galbraith

Organizational Design is more than just structures. It is having policies and strategies that are aligned with one another.  When this is achieved, it allows organizations to operate at maximum efficiency and achieve Operational Excellence.

The Galbraith Star Model™ is the foundation on which a company bases its design choices. The organization’s design framework consists of a series of design policies that are controllable by management and can influence employee behavior.

Organizations use the Star Model™ framework to overcome the negatives of any structural design. Every organizational structure has positives and negatives associated with it.  If management can identify the negatives of its preferred option, it can better design other policies around the Star Model™ to counter the negatives while achieving the positives.

Understanding the Galbraith Star Model

Galbraith Star Model™ is the organization’s design framework for effective strategy execution. It consists of 5 major components.

 

  1. Strategy. This component is the company’s formula for winning. It is the goals and objectives to be achieved, as well as values and missions to be pursued. It defines the basic direction of the company. Strategy Development is essentially important in specifying sources of Competitive Advantage.
  1. Structure. The second component, the Structure, determines the location of the decision-making power. It is the placement of power and authority in the organization.
  1. Processes. Information and decision processes is a component that cuts across the organization’s structure. It is a means of responding to information technologies. Management processes can either be vertical or lateral. Either way, these are designed around a workflow from new product development to the fulfillment of a customer order. If the structure is the anatomy of the organization, processes are its physiology or functioning.
  1. Rewards. The fourth component provides motivation and incentive for the completion of the strategic direction of the organization. Rewards are recognition that influence the motivation of people to perform and address organizational goals.  It becomes effective only when they form a consistent package in combination with other design choices.
  1. People. People is the fifth component that focuses on influencing and defining an individual’s mindset and skills. It looks into the human resource policies of recruiting, selection, training, and development of people needed by the organization to achieve its strategic direction. HR policies work best when these are consistent with the other connecting design areas.

The five components are essentially important. Each component has its underlying purpose and impact.  How the organization can effectively align the components with each other makes a huge difference in achieving an impact. Further, in this fast-changing business environment, organizations must be keenly aware of the implications of implementing the Star Model™ framework. The Star Model may have its implications, including the interweaving nature of the lines that form the star shape.

The Man Behind the Organizational Design Framework

Dr. Jay Galbraith was an internationally recognized expert on Strategy and Organizational Design.  With more than 45 years of research and practical experience, Dr. Galbraith’s extensive knowledge came from his background in information processing systems, chemical engineering, and organizational behavior.  As the original creator of the Star Model and the Front-Back organization structure, Dr. Galbraith transformed organizations across a broad span of industries including consumer goods, manufacturing, health care, financial services, and telecommunications, among others.

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Organizations today are spending money on the latest technologies and working hard to solve problems as they arise. Yet, sad to say, this is simply not enough.

Today, to get on top of today’s fiercely competitive business environment, organizations need to take a strategic move: Develop an Innovation Mindset. What is an Innovation Mindset? What does it take to develop an Innovation Mindset? Often, this can be mindboggling as we get confused as to understanding what is an Innovation Mindset. Developing an Innovation Mindset is never the mere act or intent of investing in technology. It goes beyond spending money on the latest technology.

Developing an Innovation Mindset is to undergo the transformation from an innovation-averse to a forward-thinking organization.

Understanding an Innovation Mindset: What It Takes to Develop One

Developing an Innovation Mindset requires scaling innovations repeatedly and making it grow as fast as others. Companies need to depart from adopting technologies as point solutions to evolving future systems. This can be achieved by cultivating the mindset and methods of the top 10%.

The top 10% are the Leaders in Innovation Management that are already enjoying a considerable head start and are not standing still. The systems they have put in place are specifically designed to not only accommodate innovations but also scale them across the enterprise.

Developing an Innovation Mindset Starts with the Right Tools

To foster than Innovation Mindset, we need to put in place 5 key principles.

These 5 principles can provide organizations the foundation on developing Innovation Mindsets.  There first 2 are defined as:

  1. Adopt technologies that make the organization fast and flexible. Consumers now demand that companies are fast and flexible. The market is getting impatient when there are delays and so structured that it ceases to be an organization with a Customer-centric Design. Principle 1 focuses on making organizations fast and flexible. Achieving this call for efficient use of decoupling data, infrastructure, and applications to achieve greater flexibility and a faster-moving IT culture.
  1. Get grounded in cloud computing. This principle is focused on catalyzing innovation. Adopting this principle will enable organizations to maximize the use of the cloud to successfully utilize other technologies, including Artificial Intelligence and analytics.

There are 3 other principles that organizations must take notice of and focus on. The other 3 principles are recognizing data as being both an asset and a liability, managing technology investments well across the enterprise, and finding creative ways to nurture talent.
Integrating these principles in the organization’s journey towards Digital Transformation will promote the development of an Innovation Mindset. When this happens, we can expect our organization to keep up with the pace and catch up.

What Does It Take to Have an Innovation Mindset

Developing an Innovation Mindset has led leaders to take command and be in-charge of market demands. Leaders are adopting DevOps, automation, and continuous integration/continuous deployment at a faster rate than Laggards. Let us take a look at a Travel Industry disruptor. The company migrated its platform to microservice as part of decoupling initiatives.

As a result of taking this initiative, rapid response to change was achieved. This also enhanced its capability to add new features as the company experiences explosive growth.

Let us take a look at a more internationally recognized company: Ant Financial (formerly known as Alipay), the Alibaba Group’s financial arm. The organization embedded cloud services and AI across multiple processes and product lines. Furthermore, AI capabilities were offered to external ecosystem partners.

Today, Ant Financial can instantly assess the credit risks of underserved people who may not have bank accounts and even target them with loan offers. The overall cost was reduced by 50% and the company experienced a 10-fold increase in daily visitors.

Developing an Innovation Mindset is key.

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Post-merger Integration is a highly complex process. It requires swift action as well as running the core business activities simultaneously.  There is no one-size-fits-pic 1 PMI Day One Activitiesall approach to a successful PMI Process. However, careful planning focusing on the strategic objectives of the deal and the identification and capturing of synergies will help maximize deal value.

It is inevitable that some elements of information will be withheld from a Buyer pre-deal. Further, not all the synergy benefits originally identified in the deal will prove to be achievable. The foremost challenge for management at the onset of the PMI process is to identify how value can be captured from the newly combined organization via synergies and cost savings.

Understanding Post-merger Integration

Post-merger Integration is the fundamental stage of realizing the value of an M&A deal.  A highly complex process, it entails bringing together 2 companies experiencing change while ensuring that business continues as usual.  A truly challenging undertaking that must never be underestimated.

When 2 companies agree to undertake a Post-merger Integration, its primary objective is to maximize synergies to ensure that the deal lives up to its predicted value. It is a phase during which the results of the Buyer’s M&A strategy and expectations for the closed deal start to materialize.

In the entire phase, Closing and Day One of change is the most critical. It is the initial starting point towards the change of ownership and where Strategy Development is at its core.

Closing and Day One

During Closing and Day One, Managers must focus on 3 important areas.

  1. Communications. Corporate Communications must be well planned and well implemented. This is to enable managers to lead an M&A project more effectively. Through structured communication, trust is built, motivation developed, and important information shared. In fact, it can prevent the negative impact of rumors and unify the different parts of the joint company.
  1. Operating Structure. New operating structures and systems are made once the joint company’s strategy and goals have been agreed upon. From Day One, it is important that new management and operational structure/reporting procedures are clearly communicated. In the development of the operating structure, it is important that a CEO has been appointed, the key personnel roles decided, and there is already an agreement on operative and statutory structures.
  1. Systems & Controls. A clear and detailed Systems & Controls must be established by Day One. This is essential for management to be able to gain control of the operations of the Target. If operational structures are not finalized at this point, a temporary management system and control need to be established.

The Important Role of a CEO and Key Personnel from Day One

The CEO plays a vital role in the joint business. The CEO or Managing Director is involved in the acquisition process.  Hence, it is important that from Day One, a CEO or Managing Director has already been appointed.

Often the CEO comes from the Buyer or its group or corporate entity.  If an existing CEO of the acquired entity continues the same role, then the Buyer must nominate a controller to ensure financial integration and smooth reporting.

The Key Personnel is also essentially important from Day One.  In fact, there is a need for positions and roles of key personnel during the integration process to be planned in advance and communicated at closing.

Interested in gaining more understanding of PMI Day One Activities? You can learn more and download an editable PowerPoint about Post-merger Integration (PMI): Day One Activities here on the Flevy documents marketplace.

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