A well-planned train wreck
February 11, 2010 9:40 PM Subscribe
My company was acquired by another. The new company has all kinds of plans that, to them, look great on paper - but we at the old company know they are going to achieve not just nothing but instead a dissolution of the group they bought at breathtaking expense. I would like help in identifying examples of plans that look good on paper, but don't work.
The group I work in was acquired. The outfit that bought us can make component-level equipment but they do not do systems integration - that is what my group does, and does reasonably well. The acquiring company has *no**clue* how their plans are going to go awry. We know: we all do and there is shortly going to be a rush for the exits if I cannot come up with a calm, cogent presentation including a decent parallel to the situation such that the scope of the problem is well-understood.
Here is the situation: the new company wants our technology and they think we build Heathkits that magically come together. They don't understand enterprise resource planning and they don't understand systems integration. They would like to simultaneously a) move production lines; b) reduce cost by changing subassemblies and components; c) build a new production organization; d) change vendors for about 3/4 of the components; e)install all this in a new building.
It's intrinsically obvious that this recipe won't work, but the fact it's obvious shows my blind spots. How do I explain -why- one doesn't do this? I would like an example to follow.
The best kind of example would be, in my view, an edifice or "planned community" that was well planned and whose planning was both public and trumpeted, but turned out to be un-livable. I cannot find such a case study. It isn't a straightforward engineering-disaster situation because there is no -one- element that doesn't work; it's the -combination- of elements that is going to be fatal.
There is nothing wrong with the intelligence or capacity of the acquiring organization; they simply do not know what they do not know, and they lack perspective.
The only thing I have to fall back on is the part in "Systemantics" with the case studies showing a complex system is always the result of development around a simple system. These studies are a bit too abstract for the audience.
Do you have an example, which is reasonably well documented, of an overly-ambitious plan each element of which looks right and proper, yet results in a tangled and expensive mess?
The group I work in was acquired. The outfit that bought us can make component-level equipment but they do not do systems integration - that is what my group does, and does reasonably well. The acquiring company has *no**clue* how their plans are going to go awry. We know: we all do and there is shortly going to be a rush for the exits if I cannot come up with a calm, cogent presentation including a decent parallel to the situation such that the scope of the problem is well-understood.
Here is the situation: the new company wants our technology and they think we build Heathkits that magically come together. They don't understand enterprise resource planning and they don't understand systems integration. They would like to simultaneously a) move production lines; b) reduce cost by changing subassemblies and components; c) build a new production organization; d) change vendors for about 3/4 of the components; e)install all this in a new building.
It's intrinsically obvious that this recipe won't work, but the fact it's obvious shows my blind spots. How do I explain -why- one doesn't do this? I would like an example to follow.
The best kind of example would be, in my view, an edifice or "planned community" that was well planned and whose planning was both public and trumpeted, but turned out to be un-livable. I cannot find such a case study. It isn't a straightforward engineering-disaster situation because there is no -one- element that doesn't work; it's the -combination- of elements that is going to be fatal.
There is nothing wrong with the intelligence or capacity of the acquiring organization; they simply do not know what they do not know, and they lack perspective.
The only thing I have to fall back on is the part in "Systemantics" with the case studies showing a complex system is always the result of development around a simple system. These studies are a bit too abstract for the audience.
Do you have an example, which is reasonably well documented, of an overly-ambitious plan each element of which looks right and proper, yet results in a tangled and expensive mess?
It's not just business plans that look good but fall apart at the seams
posted by pupdog at 10:31 PM on February 11, 2010 [1 favorite]
posted by pupdog at 10:31 PM on February 11, 2010 [1 favorite]
The AOL Time Warner merger was the first thing I thought of.
posted by SisterHavana at 10:31 PM on February 11, 2010
posted by SisterHavana at 10:31 PM on February 11, 2010
Are you certain they didn't buy you for the express purpose of burying you? Buying is only an 'r' away from burying, and sometimes is cheaper than fighting it out in the market. Probably I'm too cynical though.
posted by smcameron at 10:31 PM on February 11, 2010
posted by smcameron at 10:31 PM on February 11, 2010
I would suggest putting your energy into selling your group on being the only people who can execute their plan. Coming up with examples of other acquisitions that went boondoggle is only going to tell them that you have no idea what you're talking about. The only thing "intrisically obvious" is that everybody thinks they're different. You do, and they do. They're the ones who have accounted for all the pitfalls, and you're an employee of the rare aquired company who succeeds in schooling them on what's what. However, they've put money and time into this plan, and Mr. Acquired Guy stepping up telling them what a mistake they made is not going to fly well. Transition Time is pretty much the worst time to stick your neck out. You don't want to convince them that they're Daimler-Chrysler, you want to convince them that they're Berkshire-Hathaway.
Put it this way: from the acquiring side, any "fact" that you "all" know that this isn't going to work is going to basically appear to be a risk from anybody on the acquiring side who thinks the deal is a good one (and anybody on the aquiring side who doesn't think it's a good fit is likely already marginalized). Their plan is ultimately merely a guess, and you don't have all the info that they do. I mean really, "systems integration" is all you guys can do? I doubt it. It might be all you want to do, but that's different.
I'm sorry to be harsh about this, but I've been through acquisitions and I'm also idealistic in a way that you appear to be. There's a word for what you're going through, and that word is "hubris." It never ends well. You have confidence, but they have an axe. If I get your inference right, though, I agree: "Gladiator" had a pretty good message for a Mel Gibson movie.
posted by rhizome at 10:38 PM on February 11, 2010 [6 favorites]
Put it this way: from the acquiring side, any "fact" that you "all" know that this isn't going to work is going to basically appear to be a risk from anybody on the acquiring side who thinks the deal is a good one (and anybody on the aquiring side who doesn't think it's a good fit is likely already marginalized). Their plan is ultimately merely a guess, and you don't have all the info that they do. I mean really, "systems integration" is all you guys can do? I doubt it. It might be all you want to do, but that's different.
I'm sorry to be harsh about this, but I've been through acquisitions and I'm also idealistic in a way that you appear to be. There's a word for what you're going through, and that word is "hubris." It never ends well. You have confidence, but they have an axe. If I get your inference right, though, I agree: "Gladiator" had a pretty good message for a Mel Gibson movie.
posted by rhizome at 10:38 PM on February 11, 2010 [6 favorites]
One other generally acceptable course you can take, to keep the existing structure of your business, if you and your compatriots believe, very strongly, in it, is simply to buy it from its new owners. You're late to the party, in terms of the acquisition cycle, but sometimes, an acquiring owner, having made the acquisition of a new unit, uncovers issues that were entirely unappreciated during the due diligence phase of the acquisition process. If that is legitimately the issue, a single quiet approach from current management to the acquiring party, to buy the business, in toto, from the acquiring party, at fair market price, is sometimes welcomed.
The issues have to be immediate and concrete, and the offer close to, or slightly more than, what the acquiring party paid, for the offer to have much of a chance; more over, such offers generally have to be substantial cash offers, based on third party financing, to succeed. It's pointless to make an offer to an acquiring party that requires their participation in deal financing for any length of time, since, if they must hold risk on such a deal, they'd generally prefer to retain operational flexibility, too.
posted by paulsc at 10:43 PM on February 11, 2010
The issues have to be immediate and concrete, and the offer close to, or slightly more than, what the acquiring party paid, for the offer to have much of a chance; more over, such offers generally have to be substantial cash offers, based on third party financing, to succeed. It's pointless to make an offer to an acquiring party that requires their participation in deal financing for any length of time, since, if they must hold risk on such a deal, they'd generally prefer to retain operational flexibility, too.
posted by paulsc at 10:43 PM on February 11, 2010
Lots of big deals happen only because the people with the power to make them or stop them have taken positions in the market which will become very profitable as the deal goes through.
In particular,
They would like to simultaneously a) move production lines; b) reduce cost by changing subassemblies and components; c) build a new production organization; d) change vendors for about 3/4 of the components; e)install all this in a new building.
sounds much more like a checklist of what stock analysts would like to hear rather than anything anyone with real experience could bring themselves to swallow or propose.
If you go around throwing cold water on it, however, and analysts get wind of it, you may find yourself almost as unpopular almost as suddenly as a certain Canadian colonel.
Keep your head down; go with the flow. Living well is the best way of living well.
posted by jamjam at 11:47 PM on February 11, 2010 [1 favorite]
In particular,
They would like to simultaneously a) move production lines; b) reduce cost by changing subassemblies and components; c) build a new production organization; d) change vendors for about 3/4 of the components; e)install all this in a new building.
sounds much more like a checklist of what stock analysts would like to hear rather than anything anyone with real experience could bring themselves to swallow or propose.
If you go around throwing cold water on it, however, and analysts get wind of it, you may find yourself almost as unpopular almost as suddenly as a certain Canadian colonel.
Keep your head down; go with the flow. Living well is the best way of living well.
posted by jamjam at 11:47 PM on February 11, 2010 [1 favorite]
I would suggest bringing your team together to plan a White Paper for real change that integrates your team successfully. Maybe it won't work, but you'll at least have a nice thing to bring from the experience if it fails.
posted by parmanparman at 12:23 AM on February 12, 2010
posted by parmanparman at 12:23 AM on February 12, 2010
Maybe what you should consider doing is writing out a detailed plan of how to execute each step, how much time, money, and manpower it's going to take. So for example, how much time/expense/effort is involved in changing vendors? I'm assuming it's not just a phone call away. Take each task and each sub task and try to illustrate how expensive each is going to be, and what the risks are.
posted by delmoi at 12:39 AM on February 12, 2010 [2 favorites]
posted by delmoi at 12:39 AM on February 12, 2010 [2 favorites]
If you presented me with a city planning metaphor that I understood to explain a product development process I didn't understand, I'd then need to say, "so wait ... the fact that the housing prices were too high for the workers to live there, thus making everyone have to in-commute for hours, is like ... us relocating the assembly lines?" and in the end, you'd have to explain the entire process to me slowly. /city planner
You could win their confidence and get yourself into a position of power, then use that authority to re-do their plans without making a big deal about it, or you could point out the holes in their plan while situating yourself as the best one to re-do them. In either case, you'll be better served by concrete suggestions than by examples of other boondoggles.
posted by salvia at 2:00 AM on February 12, 2010
You could win their confidence and get yourself into a position of power, then use that authority to re-do their plans without making a big deal about it, or you could point out the holes in their plan while situating yourself as the best one to re-do them. In either case, you'll be better served by concrete suggestions than by examples of other boondoggles.
posted by salvia at 2:00 AM on February 12, 2010
Best answer: Heh, I lived through your exact scenario. I even followed the some of the advice here, namely to try and work with the acquiring company to fully leverage what we had into their business model. The problem I ran into is that our core product was a side product/distraction to them. I see the same issue in your case. System integration is complex in a non-obvious way (unless you've done it before). A great example is trying to build your own computer. Using that analogy, it sounds like the acquiring company is saying things like: "hey we got this great deal on this AMD processor, all you guys need to do is plug them into these (Intel based) motherboards, that can't be too hard, right?". Or on the software side asking you to install Garage Band on Windows. My point being that system integration seems to be a distraction to them, a necessary but unwanted means to an end. In most cases this will end in disaster because the acquiring management won't grasp the value add of good system integration. It's not a problem of education/intelligence, it's a problem of emotionally "getting it". In my case, we made case after case showing the necessity of making (expensive) infrastructure upgrades so that our product would run well, and keep our customers happy and using our product. However, because the product wasn't their core product, they didn't see the need for the expense, which meant the product never took off on their platform, and then watched as they bled customers left and right.
Looking back, I don't know what I could have done differently or better. Economically, I would have been better off taking the layoff and severance, but I'm glad I stayed and tried to make it work. It didn't work out in the end, but it was an excellent education on how corporate culture and attitude has a profound affect on all aspects of the business.
My advice to you is to figure out how much you care about this on a personal level. Because it is possible to get it right, and I agree with those that say you have to take ownership of the solution if you're to have any chance at all. But, I doubt very much that the amount of work and effort that it takes to get it right will be understood or appreciated by the acquiring company. So if you're motivated by the end product itself, go for it. If you're looking for acknowledgment or understanding from the acquiring company management, prepare to be disappointed.
However, I will share with you an observation that I've seen work very well for many in your situation. Leave on good terms (ideally with some colleagues), keep in touch with the company, wait for things to fail as you predict, then come in with your colleagues as contractors and clean the mess up (for a decent fee of course).
Good Luck
posted by forforf at 7:10 AM on February 12, 2010 [3 favorites]
Looking back, I don't know what I could have done differently or better. Economically, I would have been better off taking the layoff and severance, but I'm glad I stayed and tried to make it work. It didn't work out in the end, but it was an excellent education on how corporate culture and attitude has a profound affect on all aspects of the business.
My advice to you is to figure out how much you care about this on a personal level. Because it is possible to get it right, and I agree with those that say you have to take ownership of the solution if you're to have any chance at all. But, I doubt very much that the amount of work and effort that it takes to get it right will be understood or appreciated by the acquiring company. So if you're motivated by the end product itself, go for it. If you're looking for acknowledgment or understanding from the acquiring company management, prepare to be disappointed.
However, I will share with you an observation that I've seen work very well for many in your situation. Leave on good terms (ideally with some colleagues), keep in touch with the company, wait for things to fail as you predict, then come in with your colleagues as contractors and clean the mess up (for a decent fee of course).
Good Luck
posted by forforf at 7:10 AM on February 12, 2010 [3 favorites]
i lived through this as well in the early years of the naughties. my company, quantum leap, merged with some lame technology company, eagle technologies i think it was called.
at the time, we were an up and coming ad agency. the creative team there had some really good ideas that were at the time a little too forward thinking: we were in the midst of creating a broadband-specific arm of the agency (this was in 2000), and we'd created prototypes for a twitter-like device.
after the merger, we became leapnet, and the technology company's propensity for needless busywork and constant strategic shifts overtook my company's management team, who were prone to trusting. creative work ended as we focused on constantly redefining the company's mission.
after that, the layoffs began, then we were delisted, then our assets were sold to the same company in utah who bought the remains of razorfish, and now i think the entire mess is a part of microsoft under the name razorfish. but it's actually razorfish comprised of the corpses of several other dead companies. and the wheel of life continues to turn.
posted by patricking at 8:01 AM on February 12, 2010
at the time, we were an up and coming ad agency. the creative team there had some really good ideas that were at the time a little too forward thinking: we were in the midst of creating a broadband-specific arm of the agency (this was in 2000), and we'd created prototypes for a twitter-like device.
after the merger, we became leapnet, and the technology company's propensity for needless busywork and constant strategic shifts overtook my company's management team, who were prone to trusting. creative work ended as we focused on constantly redefining the company's mission.
after that, the layoffs began, then we were delisted, then our assets were sold to the same company in utah who bought the remains of razorfish, and now i think the entire mess is a part of microsoft under the name razorfish. but it's actually razorfish comprised of the corpses of several other dead companies. and the wheel of life continues to turn.
posted by patricking at 8:01 AM on February 12, 2010
How do I explain -why- one doesn't do this? I would like an example to follow.
My husband went through something like this with a manager who was going to streamline processes at a former employer that made turnkey computer systems for an industry with B2B and B2C aspects. (Not going into more detail because there are a handful of companies in the industry.) This is how they knifed the hotshot manager with the bad ideas:
Mr immlass had worked for a flowcharting software company in the 90s. He sat down with his boss one weekend and together they documented all the processes she was suggesting in a giant flowchart. This sucker was close to 30 printed pages and took over a cube wall. Then they found all the holes in it, and with the assistance of other colleagues who had been nodding and waiting to sabotage the person who was about to screw up all their jobs, took her down in a meeting by pointing out every hole in her ideas that they had figured out using the flowchart. There were a lot. She ended up resigning soon afterwards.
Not everybody has the skill set (or the guts/lack of care about keeping their job) to make that flowchart and point out the problems, but it worked for them.
posted by immlass at 9:18 AM on February 12, 2010
My husband went through something like this with a manager who was going to streamline processes at a former employer that made turnkey computer systems for an industry with B2B and B2C aspects. (Not going into more detail because there are a handful of companies in the industry.) This is how they knifed the hotshot manager with the bad ideas:
Mr immlass had worked for a flowcharting software company in the 90s. He sat down with his boss one weekend and together they documented all the processes she was suggesting in a giant flowchart. This sucker was close to 30 printed pages and took over a cube wall. Then they found all the holes in it, and with the assistance of other colleagues who had been nodding and waiting to sabotage the person who was about to screw up all their jobs, took her down in a meeting by pointing out every hole in her ideas that they had figured out using the flowchart. There were a lot. She ended up resigning soon afterwards.
Not everybody has the skill set (or the guts/lack of care about keeping their job) to make that flowchart and point out the problems, but it worked for them.
posted by immlass at 9:18 AM on February 12, 2010
Best answer: I agree with rhizome's comment. You are NOT going to win this by telling them they're wrong (even if you've great examples of how they're wrong). You need to sell your organization as the only one with the domain knowledge to execute their plans. Remind them that they (hopefully) acquired your team for the expertize and the best way to leverage that is by letting you execute.
Most importantly you're going to have to understand the vision they have for your business. It may not be your vision, but nevertheless you need to embrace it, and convince them that you think its the best thing since sliced bread. All these plans are just their mis-informed version of how to achieve that vision. They want to transform your business, all you can do is offer to do that for them rather than let them screw it all up trying to do it themselves.
posted by Long Way To Go at 10:36 AM on February 12, 2010
Most importantly you're going to have to understand the vision they have for your business. It may not be your vision, but nevertheless you need to embrace it, and convince them that you think its the best thing since sliced bread. All these plans are just their mis-informed version of how to achieve that vision. They want to transform your business, all you can do is offer to do that for them rather than let them screw it all up trying to do it themselves.
posted by Long Way To Go at 10:36 AM on February 12, 2010
Response by poster: There are loads of perspectives in the answers I had not considered. Thank you for putting all this work into answering my question.
The company I work for is not just a systems integration firm. We make instruments and they're selling - but something happened to the economy a couple years ago and even though these things are in demand, customers have trouble finding the money. That's why we went up for sale.
The instruments are complex and difficult to manufacture, and need a pretty good hand at testing to calibrate them right. There are probably fifty steps where a mistake results in performance errors, and errors with these instruments are physically dangerous. (I have to maintain some deniability here so that's as far as I can go about the products.)
The 'vision for the corporation' comment of Long Way To Go is consonant with my opinion before all these answers were expressed. Now, I'm not so sure.
The question isn't about keeping my job. If I lose it, no problem. I like working with the others in the group, and would value the experience of actually doing this line move. Therefore maybe it is not just the acquiring operation that has things to learn.
posted by jet_silver at 6:10 PM on February 12, 2010
The company I work for is not just a systems integration firm. We make instruments and they're selling - but something happened to the economy a couple years ago and even though these things are in demand, customers have trouble finding the money. That's why we went up for sale.
The instruments are complex and difficult to manufacture, and need a pretty good hand at testing to calibrate them right. There are probably fifty steps where a mistake results in performance errors, and errors with these instruments are physically dangerous. (I have to maintain some deniability here so that's as far as I can go about the products.)
The 'vision for the corporation' comment of Long Way To Go is consonant with my opinion before all these answers were expressed. Now, I'm not so sure.
The question isn't about keeping my job. If I lose it, no problem. I like working with the others in the group, and would value the experience of actually doing this line move. Therefore maybe it is not just the acquiring operation that has things to learn.
posted by jet_silver at 6:10 PM on February 12, 2010
This thread is closed to new comments.
Perhaps some constructive self-criticism is in order for your group; some mergers occur with an intentional plan that a merged party be bankrupted, for the protection bankruptcy offers for the re-organization of the bankrupted party into a potentially profitable venture, with new efficiency, going forward. If there is all you indicate needing to be done to your operation, in order for it to have a profitable future, an immediate, skilled bankruptcy/re-organization (and, perhaps, a concomittant voluntary head count reduction) may be just what those acquiring the business are counting on.
If so, align yourself immediately with their vision, and forget trying to "educate" them. They, being the acquiring party, have the deeper pockets, and right to move forward with their vision of your enterprise.
posted by paulsc at 10:01 PM on February 11, 2010 [1 favorite]