Nitin Kumar • 2022-11-21
Several companies fall short of harnessing revenue synergies as integration teams get caught in the middle of harnessing quick hits through back office consolidations and leave revenue synergies aside
M&A Integration surveys have revealed that more organizations are now seeking revenue growth as opposed to cost reduction through M&A. At the heart of revenue growth is the customer and therefore functions that touch customers such as sales, marketing, service, products, customer experience and pricing on the front end and customer service, billing, invoicing and collections at the back end become critical to align and integrate right way in order to maintain stability or develop a sustainable competitive advantage.
Yet, several companies fall short of harnessing revenue synergies as integration teams get caught in the middle of harnessing quick hits through back office consolidations and leave revenue synergies aside. Synergies from customer facing functions tend to be more transformative and take longer to realize, they could also require some upfront investments that are counter intuitive to the rapid cost reductions that organizations are so used to executing. Ensuring revenue continuity lays a good platform for executing growth.
When an organization acquires revenue it is one or more of the four out of brands, channels, new customer segments or products and often one of them is a primary driving force. Whichever be the primary driver, the other three need to very quickly align to it. For example, if a product is the primary driver — the channel structure, target customer segments and the brand need to rally behind it ASAP.
There are four primary strategies towards GTM integration that can be leveraged to maximize revenue synergies, each one requires a multitude different skills to be in focus when executing for success.
Brand Centric : Skills around sales/marketing, positioning, messaging and culture of relationship building
Customer Centric : Skills around data/analytics and culture of decisiveness, customer engagement and collaboration
Channel Centric : Skills cost/efficiency leverage and culture of continuous improvement
Product Centric : Skills on innovation/features, portfolio alignment and culture of empowerment
Typical M&A integration issues related to the GTM functions for executive to think about:
Brand protection: Acquisitions are rarely done to switch brands, they are mostly undertaken to fill the product or service gaps within existing portfolios. Hence having a pervasive brand strategy makes sure that everyone is aligned on the execution. The Brand elevation for the combined entity should be the primary goal and organizations should not get caught in the misguided efforts to preserved the acquired company’s brand beyond a certain point in time, these sorts of misguided efforts have a huge drain on resources in the functions that should be driving growth and also cause widespread confusion for the customers. Products and channels must change and change very quickly to fit the brand strategy so that this can lay a platform for growth.
Customer retention: As mentioned before, customers are at the heart of the revenue growth strategy and no organization can derive revenue synergies without them. Each customer or account either lost or diminished makes it that much more difficult to attain revenue synergies. Maintaining transparency with customers, articulating value early and clearly, not overselling, keeping performance high and integrating customer-related activities at the end when rest of the infrastructure is in place are core to the integration strategy. Some of the critical activities that should be taken upfront are to design a safety net for the customers under flight risk, these are typically customers affected negatively by changes in policies, operational processes or systems that will tend to downgrade their experiences, the safety net can be a set of activities that include promotions, targeted incentives, exception management protocols and executive level coverage. Incentivizing the sales force to retaining customers is also very critical to success. A favorable outcome of a good channel integration is to generate customer pull than product push.
Channel confusion: Channels are a way to reach the customers in the most efficient and effective way, they can be an integral part of the customer experience. Many a times during mergers acquiring new channels and integrating them is the end game. Channels need to be in harmony with the brand and products. The alignment between Sales, Marketing, Channels, Products and Customer segments being in perfect harmony is the only way to capitalize revenue synergies , this also needs to be done rather quickly after the basic functions and infrastructure are in place, products are rationalized and mapped to the right channels in line with the brand strategy.
Product dilution : Products must fit the overall portfolio and align with the brand strategy. This would include names, packaging, look and feel all of which impact the customer experience. Having a framework to name, position, integrate and communicate about products and their value propositions early on is a key to success. Duplicate and competing products must be rationalized and the sales force must clearly understand the value drivers in the new product portfolio as well as the way that is aligned. Integrating and mapping the right products to the right channels is vital to realize cross-sell and upsell opportunities by hitting the right target customer segments.
People and culture integration : Culture at a very high level can be defined as ‘the way of doing things’, after every M&A integration activity there does occur a shift in culture, however it needs to be controlled and aligned with the vision and goals of the organization and its leadership. Business leaders must recognize the type of culture that is required to drive the shift and place a lot of emphasis on the right organization design and incentives that will align the right behaviors with the desired results. M&A often tends to identify cultural similarities but tend to overlook cultural differences which makes integration very challenging. Culture and change succeeds when it is business owned and HR facilitated and not the other way around as typically witnessed in many organizations.
Some examples of value drivers and tactical considerations (non-exhaustive list) from the GTM functions which help create value from GTM functions:
At all given time, brand , product, channel , customer segments and culture must stay aligned in total sync. An organization pursuing any given strategy, eventually needs to align and integrate other drivers but using one as the starting point is the winning strategy. There is a very systematic way in which one should think about execution of revenue synergies from the GTM functions, more on this can be found in my article by clicking here
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