Mergers and Acquisitions. The Strategic Challenge

The Impraise Blog from Impraise.com states, "It's no secret that mergers tend to fail. According to a KPMG study eighty-three percent of mergers do not boost shareholder return. Historically, roughly two-thirds lose value on the stock market. Mergers are often driven for the wrong reason: Fear." 

What are some strategic challenges with mergers and acquisitions? 

The experts at CareerMinds.com spell out significant issues on the HR side of things. These are key challenges to keep in mind as your company merges its culture with another. 

1. Identifying and communicating the reasons for the M&A to employees. Often employees see change as dislocating and upsetting. HR must communicate effectively and openly with all employees throughout the transition. Specifically, HR must communicate with employees about the necessity for the change, explain how the change will benefit them, and manage the stresses that accompany change.
2. Forming an M&A team and choosing and coaching an M&A leader. The team leader must focus solely on the M&A rather than be involved in running the business, be sensitive to cultural differences, lead the change process, and retain and motivate key employees.
3. Assessing the corporate cultures. One company may be driven by a sales mentality while another may be focused on innovation. Or decisions in one company may be top down while the other may be used to more participative decision making. HR must anticipate cultural challenges and take steps to integrate the two cultures.
4. Deciding who stays and who goes. HR must determine the new organizational structure, and retain and motivate key talent. Our workforce planning template can help you better assess this issue. Download it here.
5. Comparing benefits, compensation and union contracts and deciding on HR policies and practices.

When visiting again the writing by Impraise.com the M&A risks are spelled out slightly differently.

They mention the following: 

Communications challenges.

Employee retention challenges.

Cultural challenges

Solutions

For whatever reason mergers and acquisitions occur, it's vital that the decision-makers take the intangible factors into account. 

One way to measure intangible challenges is to use this formula from Investopedia.

Understanding Calculated Intangible Value (CIV)

Usually, a company's intangible assets are valued by subtracting a firm's book value from its market value. However, opponents of this method argue that because market value constantly changes, the value of intangible assets also changes, making it an inferior measure. Finding a company's CIV involves seven steps:

1. Calculate the average pretax earnings for the past three years.
2. Calculate the average year-end tangible assets for the past three years.
3. Calculate the company's return on assets (ROA).
4. Calculate the industry average ROA for the same three-year period as in Step 2.
5. Calculate excess ROA by multiplying the industry average ROA by the average tangible assets calculated in Step 2. Subtract the excess return from the pretax earnings from Step 1.
6. Calculate the three-year average corporate tax rate and multiply by the excess return. Deduct the result from the excess return.
7. Calculate the net present value of the after-tax excess return. Use the company's cost of capital as a discount rate.

In summary, strategically, if a company will use the discipline to look ahead and count all these considerations as part of the decision making and implementation process, many of the challenges in M&A could be minimized.

 

Alton Lane and a Blue Ocean Strategy in Men's Clothing

I wasn't raised in an environment where custom clothing was the norm. My dad's dad had one suit. It was a quality piece because that's what you did back then. He was a brick mason and contractor and he called that suit, his "puttin away suit". He was buried in it. My dad, I don't recall ever seeing him in a suit. He was a fireman, mechanic, and painter. His idea of dressing up was a shirt and tie for a funeral or special event. Jackets weren't his thing.
This all having been said, they would laugh at the thought of my owning custom shirts, made to measure, and experiencing shopping for them the same way.
I share the background of my own life to cast some light on what is likely the case with most men who end up in a custom clothing experience.
I've spent most of my life at the TJ Max or Marshall's type of stores going through racks of shirts occasionally finding that awesome high-end shirt in my size for $12.00. Score!
When life got a bit more financially stable, I opted in for an appointment with a Trumaker Fitter who met me at the office, measured me up and in about three weeks, my first custom shirt arrived. It was a great experience. I enjoyed the young lady who served as the fitter and we stay connected. I bought a second shirt and with a strong referral bonus, I referred a half a dozen men to this particular rep.
The experience and vibe during the entire process was far better than scouring through bins of shirts.
About a year and a half ago, I experienced what is an even newer disruption of the personal shopping space.
Alton Lane is a custom clothier that marries technology and personal touch in some masterful ways. I'm writing about them in Blue Ocean Strategy context as I would argue they are finding noncustomers and uncontested marketspace by virtue of their specific business model.
As a quick review, a business is entering Blue Ocean Shift territory, where uncontested marketspace exist, if the cost of production, delivery or sales lowers while value to the customer increases. Blue Ocean success stories are identified by their discovery and acquisition of noncustomers.
I was a classic tier-three noncustomer of Alton Lanes. Tier-three noncustomers don't know you. They don't have your business on their radar. They have to be identified via buyer personas, then found, then talked to, and then served with testing roll-outs and then surveyed to know what will keep them coming back.

I was invited to a business mixer by a friend that was held at a Nashville Alton Lane location. There was a shortlist of invitees to this mixer as the Alton Lane location is approximately 750 square feet or so. I'll describe the initial impression so you have some context around their unique experience.
As one finds this particular Nashville location, one notices that the location is in the rear of a converted warehouse facility that now hosts upscale restaurants, shops, and bars. The entry is marked but upon stepping up to the door, one experiences an automated door that is somewhat hidden. One feels as though they've entered a speakeasy or secret location. The establishment is scented in what may be a custom scent or at the least has the scent of new clothing.


One is immediately offered a drink. Each showroom features a well-stocked bar where their relationship with Heaven Hill Distillery is clear to those with trained eyes in the spirits space. The experienced showroom manager serves as narrator and host for the event and each is trained to carry on conversations that lead to data gathering that lead to a better understanding of what one seeks in their clothing.
In the case of this event, each attendee had an opportunity to experience a digital body scan with technology patented by Alton Lane. A brief video describing the tech is featured here.

Once one is measured, the showroom manager tightens up the data with some hand measurements and then it's back to the bar or a comfortable leather couch for a visit with the massive collection of swatches. The personalization of one's shirt, suit, trousers, etc really gets taken to a new level at this point.
During this entire process, one is still enjoying the event, the conversation, and the environment.
It is easy to see how this process differs from a visit to a department store. Even a high-end establishment with comparable pricing, i.e. a Nordstrum or custom men's clothier.
One tool that demonstrates this distinction visually is a Blue Ocean Strategy As-Is Strategy Canvas.

View the vertical axis as a measurement of value in this case. The horizontal axis demonstrates strategic factors associated with the purchase of men's clothing. The two strategic profiles studied in this canvas are traditional retail, not discount retail, and Alton Lane.
As you can see, price is not all that different when quality becomes the benchmark. Convenience is a strong strategic factor for Alton Lane. When you have your appointment set at Alton Lane, you are taken care of individually and personally. That's not common in a traditional department store setting.
Fit is a game-changer for Alton Lane as a strategic factor. As one who has ordered and received custom clothes before, there is no fit quite like the one received after a digital scanner reinforced by manual measurement. If the item, for any reason, isn't satisfactory, take it back and with few questions, the item is made right. This isn't an endorsement of Alton Lane, it's simply a discussion of the strategic factors. 
Personal service and customization are strong features in the strategic arsenal for Alton Lane. The experienced staff who knows you or who can pull up your data and details and pick up where the last conversation left off is not available in the traditional retail environment. Customization around fabrics and design choices make every piece uniquely one's own.
Both strategic profiles feature quality clothing so the distinctions in this area often have to be perceived. That is to say, what does the narrative around quality sound and read like? How are staffers trained to speak to quality?
Finally, the after purchase experience has to be considered as a strategic factor. How does an after purchase experience make a company unique? With Alton Lane as with some other custom clothiers, one receives a login and can then order anything online and thanks to the stored data, the fit is perfect, time after time. That's not happening in traditional retail. The data stored by Alton Lane lends itself to one's receiving great experiences on every return shopping trip as well as giving the showroom staff context and history on the individual visiting or calling the showroom.
The "As-Is" strategy canvas is just one tool that is used in the Blue Ocean Shift journey. There are many other shift related processes to go through when a company seriously enters the Blue Ocean journey.
A part of the narrative from Alton Lane includes the following: "From our design bar and personalized service, to our collection of over 3,000 premium fabrics and our 3D body scanning technology, our experience is designed to help you find the perfect fit in the most comfortable and convenient way possible."
Recently, Macy's made the news with their additional use of technology to enhance the online experience customers will receive in the future. They are linking up with Google to use its Cloud platform in its warehouses across the U.S. Through its data analytics, the platform will help the department-store chain manage online orders, merchandise and deliveries — including of bulkier items such as furniture — one “of the key challenges” Macy's has been trying to solve, says CNBC. While the store reported lower second-quarter profit and has lowered its earnings outlook for the year, it’s seen a rebound in online sales.
If you or your company is interested in discussing how Blue Ocean may work for you, please don't hesitate to reach out. An initial discussion is completely complimentary.
Sherman Mohr is an Insead Blue Ocean Strategy Institute Certified Blue Ocean Strategist. He is located in Nashville, TN.

Strategies for Religious Institutions in Uncertain Times

The premise for this post is the reality that there are a number of strategic challenges confronting the church and religious institutions. Without considering and planning for the potential scenarios that may lie ahead, church leaders may not be effectively carrying out their strategic and fiscal responsibilities and could be placing their organizations at risk.

First, what is the primary problem? 

Second, what are some possible fixes? 

Once one prepares to visit possible issues in the church, one then has to revisit their current strategic foundation and stress test the strategy. Then it is time to act. Asking, “what now?” leads to developing a proactive plan and acting on it. Uncertainty is not an excuse for inaction. Whether you are focusing on your members, choosing to scale up (or down), grow or shrink programs, or restructure your operations, it is critical that you not only plan to act but actually implement your strategy. Remember inaction is a choice. 

So what is the primary problem? There are lots of opinions about the primary issues facing the church or religious institutions. 

Is it giving?

Is it membership?

Is it aging attendees? 

Is it the message? 

Is it the pulpit or leadership?

Is it the culture?

Candidly, we would argue, it makes no difference what the primary issue is if you have a strategy built around identifying noncustomers, i.e. the unchurched and seek to serve them. 

Trevin Wax stated in 4 Big Challenges Facing the Church in the West Today in August of 2018 the following: 

"The church is in crisis, as it always is. Such could be said of the church in the early centuries, during the middle ages, in the tumultuous time of the Reformation, and in our modern era. From the days when Christians were getting drunk at the table in Corinth to the brutal extermination of Christians today at the hands of Islamic terrorists, crises have been constant. Heresies strike from inside, persecutions from outside. The church is in crisis.

The church is also stable. “Upon this rock, I will build my church,” Jesus said. Like the parable he tells of the wise man, Jesus builds his house on the rock, and the gates of hell will not prevail against his people. Yes, there will be fallings away, false messiahs, heresies that ravage his teaching, moral aberrations that harm our witness, and persecutions that sweep over the landscape. The true church is always in crisis but always stable. We are in a spiritual battle whose outcome is secure."

So that having been stated, let's talk about some issues. 

Pat Robertson is quoted as having stated the biggest problem facing the church is unity. 

John Stonestreet stated in the Christian Post, "One of the most pressing challenges for Western Christians is to explore the implications of our civilization's transition to a secular age. As Charles Taylor has argued, Christian belief has not only been displaced from the default position, but is aggressively contested by numerous other options. Christianity is merely one option among many, and an implausible and unimaginable one at that. Thus, Christians have a unique opportunity to reimagine our social, cultural, and political witness so that it speaks with salience to our secular age."

Unity and relevance. They seem to this writer to be the underlying core challenges that all other symptomatic challenges fall under.

Build Your Leadership Life with Blue Ocean Strategy

There are ways to reinforce leadership strengths in your life. One possible approach is to view your leadership qualities through the lens of Blue Ocean Strategy. Few people lead this process better for executive teams than @LaurenMathys of BlueCrestConsulting.com. My attempt to offer some insight as to how you can leverage this great strategic model for personal use is very well explained via the app for iPads by Blue Ocean Strategy.

In this short visualization, I leveraged the As-Is Strategy Canvas software available via Blue Ocean Strategy. I also used a study published in Inc. Magazine. This study covered the qualities of 300,000 leaders. Most of the Key Factors of Success are featured. I added fitness and reading/ongoing learning as well.

There are two leaders represented. One is the poorly performing leader. The other, in red, is a highly effective, excellent leader. 

Ranking each leader's Key Factors of Success from high to low makes this the most obvious strategy canvas ever constructed. The real work for you? Plotting where you are in the midst of these two lines.

The question to ask?

What are your Key Factors of Success? In your role in life or the role that you envision yourself in given the years ahead, what are the key qualities that will lead to your success? Plot them along the horizontal axis and measure your current effectiveness against where you need to be. In the course of doing so, you'll develop an "as-is" strategy map. As most of you know, this step is a modification of what all of us know as the simple gap analysis.

In the Blue Ocean Strategic mindset I live in, I'm utilizing this tool to measure where I am personally against the leader I need to be to capture my own version of uncontested market space. In professional terms, that means for me, what kind of leader will capture the hearts and minds of future customers, clients, employees, investors, board members, colleagues, and so on.

 Sherman Mohr serves as a Chief Digital Officer and CEO.     He is a Certified Blue Ocean Strategists residing in     Nashville, TN.

 Inquiries around Blue Ocean Consulting may be directed to https://ourstrategists.com 

My contribution to the retail apocalypse

A Business Insider Intelligence Report on In-Store Personalization provides these key takeaways. 

• Consumers say that a personalized shopping experience can inspire loyalty and increases in spending.
• But brick-and-mortar retailers aren't meeting consumers' in-store personalization expectations.
• The nature of online shopping gives e-commerce the upper hand when it comes to personalization.
• Physical retailers can close the gap in personalization by identifying consumers when they enter, tracking them throughout their journey, and then using that information to inform individualized offerings.
• To make the most of personalized offerings, retailers must consider how content is being presented to consumers in-store, and what the strengths of each channel are.
• If physical retailers fail to improve their in-store personalization, they risk losing sales and market share to e-commerce companies, both online and in-store.

These takeaways remind me why I choose the in-store experiences I currently choose. My favorite place to shop for men's clothing is Alton Lane. The environment is like nothing else. The stores mix a combination of a speakeasy, personal shopper, retail, and tech firm. Their measurements include a whole-body scanning technology that literally leads to the Alton Lane clothing being more custom made to fit my body than any hand measurement could accomplish. While your scanning fabrics, you can partake in a nice Elijah Craig Bourbon or a cold beer. The selections are fantastic and the help is highly skilled. They know their products and their value proposition. They provide an environment as well as an experience. There is nothing else quite like it. 

In my personal migration to Amazon, where most of my purchases now take place, I can explain exactly what happened via the use of some tools from the strategic professionals at Blue Ocean Strategy. 

When working in Blue Ocean Strategy frameworks, companies begin to analyze why things happen strategically and seek first to identify unknown or non-customers as a way to capture uncontested market space. It's a process. There is little that's random about the method.

One of the first steps is identifying an industry's Key Factors of Competition.

When you layout your industry's key factors of competition, you begin to understand the current state of play in your industry. You wouldn't think of starting a game of any kind without first reading the rules of the game or allowing a friend to describe the rules of the game. Once you know the rules and understand the key factors that competitors use, you can then compete and have a chance to extend play or even win!

It's the same in business. I'm often shocked to find that companies and business owners don't assess the key factors of competition. This is why you see decimation in some industries. The innovators understood enough about the "state of play" of what the non-customer want and are willing to pay for that they offer it in some way.

Back to the state of retail. I share this simple post, not to provide details about the state of the industry. There are lots of resources for that. This post provides a visualization via a Strategy Canvas for what my experience is in the retail business. I'm a consumer, not a retailer. The canvas shows a grid with the vertical axis the key factors from high to low. The factors of competition are shown on the horizontal axis. Three parts of the industry are represented. High-End Premium Retail, Discount Retail, and My Amazon Experience. You could substitute brands or your version of any three and end up with a similar visualization in your own mind.

The image shows a limited number of key competitive factors. I listed the things that are important to me. Factors include price, convenience, inventory, return policy, and personalized marketing.

The strategy canvas makes it obvious as to why I am an Amazon fan and Prime Member. It must not just be my experience given the nature of today's retail environment. For my use of retail, Amazon is killing it on key factors of competition. There are other online platforms killing it as well. For my retail needs, convenience, inventory, personalized marketing, and return policy are key factors. The high-value proposition afforded to me by Amazon is why the Prime Membership could go up another $100 annually and I wouldn't blink.

So what is a retailer to do? The first step, stop comparing your store to the competition. The second step, get a variety of employees together to brainstorm the key factors of competition. In most cases, the CEO will be of no real assistance here. Third, ask a large variety of non-customers where they shop, why they shop there, and what keeps them going back and what they most dislike as well. Just this data alone will set you on the path for some significant gains. If you're interested in true shift to a blue ocean of uncontested market space, buy Blue Ocean Shift, read it and implement the work. Count on a year's worth of work if you're a large company. Perhaps a bit less if you're smaller. Here is the link. https://www.amazon.com/Blue-Ocean-Shift-Competing-Confidence/dp/0316314048 

Sherman Mohr serves as Chief Digital Officer of a Blue Ocean Strategy influenced company serving communities of faith. He is a Certified Blue Ocean Strategists. 

Inquiries may be directed to https://ourstrategists.com