Rileybiz

By Mike Docherty, Venture 2

In my previous posts in this series, I highlighted examples of poorly integrated acquired innovation and some key success factors.  Here are some examples of “doing it right.”

Examples of companies that have successfully integrated innovation.

Great Harvest Bread:

In an NPR story, part of the station’s “Making Ends Meet” series that aired on October 23, I heard the story of Great Harvest Bakery, a franchise that encourages its franchisees throughout the U.S. to “do their own thing.” In other words, Franchise Central offers guidelines but truly allows frachisees to run their businesses as they see fit.

Often franchises are very conservative and strict when it comes to the leeway(or lack thereof) they give their franchisees in making business management, marketing and other decisions. The three sole requirements of this “freedom franchise”: 1) display the corporate logo, 2) bake the signature honey whole wheat bread and 3) grind fresh flour each day.

Focusing on a Seattle-based Great Harvest franchise, the story discusses the pastry innovation (e.g., “cini-minis”) and the general love the owner for what he has and what he offers. While not a typical example “integration” they have found a great balance between standardizing processes, while allowing individuality to continue to thrive.

P&G MDVIP 

I have previously discussed the interesting example of P&G acquiring MDVIP. It’s a very non-traditional example of acquiring new capabilities and brands. What’s also interesting now is to look back and discover that P&G , that behemoth of a company, that wrote the book on corporate “processes” has actually done an outstanding job of leaving a good thing alone. While P&G has direct involvement in the business (including some co-located P&G people), they’ve continued to allow MDVIP to operate somewhat independently, and have used the venture as a learning vehicle for expanding P&G’s ability to launch and grow service-based businesses, expecially in health care.

Printed with permission of Venture 2.

By Mike Docherty

In my first post on this topic, I discussed the importance of successful integration of innovation acquisitions. It’s a timely topic because increasingly, open innovation is being expanded from simply acquiring/licensing technologies to more situations of acquiring small companies as a platform for innovation-driven growth.

I’m differentiating here between M&A for traditional purposes (synergies, new market expansions, new categories, etc.) and acquisitions driven from the strategic goals of ‘ open innovation’ which are more about acquiring a technology or product platform that can be married with the large companies’ brands and distribution for rapid innovation-driven growth.

More and more start-ups are recognizing the value of selling directly to these large companies versus pursuing venture capital money and/or IPOs  to take the business to another level.  Here’s a link to an interesting article from last year in Fortune Small Business on that topic (I’m quoted in the article). 

In my prior post on this topic, I used the example of Black and Decker and Vector Products as something that represented what I see as an unsuccessful integration. In the post, I discuss how what looked like a smart acquisition turned out to have apparently destroyed the innovation that was acquired.

So what’s it take to make for a successful integration ?

Here’s my list of key success factors:

•  A recognition upfront of the cultural differences and sensitivity (especially on the large company’s part) to          those  differences.
• An integration strategy that deals not just the first 90 days (this is the part companies do well), but also the first 900 days (meaning that companies need to recognize the integration process is a 3-year process, not a 3-month process.)
• A willingness to allow exceptions to the rules–successful integrations allow these smaller enterpreneurial entities to sometimes play by different rules when it comes to financial reporting, bonus,/incentive structure and even reporting relationships.
• Senior leadership’s ability to accept and support ambiguity and dual systems, at least for a period of time. — I use the analogy of China and Hong Kong (somehow the People’s Republic of China has thus far been able to govern successfully under two vastly different approaches without destroying the success of Hong Kong’s openess)
• Most of all, the selection of a strong leader (who has creditability with and strong support of the parent company CEO for the acquired business who understands and can relate to both the parent company’s culture, systems and approaches, and the acquired company’s unique entrepreneurial style.  Often, this will turn out not to be the original founder/CEO, but rather someone who has had experience in both startups and the large corporate environments (likely the parent company).

In my next and last post,  I’ll provide  a few examples of companies doing this well.

Printed with permission of Mike Docherty at Venture 2.