Planning for Digital Transformation After M&A

As the world moved online during the pandemic, companies and workers were forced to adjust to a new normal. Organizations battled to grasp the new realities of doing business in the midst of chaos, making them ripe for mergers and acquisitions (M&A).

According to Statista, amongst the biggest M&A deals of 2020 were: Salesforce’s acquisition of Slack for US $27.7 billion, Uber acquiring rival Postmates for US $2.65 billion, and Amazon acquiring autonomous driving startup Zoox for US $1.2 billion.

All of these companies going through M&A have technology at their core. Some will remain autonomous business units. Others will require integration between disparate technology stacks. But one thing is certain: companies with mountains of cash will solve their tech issues, while midsize companies face a more daunting task.

Digital Transformation is on the Lips of Every CEO and IT Department Worldwide

While digital transformation is simply a blanket term for a transition from the old way of doing business to the new, and some may be tired of hearing about it, no one is exempt. Since the pandemic, every major company in the world – whether part of an M&A or not - is rethinking their old operating models and trying to become more agile in their ability to respond to customers and rivals. This is putting tremendous pressure on technical capabilities, talent and internal resources.

What is the right time to consider digital transformation in the M&A process? Some say that investing in technology prior to M&A activity will increase a company’s valuation. Others want to save the bump in productivity and revenue growth until after they complete a the M&A transaction to demonstrate the value of their business decision to shareholders.

Regardless of when you invest in technology, if technology is central to your business strategy digital transformation is inextricably linked to your future. Understanding, planning and budgeting for Digital Transformation efforts, and describing how value will be realized, must be considered before, during and after the M&A concludes.

Mid-Market Companies Face Hurdles After M&A

Midsized companies also got into the M&A act over the past year as they acquired competitors to secure and improve their market positions. They face a bumpy road ahead as they struggle to merge not just personnel and corporate cultures, but also technologies.

Organizations seeking to maximize efficiencies and set their sights on innovation face a dizzying array of technologies to modernize, migrate, and integrate systems after M&A. These challenges are never straightforward or easily managed, but they’re imperative to realize the cost savings and growth anticipated by the new structure.

While midsize companies may be adept at managing corporate cultures, perhaps the biggest problem they face may be the shortage of technical talent to achieve digital transformation and make the most of their technologies.

The Path to Digital Transformation

The paths companies take to digital transformation can vary vastly. The most successful ones begin by identifying business goals and working backwards to develop a business strategy and selecting the technologies to enable the journey. But while looking ahead toward innovation, it is still critically important to determine how to merge basic technologies and applications. A roadmap must be created for not only innovation and integration, but also replacing non-digital or manual processes with digital ones.

With all their complexity and investment of time and resources, successful digital transformations have one thing in common: leaders in charge encourage their teams to think big and imagine what could be, rather than what is.

Mid-Market Strategies for Successful Digital Transformation

According to the experts who have gone through digital transformation processes, the following approaches can help ensure successful outcomes:

• Think about “quick wins”. It can be difficult to secure buy-in from leadership and employees if there’s a perception that the company is focused on the future but can’t or won’t address the needs of the present. If you are only focused on the grand vision for the future, it doesn’t help foster a sense of progress and can leave some employees feeling defeated before the process even gets started.
• Competition for Technical Talent is Brisk. There are simply not enough data scientists, architects and software developers to go around in the United States. As a solution, many have chosen “nearshoring” – the process of creating and managing a team in an adjacent country with high quality technical talent at lower costs. For the U.S., examples include Mexico and Argentina.
• User Experience Always Comes First. While it’s tempting to quickly formulate a solution, the most critical factor is how people will use new technologies. Seek a technical partner who focuses on users first (also known as UX design). UX design should be done in conjunction with software development and not as an “add on” at the end.
• Spend Time on Strategy. When selecting a technology development partner, choose one that can analyze and develop solutions, recommend improvements, and identify new opportunities.
• Plan for a Long-Term Relationship. While your project may have a completion date, technology development never ends. From maintenance to adding new features and capabilities, you will always need to maintain competitive advantage and innovate to retain customers.

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By Cesar D’Onofrio, CEO of Making Sense, a technology development firm that creates software experiences people love. An expert in UX Design, the company brings technology solutions that adapt to people, not the other way around.