Thursday, March 03, 2005

Synergy is Dead (revised): Remember that word, "synergy", say back in 1997/1998? Everything was done to create synergy and to shift paradigms. If you didn't have synergy, heck boy, you better go get some.

I heard the siren call. At that time, I was seriously considering throwing away my legal education in order to find one of those hot "dot com" jobs everyone was talking about (you know, with the foosball tables and keg parties?). I didn't know what the word meant, but it seemed everyone else did, and the hell if I was going to get stuck in an old-world job like providing legal advice and fighting in a courtroom over ancient concepts rooted in Roman tradition. Nope, synergy was the name of the game. And it continued to be just as we crept into the 21st century. What happened next is well-documented: failure of corporate cultures to mesh, too much overhead, and not enough of a bump from the cross-marketing to justify the massive cash, stock and personnel outlays/upheavals.

But, it's clear that companies just couldn't help themselves. Take Gillette, a well-established company that dominated market share and had only one competitor. "Too easy," said the highly-paid business school graduates. So, it branched out into highly competitive markets, like tooth care, batteries, and deoderant. Naturally. And nature took its course via a sinking share price, customer dissatisfaction, and a bloated corporate structure. All the vibrating razors (!) in the world can't make up for that.

What we've learned in just the past 6 or 7 years, is that business should be about core markets, about the tried-and-true. It's about building, maintaining, and gradually improving your single business model. It's boring, and it makes it harder to justify all those Ivy League MBAs, but very few blockbuster deals, merging previously separate worlds have produced shareholder satisfaction.

And, it is being revealed today that merging previously separate UNIVERSES is even harder (and by companies that are otherwise very successful) and hence, synergy is dead.

Now, companies can still use diverse holdings to their advantage, but as is well-described in this article (and I came across this piece as I was searching for articles containing "synergy" and "media" - oh well), the s-word effect is best achieved organically, i.e. Nickolodeon feeding CBS (both owned by Viacom) morning cartoons. But to artifically smash together say a soft drink company with a movie company so that you can, I don't know, have Dracula knock back a ginger ale ("I'm giving up blood for that fresh sparkly taste of Canada Dry...ah, ah, ah!"), just doesn't make any sense.

But there is hope. Some companies are seeing the light. First, streamline. Get back to your core market. Then, abandon the old and embrace the new. Best example? Eastman Kodak. A few years ago, the company was in the crapper. The company had branched out into microfiche, copiers and the like. It had also recently sunk a ton of money into developing (pun intended) a new form of film cartridge - perhaps you heard of the Avantix film system? Just as that was being launched, digital imagery was rearing its virtua head.

Now, it's true that Kodak was investing substantial money into digital as far back as 10 years ago, when digital imagery wasn't profitable, but Kodak is a film company (like the adage about shaving companies: "give away the razor, sell the blades"). And even today, it gets more income from film than from digital imaging, even as the market moves more and more to digital. However, the share prices has rebounded significantly, and it appears the company is on the way to at least a mild recovery. All from putting its focus into what it has always done best: let people look at their family vacation photos, albeit in a new-fangled format.

Fortunately, I have the next best thing: tulips. They're going to be huge in 2005. It's a whole new me.

No comments: