How Microsoft Can Make The Nokia Acquisition Work

Microsoft has the reputation amongst pundits for being the company where Wood for treesmobile technology goes to die. After three years of collaborating together a $7B deal was struck by Microsoft to acquire Nokia. The acquisition might not have received jubilation from stakeholders (stock went down 4.6% on the initial news), but for Microsoft to stem the tide of failure it knows that it must now create devices that appeal to both partners and customers. They also need to fortify a position in hardware manufacturing that will be tough to accomplish, generate buzz amongst skeptical app developers and calm descent amongst shareholders. That is all to happen while they integrate two huge businesses with a combined workforce of 132,000 people!

If Microsoft doesn’t figure out mobile it will be staring at a precipice. The main hurdle for Ms Tami Reller, Microsoft’s EVP of Marketing, Mark Penn, Microsoft’s EVP of Strategy along the transformation team (including HR) that should have been organized already is that the majority of M&As fail due to the lack of long term integration management that causes the M&A process to lose momentum and post deal communication is not handled well. Also soft issues get neglected: culture, problems of retaining key personnel and cross category M&As clash as a result of pay conditions, pensions, etc. Most importantly people forget that after the heady aspirations of Friday’s deal team there’s work to be done come Monday morning:

“Merging and acquiring companies destroys shareholder value. It is as simple as that.” Mark Sirower, Former Chairman, Goldman Sachs

There are no equals in M&As. The enterprise that has the strongest culture & practice will dominate! In the case of Microsoft and Nokia that will be a challenge in itself. As Microsoft will find out there are two determinates of value creation. Number one, how tight the ship is run: typically the successful ‘acquirer’ are those with a history of cost control and productivity that makes the ‘acquirers’ culture more successful in directing and getting the most out of the deal. Number two, the closeness of relationships. In M&A soft is hard and the closeness of relationships with employees, customers, suppliers and partners are crucial.

The internal reasons for M&A failure that make it tough to keep the business performing whilst managing the acquisition include not addressing victor & vanquished attitudes that will cause a loss of momentum and divisive leadership struggles. Add to this the inability of managers to lead their people through the transition due to a ‘do as I say’ attitude as opposed to ‘do as I do’ leads to a lack of role models and internal opposition to new ways of working, resistance to the new structure, not engaging the workforce or addressing conflict and culture issues that generates fear of job losses.

As for the external reasons for failure, market share does not grow due to a confused brand identity where the publicized promise is difficult to match on the inside. Also regulators (can) both hinder and help the process, existing customers and suppliers can no longer remain loyal and shareholders further doubt the acquisition strategy. Reller and Penn need to communicate other dimensions to the added value of the deal beyond simply a strategic need for Microsoft to have a foothold in the mobile space with scope and resources, especially as it was already meant to have had that with the Nokia partnership prior to the acquisition.

For Microsoft and Nokia to build a program internally and externally, it’s essential that they do not overly reassure internal audiences by saying there will not be significant changes; this deal represents a major change for who and what Microsoft will become. This requires regular and frequent communication using both face-to-face methods (for effectiveness) and digital methods (for timeliness). The key for Reller, Penn and the transformation team is to focus on survivors, not on leavers, by not pretending it is business as usual. Microsoft must explain the business rationale for the transaction (and constantly repeat) that confirms they are not approaching integration as a phase, but as an ongoing process.

For a successful external communications program, Microsoft and Nokia must be clear about the future and create a sense of direction while not being afraid to state that they do not have all the answers. This would run far smoother if Microsoft managed external and internal communication together. Microsoft should have had a communication (and integration) plan in place before signing the deal, which includes audiences (including unions and work councils), key messages, a timetable of the integration process, supporting activities, online initiatives, materials and an approvals process that identifies responsibilities for management across all divisions.

Paramount to success is a contact program between both firms’ senior and middle management with key messages – internal and external. Consultants and agencies will also be essential to the process so who, why, what and when. One simple, but powerful tool for Reller and Penn is branding the interim integration program itself. This requires identifying a new vision, mission and desired culture and planning ongoing identity and communication strategies for regularly reporting news that assures all stakeholders how well the program is being managed with a process for feedback.

In M&A, the business that has the deepest rules wins with energy and focus placed in five key areas: planning, announcements and pre completion, early post completion, integration and transformation. Microsoft and Nokia’s transformation does not occur simply through Steve Ballmer standing up announcing it. There must be a vision with action. Moreover, it has to amount to more than a few well-chosen words and Ballmer’s comments about their vision on the day of the deal does not help: “For us to really fulfill the vision of what we can do for our customers, we have evolved our thinking,” but the thinking was not shared. Hopefully it is internally.

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Author: Dean Crutchfield

In an award-winning career spanning two decades, Dean Crutchfield has created, built and re-invigorated some of the world's most iconic brands.

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