SpectatorBytes

Acquisitions have emerged as an essential capability for digital media players to build scale and drive product innovation. The digital media business has become hit-driven and increasingly hyper-competitive. As a result, building a successful Web business is increasingly hard for anyone but particularly for corporate media players. This is leading most media players to rely on acquisitions to drive long-term growth.

Even though most players are recognizing the growing importance of acquisitions in digital media, they do not seem to have taken the necessary steps to maximizing the value and ensure the sustainability of this strategy.
For media players, institutionalizing acquisitions as a corporate capability requires re-designing the overall organization and operational approach. For example, functional (highly centralized) environments will prove inadequate in dealing with acquisitions. Organization needs to recognize the need for independence for acquired companies to be successful as well as clearly identified the key support layers they need to extract the benefits from belonging to a larger organization. This does not mean I am advocating a holding company approach but rather to rethink what is the right “operating” company approach to manage digital enterprises.

Corporate media players should consider some of the following principles as they organize their digital efforts:

- Design organization to enable acquired companies to remain independent and to enable successful internal products to flourish.
- Establish support organizations with a focus on service
- Create a “titling” hierarchy, which allows talent to co-exist with corporate management
- Set up an integration team to manage integration process
- Organize your talent recruiting efforts around backfilling exiting personnel from acquired companies (e.g., have a strong bench of engineers/developers, stable of General Managers, etc.)
- To the extent possible, allow business units to serve both internal and external constituencies. Similarly, allow business units to use both internal and external resources. (e.g., a publisher should be able to use a sister ad network as well as third party ad networks; optimal way to optimize monetization and ensure competitiveness)
- Create a thin corporate layer to stimulate interaction among business units and ensure strategic cohesiveness
- Always be concerned with too much integration. There is always a tendency to consolidate companies with similar capabilities. Yet, this may reduce overall competitiveness for an acquired business. I would always lean on the side of enabling businesses to remain independent (I am not talking about incremental product acquisitions but rather business that have the potential to scale on their own).
- The collorary of the above is focus on “fostering collaboration” among business units
The better companies prepare to absorb acquisitions, the more successful their digital businesses will be. These principles are not easy to follow and may be considered counter-intuitive to current organizational principles. However, I have seen them work.