Transaction to Transformation: How an M&A Can Lead To Digital Transformation

In Brief: What is Digital Transformation

Why Is Digital Transformation Important?

Another trait of legacy businesses are silo-ed business units and/or technology enabling those business operations. For example, a firm might have a Marketing department running its own CRM system that isn’t tied to their financials platform and isn’t “aware” of actual sales data — regions, customer types, customer triggers, etc. This valuable information is silo-ed off and there are several attempts to reproduce redundant data across the enterprise, leading to costly duplication and overlapping processes.

1. New Revenue Streams

Technologies like the internet, on-demand, online payments, etc and have opened up so many new business avenues and opportunities that by integrating these technologies into their business model, enterprises unlock a host of new revenue streams.

2. Competitive Advantage / Counter Disruption

By upgrading core platforms before competitors, companies can maintain their competitive advantage. In other words, you can counter disruption in your industry by being a disrupter.

3. More Value For Customers

Customer expectations are changing in response to changing improving technologies, in fact, entire demographics are changing too — the generations are changing. Customers are prioritizing customer service and brand name (marketing) more these days. Especially with every other company entering a price war its competitors, it is important to provide value separate from just the good/service.

4. Market Necessity

Right now, a digital platform is a necessity but soon enough it will be a requirement. And there are many drivers in the external environment that will make it a requirement. Rise of automation and robotics, a severe shortage of skilled workforce in blue-collar industries, IoT being a few of these market necessities.

How a Merger or Acquisition Can Lead To Digital Transformation

Digital transformation means bringing changes to nearly every aspect of the business, updating the business model, if you will. But this involves huge costs and can severely hamper productivity and employee morale if not done correctly. Something else that shares similar characteristics? Mergers and acquisitions.

To Build It or To Buy It?

Case Study: Walmart’s acquisitions and partnerships

Walmart is one of the largest chains of department stores in the world, but the management at Bentonville realized that being a physical retailer, no matter how big, would not be ideal in an online world. So in a bid to maintain their superiority and fight off the growing threat of Amazon, Walmart has acquired a series of technology-based startups in the past decade. It’s digital transformation began with the acquisition of Jet.com, an urban e-commerce retailer. In the following years, the company acquired about a dozen more e-commerce platforms including one of the biggest e-commerce marketplaces in the world — Flipkart.

Transformation Won’t Come Naturally

It’s a common misconception that an M&A transaction will automatically lead to transformation and while big events like an M&A transaction can trigger organizational level changes, they won’t necessarily result in positive transformation or value creation.

Wrapping up…

With the number of businesses competing today, every dollar counts, which means growth decisions must be critically analyzed. Digital transformation is one of those decisions and it must be done as efficiently as possible. One way of doing that is by leveraging a merger or acquisition to integrate the target company’s technological platforms into its own.

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Azmat

Azmat

seasoned technologist with experience in software architecture, product engineering, strategy, commodities trading, and other geeky tech.