[Editors note: Read about how Intel is renaming its McAfee security brand, in response to founder John McAfee’s antics.]
What amazes me in the technology industry is that companies tend to use the Lemming strategy when it comes to strategies and policies rather than follow best practices. This makes the latest Intel move with McAfee – which emulates Dell’s best practice of how to do acquisitions – an exception rather than the rule it should be.
Granted there are some risks, given that Intel and Dell are vastly different kinds of companies. But knowing that the more common path fails nearly 90% of the time, it is still the better option. Let me explain on both points.
The Lemming Strategy
What we often see with large companies is a tendency to follow rather than lead. Let’s take for example the most egregious policy currently in place in the US, Forced Ranking.
This policy came out of the GE turnaround and it was a tool used specifically to correct a problem that GE had, in which management wasn’t doing part of their job. But like a surgical procedure, its success was directly connected to the problem GE was facing and, as GE itself demonstrated, leaving this policy in place overly long created additional problems.
Forced Ranking is a process that forces employees into a bell review curve, it emulates bell curve grading in schools. But it doesn’t account for the difference between educations where students are assigned to classes either randomly or through student choice, and businesses where there are tight controls with regard to who goes into which department.
The process pits employees against each other competitively and rewards managers who game the system by intentionally hiring underperforming employees to assure they have people they can use to create the required curve. This process is believed to be at the core of Microsoft’s decline last decade and yet only recently has Microsoft publicly abandoned it.
Like Lemmings, other technology firms continue to use it even though it continues to be identified as a reason they aren’t competing as well as they were before adopting this policy.
You can also see this in acquisitions, where the common practice is to slam the acquired company into the acquiring entity. This “slam together” policy disrupts career paths, destroys policies that created the value that resulted in the acquisition and generally drives the most valuable employees and customers to abandon the firm.
The core goal to this practice is to assure similarity between the two firms and make it so senior management doesn’t have to deal with diversity. It is done to make the acquisition easier to manage, but that is rarely the result because the process destroys the acquisition 9 out of 10 times. And that is actually a conservative number as finding successes is far more difficult.
At IBM an innovative process was created after a massive amount of research, which kept the company separate in structure but merged the brands and elements where synergy could be created (common services, sales, branding).
This made the acquisition appear and function like an integrated part of the combined company on the outside, but left the aspects that made the company uniquely successful intact, and the firm generally retained responsibility for their existing customers. What is interesting is that Dell adopted this policy more aggressively than even IBM did. And the very clear result is that virtually every acquisition they have made since has increased in value and both customer and employee retention has vastly exceeded industry norms.
While EMC has an interesting variant and Intel had implemented the hands-off part of this policy previously, it is only Intel with this latest move that has appeared to follow Dell in this best practice.
Intel wisely left McAfee alone after acquiring them. But while this assured that McAfee wasn’t broken, there didn’t seem to be any resulting synergy.
In addition, McAfee’s founder had drifted into crazy land with a series of moves that indirectly and directly damaged the McAfee brand. The combination of these two things appears to have driven Intel into implementing the second phase of IBM/Dell’s best acquisition practice: McAfee products will now fall underneath the Intel brand, with two clear benefits.
You should now see far more synergy between Intel and McAfee, and McAfee will be increasingly protected from anything John McAfee does. McAfee will still remain independent, however, and that means key employees and customers will largely be unaffected and protected. So the first phase protected that asset that is McAfee, and the second phase should, if the IBM/Dell model holds, increase its value.
The only risk is that Intel is a very different kind of company than Dell. To get full value Intel will have to expand its solutions portfolio in order to maximize the value of the acquisition. But this is still far better than the more common path, which would have them focused on assuring the acquisition didn’t lose all its value. So they may not make as much extra profit as Dell might have with McAfee, but they won’t have the catastrophe that the more common practice would have driven.
When we were growing up we all likely had a conversation with our parent where they asked us why we did something stupid and we said something to the effect that “well everyone else does it.” Apparently a lot of firms don’t grow out of that and repeatedly do stupid things with the defense they are in good company. Watching firms like IBM, Dell, EMC and now Microsoft and Intel switch to creating or driving best practices instead suggests – assuming this practice continues to spread – that the technology industry will strengthen, because this idea of doing stupid stuff just becomes it is common will become deservedly obsolete. Thank goodness.