Sunday, December 21, 2008

The Writing Is Not Always On the Bathroom Wall


Knowledge is everywhere. I’ve learned about the strangest things in the strangest places. On the business and finance front, I’ve always been intrigued by companies with a core competency in M&A. Recently, I’ve been reading John Chamber’s account of the M&A spree that Cisco went on in the late 1990s. His recollections speak to a universal problem that affects all of us as marketers: inappropriate generalization of historical events.

To many, Cisco was the champion for successful M&A during the late 1990s. They had a success rate of roughly 70%, far above industry average. They maintained an HR retention rate of almost 80% post-acquisition, again far above average. However, they weren’t without flaw and these flaws seriously crippled Cisco for many years. Mr. Chamber’s openly acknowledges that Cisco inappropriately generalized its historical acquisition knowledge to new acquisitions which were fundamentally different. The effect was a series of mismatched acquisitions and losses for Cisco. Ultimately, Cisco recognized the problem of a single M&A model and retooled its entire M&A process. The results, thus far, are promising.

As marketers, there is much to learn from Mr. Chambers. Too often, we use our historical successes and failures as tactical precedents for new campaigns. However, we ignore the fundamental positions that customers evolve and clients change. We may even write revisionist history to account for our outcomes. But even if we’re neither dense nor duplicitous, we often poorly generalize success and failure to inappropriate situations.

Generally speaking, the only time historical conditions project positively on future campaigns is when the experience is truly similar. The factors on which we judge similarity vary from campaign to campaign and your model must be flexible enough to accommodate that. The factors may include size, scope, product, industry, client, customer, platform, timing, or any other item relevant to your campaign. The important thing is that you use an appropriate model before generalizing an antecedent campaign.

Finally, it’s not fair to say that high-tech M&A during the dot-com and dot-bomb era is the perfect proxy for projecting historical past or failures. But what it is, if nothing else, is an interesting mental exercise to find knowledge in unusual places which may inform our marketing.

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