- November 20, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
Digital boost M&A strategy
Digital has boosted enterprise M&A strategy. In a time of shrinking customer loyalty and growing market skepticism, digital technology presents businesses with possibilities to distinguish themselves in the market and drive extraordinary performance.
- Leaders have invested massively in digital and see it as a transformative advantage for their enterprise. They have a definite idea of how to leverage digital innovation to enhance customer experience and generate value across the organization.
- Other companies have also invested in digital, but not to the degree that has redefined their strategy. They see digital as strengthening their current business rather than driving the next wave of innovation and value creation. As a result, they are not as well equipped to pivot their strategy in capturing new opportunities.
Why embedding digital in organizations’ DNA is crucial for success
A successful digital transformation needs a robust and innovative culture and a clear vision from the top down, which translates into an actionable business strategy. Digital must be a part of the organization’s DNA. Instead of having digital as an add-on, active businesses instill digital capabilities throughout the company.
Why investing in digital M&A strategy is driving customer loyalty and generating long term value
For most organizations, the strategic goal is clear – finding growth. However, making the right strategy is not straightforward, particularly in a market environment where customer loyalty is shifting, and disruption can come from anywhere.
To succeed in the long run, companies need to design their capital allocation strategies and offset investments in their core business with the ability to meet customers’ needs and market demands, today and in the future. This strategy will likely mean investing in digital technology to transform further and future-proof their businesses.
Leaders prioritize their capital allocation to deliver a customer-centric business strategy. The majority of leaders have focused their past digital investment on enhancing the customer experience.
In a market of rising competition and diminishing customer loyalty, discovering new growth opportunities to deliver unique products, services, or innovative business models will be a crucial differentiator.
Ecosystem mindset is critical to developing digital capabilities through M&A strategy
Companies are utilizing in-house R&D, as well as inorganic approaches to build their digital capabilities. Leaders place more bets and more often look to acquire skills from the outside.
Their approach reflects a belief that leveraging M&A to acquire digital abilities renders the speed and flexibility to capture emerging opportunities before the competition.
Companies are no longer functioning in a closed environment, and disruptive opportunities exist across the value chain. So, they need to examine the ecosystem of their suppliers, customers, and competitors, which in itself is a complicated task. As such, companies must pick the right mindset in developing an ecosystem that will allow them to be more agile and expedite their growth.
Why a flexible M&A strategy enables companies to embrace disruption
Geopolitical trade and tariff uncertainty, increasing competition from startups and technology, and regulatory change are the top three challenges that companies are viewing as the various significant risks to their business growth.
Leaders are better placed to find pockets of growth and new opportunities, even in times of uncertainty. Others, in contrast, appear to spend much of their time protecting what they have now, possibly at the expense of what they may achieve in the future.
Four key actions to boost Digital M&A strategy
Active businesses choose the following measures to navigate the future.
- Create a culture that embeds digital into the organization’s DNA from the top down and throughout.
- Establish a business strategy that invests in digital to drive customer-centricity to generate long-term value.
- Adopt an ecosystem mindset and utilize M&A as a lever to accelerate growth.
- Execute a flexible business strategy by embracing digital disruption to better react to the ever-changing competitive landscape and risks.
Digital is the present for 99% and the absolute imperative for all in the future. Companies that understand in digital’s transformative potential will excel. Those more passive on the journey may continue to function well in the short term but will find themselves on the back foot, or out of the race entirely soon enough.