Monday, June 12, 2017

Synergy Failure

The article “Seven Ways to Fail Big” was an interesting read.  From my own personal experience, you learn from your mistakes, not from your success.  When something goes bad because of a mistake you made, it sticks with you and it stays in the back of your mind when a similar situation arises.  Gloating on one’s success leads to complacency and failure at some point.  Usually it’s just a matter of time before it happens.  I enjoyed the fact that this article focused on the failures and not the successes of companies.  Analyzing the failures is just as important, if not more than studying about how to be successful.

After graduating from college I worked for a large landscaping company in a beach resort town.  Looking back on my time there, I now see they were guilty of the synergy mirage.  The business originally started out as a lawn care business.  As the owner grew more successful, departments were added such as landscape maintenance, design, and installation.  Along the way, the owner’s brother started an irrigation business that shared the same name and essentially was another department, but operated under different ownership.  The two separate businesses had the same emblems on the trucks, shared the same offices, shared the same maintenance shops, etc.  From the outside perspective, no one would know there were two separate companies.  As an employee on the design and installation side, it was evident on job sites that the irrigation employees were under different ownership.  Scheduling of jobs was done independently that would create issues.  Since the two sides didn’t coordinate on jobs, there would be instances where the irrigation employees were trying to install piping in the ground while the landscape employees were still rough grading the site for sod install.  The two sides often butted heads and seldom helped each other.  More times than not, the poor scheduling and lack of cooperation cost both sides money by taking longer to complete jobs that already had a set price.  The quicker the jobs were completed, more profit was made. 

In this instance, the two companies acted as if they were merged with all the business operation entities they shared.  However, they operated poorly together and most likely would have been more profitable if they remained two independent companies and didn’t share any assets.  This situation that I witnessed working for the company is similar to the one noted in the article involving the insurance companies Unum and Provident.  Irrigation and landscaping are two totally different businesses, much like in the insurance example of group vs individual markets.  Even though two businesses seem like they complement each other and can become more profitable by working together, careful analysis must be done to know whether that truly is the case.     

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