There’s something familiar about Nokia and Microsoft huddling together for warmth in their losing battle against Apple, Google, and Samsung in the smart phone wars. Both Nokia and Microsoft suffer from bad strategy and weak implementation, yet somehow they think that by combining forces they’ve magically solved the problem.
Remember Sears and K-Mart? Two fading icons who had been lapped by competitors tried merging, in the since-discredited hope that one plus one can equal ten, or even two and a half. And further back there were Burroughs and Sperry, two one-time powerhouses of the computing industry who, bested by competitors, decided that if only they combined as Unisys they would obscure their many mis-steps and emerge a winner. Instead the merger failed from day one, and today Unisys has a market cap of less than $700 million.
Acquisition of a weak competitor sometimes (although not in the majority of cases) works when it provides a strong acquirer with a missing piece of the puzzle, such as a key technology, product or employee set that can be acquired faster than it can be built from the ground up. And a few people have gotten rich by rolling up a series of weak competitors and then flipping the combined company, leaving the problem of making sense of it all to someone else. But the merger of two weak competitors to produce a strong one never works. If you can cite an example I’d love to hear it, because I’ve been doing this for 33 years and can’t think of a single one.
The simple truth is, you have exactly two choices. Either fix your company, or take temporary comfort in huddling together with another problem child, perhaps obscuring the inevitable for a brief period of time, but not for long.
