Continuous Improvement: How It Works and How to Master It

Continuous Improvement: How It Works and How to Master It

Capturing cross-selling synergies in M&A

Continuous improvement is a dedication to making small changes and improvements every day, with the expectation that those small improvements will add up to something significant. This approach stands in contrast to the typical approach of setting a large goal and trying to achieve it in as little time as possible. While the latter may sound appealing, it often leads to burnout, frustration, and failure.

The idea of improving by just 1 percent may not seem notable or even noticeable at first. However, when you consider the long-term impact, it can be just as meaningful. For instance, if you get one percent better each day for one year, you'll end up thirty-seven times better by the time you’re done. This highlights the power of continuous improvement in achieving significant growth.

In our pursuit of improvement, we often overlook the resources and ideas that are already at our disposal simply because they don’t seem new and exciting. However, in the real world, it is often easier to improve our performance by cutting the downside rather than capturing the upside. Subtraction can be more practical than addition. In many cases, improvement is not about doing more things right, but about doing fewer things wrong.

While measuring progress by looking forward and setting goals is common practice, it is essential to also measure backward. By reflecting on what you have done in the past, you can identify areas for improvement and make incremental changes. Instead of focusing on a grand plan for the future, focus on what you did last week and how you can improve just a little bit this week. This backward-looking approach allows you to connect the dots and make continuous progress.

Now, let's shift our focus to capturing cross-selling synergies in M&A. Cross-selling refers to the practice of selling products and services traditionally sold to one set of customers to another set of customers. It is a powerful way to realize revenue synergies in post-transaction scenarios. While cost synergies are relatively straightforward to estimate and often pay off quickly, capturing revenue synergies is crucial for meeting shareholder expectations.

To capture cross-selling synergies effectively, it requires a deep commitment and understanding of the opportunity and how to execute on it. This can be achieved by considering the "six Cs" - complementarity, connection, capacity, capability, compensation, and commitment. These dimensions provide a strong sense of the cross-selling opportunity and increase the odds of capturing it successfully.

Complementarity refers to how well the accounts, products, and services of the merging companies complement each other. It is essential to evaluate this aspect to ensure a strong foundation for cross-selling. Connection, on the other hand, focuses on the existing customer relationships that can be leveraged for cross-selling. Building on strong customer relationships increases the chances of success.

Capacity is another critical factor to consider. Can the salesforce dedicate enough time and effort to cross-selling? It is crucial to assess the availability of resources and prioritize cross-selling initiatives accordingly. Capability refers to the skills and knowledge of the salesforce. To effectively cross-sell, they need to have the necessary competencies and expertise. Investing in training and development can enhance their capabilities.

Compensation plays a significant role in motivating salespeople to prioritize cross-selling. A well-calibrated compensation plan, coupled with the right recognition programs, can drive the desired behavior. However, it is important to note that compensation alone is not enough. Nonmonetary incentives and rewards are also critical to spur salespeople to make cross-selling a priority.

Finally, commitment has the highest correlation with overall program success among the six Cs. It is essential for the organization to be fully committed to cross-selling and provide the necessary support and resources. Without commitment, even the most well-designed strategies may fall short.

In the pursuit of capturing cross-selling synergies, it is crucial to evaluate overlap in customers or products accurately. M&A teams tend to overestimate the potential complementarity of products, which can lead to unrealistic expectations. Additionally, the strength of the relationship with the account and the specific buyer can significantly impact success. Building credibility and trust in the new space is essential.

Launching cross-selling initiatives requires careful orchestration and precise activity. Creating the right focus and ensuring that the salesforce understands the relevance of the new product to decision-makers is crucial. It is a process that requires strategic planning and execution.

Before concluding, here are three actionable pieces of advice:

1. Embrace continuous improvement: Instead of focusing on big leaps, commit to making small changes and improvements every day. Over time, these small improvements will compound and lead to significant growth.

2. Prioritize subtraction over addition: In your pursuit of improvement, focus on cutting the downside rather than capturing the upside. Often, it's about doing fewer things wrong rather than doing more things right.

3. Foster commitment and provide support: When it comes to capturing cross-selling synergies in M&A, ensure that the organization is fully committed. Provide the necessary resources, training, and incentives to drive success.

In conclusion, continuous improvement and capturing cross-selling synergies share common principles. Both require commitment, evaluation of existing resources, and a focus on making incremental changes. By embracing continuous improvement in all aspects of our lives and understanding the dimensions that contribute to successful cross-selling, we can achieve significant growth and maximize the potential of our endeavors.