What are the biggest challenges in aligning business and IT during a merger or acquisition?

Don't just define the vision and the goals, but also define the terms that both companies use which look like the same term, but are not, or whose meanings change when the context of the term changes, or when different departments use the same word. We had overlapping assumptions when the term "enrollment", was used. Seems simple, was not simple.

I can see many of them already covered. But to add one from my previous experience, Culture both in terms of people and organizations is one of the key challenges during M&A. Satisfying people's expectations and marring them with combined entity's goal is very crucial to maintain harmony and retain knowledge base

One of my projects involved integrating commercial escrow products of two merging banks. The issue what each bank had a different philosophy to configuring an escrow product. Merging products to create a single product became next to impossible. Finally we ditched that approach and created a fresh set of products to meet future demands. While retaining legacy products as sunset ones.

In my experience, One of the major challenge was to plan the merger without impacting existing customers. The new setup can be tricky at times and you have high chances of loosing customers for which you have worked so hard to get. Keeping the minimalist approach, and keeping things simple goes a long way. Migration of data should be done with utmost importance and accuracy.

Align distinct organizational cultures for effective collaboration between business and IT teams. Consolidating different IT systems, including legacy and modern platforms. Migrating data from diverse sources must prioritize accuracy, security, and regulatory compliance. Restructure and roles are crucial to prevent inefficiencies and conflicts between business and IT teams. Transparent communication to address concerns, and build trust among stakeholders. Strong project management to align with business objectives and avoid delays. Overcoming resistance to change requires effective strategies for a smooth transition and minimal disruptions. Balancing IT investment with budget constraints demands careful financial planning.

Imperative to actually business models, products and processes for alignment before developing a strategy. Common problem is language used where same word has 2 different meanings within each company. Substantial work is required to ensure systems are fit for purpose, and an appropriate classification of invest/maintain/retire used as an initial activity to rationalise systems where possible. Once the landscape has been reduced, migration efforts need to be pragmatic. Too many times companies over invest in trying to migrate data and products when much better to incentivise customers to switch. Data migration starts on day 1 of the project and still won't finish till after project is done.

In my experience the most important role played by stakeholders, and keeping right people aligned with the entire process, there are chances of missing things when merging or in acquiring new business, the plan and the strategy of execution plays a key role in the entire process.

I would recommend a detailed assessment in each of the areas (+more) as I mentioned above. Here are few examples: Cultural Integration: Assess the organizational cultures, values, and norms of both companies. Identify the cultural differences that could hinder integration and collaboration. Technolgy Stack Rationalization: Evaluate the existing technology stacks, systems, and IT infrastructures in both organizations. Identify redundancies, incompatibilities, and gaps. Data Integration and Govenance: Analyze data management practices, data quality, and governance frameworks in both companies. Identify discrepancies in data formats and quality. etc.

Convergence to common knowledge base, such as standardization and homogenization? Identify and factor redundancies, in work flows, precesses and procedures?

Having a business architecture baseline for both is key to assessing current state and gaps. Overlay the capabilities, value streams and business units to see what can be merged and what is missed. Also ensure the information concepts are reviewed with both teams right away to ensure everyone in the room is always speaking the same terms/ definitions!

A playbook helps to provide structure to executing the integration, but there will still be variations for each case. The complexity will be driven by the nature of the transaction, but if you’re buying a whole business it will take some effort to evaluate the transaction post-acquisition. Key thing is to understand the cash flow / burn to understand how much time you have to bring everything into a common system - the priority is usually the customers and supplier details to verify what you have purchased is in line with the due diligence documents and baseline before you migrate everything onto a common system. Once you’ve verified what you’ve actually acquired, the next step is trying to realise the synergies baked into the plan.

Leaders often overlook the importance of effective communication, specifically to stakeholders involved such as employees. All communication is not the same. And it's not just an intranet article, or a note from the CEO. Effective communication is a systematic and comprehensive approach architected and orchestrated over top of the planning and executing of the integration that takes into account the efficacy of content style and types, distribution channels for communication, reaching employee where they are, and repetition (frequency). It is not one size fits all.

Integration needs to balance speed and stability while maximizing value. A clean architecture with well-defined interfaces enables rapid but controlled integration. Focus on high-impact changes first while maintaining legacy operations, then evolve towards optimal end-state. Modularize the integration plan with rapid feedback loops to handle unforeseen issues.

Prioritize the change required by following outward in logic i.e. post merger the organization should appear as one to external entities like customers, suppliers, regulators etc. Start merging the portals based on the goal of merger. Change CRM layer, service layer. For some time core systems still may be same supported by larger operational effort to mimic a seamless experience for external entities. Improve / change business operations, supporting commodity functions and the underlying IT systems. After few years core functions like design, produce can be improved for the merged organization.

In the role of business architect, the planning and execution phase of an M&A integration is essential. It must be structured around the vision and objectives already defined, taking into account the assessments and priorities established. This stage includes developing and implementing necessary changes, managing emerging risks, and ensuring the desired transformation. It is essential to establish clear governance, assign responsibilities, define milestones and communication mechanisms, and establish metrics to monitor the progress and success of the integration.

If integrated wisely the change management should be a routine activity as if it has been a single entity all along. However if due time / budget / other constraints things where done wrong / missed then they can be again reattempted this time with a better understanding. The change / manager part must be based on enterprise model build so far rather than leaders gut feelings / technology oversell gimmicks. If done wisely mergers do wonders for both ex entities but if not there are examples of long term issues. We have few in Auto industries where the merged entities are still struggling to generalize, change and build a culture as a single enterprise.

Let me start with couple of examples. HP a product manufacturing company acquired EDS, a services company. Now HP business and IT were, well aligned. But after acquisition, HP force fitted EDS into HP business and consequently HP IT systems That created enormous problems for the acquirer and acquiree. So much so, that eventually HP divested the acquired entity. The same story repeated with Dell and Perrot systems. Dell too, divested the acquired entity. So the challenge was not aligning business with IT. The challenge was to align business between acquired and acquiree organisation. And in some cases, like these two, it may not be possible to align the businesses because they are as similar as chalk and cheese.

Effective communication must also be optimized. It is optimized first and foremost by measuring various degrees of results. The purpose of the communication is to support and drive the change and culture. So, we must measure things such as reach, and if actions asked for are taken. The reasons why communications are not effective include, but are not limited to timing, content efficacy, communication channel, and inspiring an interest and desire for the call to action. This can all be measured with analytics and insights. Then, leaders must iterate. Some of the best leaders put the hard work in to the initiative, only to fall short on the last mile: effective communication.

The more interesting element is when you have two sets of dominant teams. Having previously worked in a business that acquired several companies over three years it’s usually the acquired business that rolls over and gets assimilated into buyer’s culture. If the acquired business has a more dominant culture (usually a perceived better way of doing things) then you get the privilege of seeing Tuckman’s stages of group development play out in real life before your eyes. With regard to the winners then it’s a weighted numbers game and you have to keep an eye on its potential impacts on your financials e.g. loss of Senior sales managers = some sales loss and loss of Operations managers = Service disruptions and payment delays.

Promote open communication and psychological safety to enable authentic collaboration. Recognize and bridge cultural differences through empathy. Co-create a new shared vision and identity. Provide support and celebrate successes. Lead with patience and compassion - transformation takes time.

The emergent leadership needs to maintain consistent messaging and transparency. These two factors, if not well managed, can fan insecurities and mistrust between the merging teams and can warp decision-making at all levels of the business

Data is right at the top of the list - historic data that is. In an acquisition, it's not just the current and future operations which are taken on but the history as recorded in business data often stored on some obsolete IT. It's a particularly big deal in business sectors where records have to be kept for a considerable period of time e.g. insurance (35 years of claims history is not unknown!). A good trick with acquisitions is have a 2 phase approach: 1st phase - the acquired company continues as before using their processes & systems. All they do is provide a periodic manual / automated report to the new company. 2nd phase- integrate them into using the new company processes & systems. 2nd phase is where data & other snags are fixed.

IT teams need to refrain from jumping into solutions without a proper understanding of the business vision and goals. It is important to clearly define the scope of M&A and distinguish it from the existing IT projects in order to keep a clean budget and resource alignments. Also, addressing the stigma of loss of jobs to this M&A is an important factor that can impact the employee motivation to carryout the necessary tasks.

An illustrative story might be that of a merger where the IT platforms were incompatible. The business architect, upon identifying the incompatibility, worked to create a hybrid solution that allowed the gradual integration of the systems, mitigating risks and allowing both parties to continue operating efficiently during the transition. This example highlights the business architect's ability to not only foresee problems but also to create innovative solutions that support strategic business objectives and operational needs.