A technology company CEO approached our team to redesign her organization, a mix of legacy and newly acquired teams. The leader wanted to build an efficient, adaptable organization that could benefit from the legacy company’s scale. However, she wanted to be careful not to break the acquired companies, many of which were at the vanguard of developing new consumer technology. Like the iconic automotive executive Lee Iacocca, our client simply wanted to acquire companies “brighter than us and get out of their way.” 

Contrary to Iacocca’s famous advice, however, post-acquisition value extraction relies on deliberate design decisions.  This is strategic integration, based on an intentionally designed horizontal organization, enabled through lateral integrators that drive value where the old and new connect. Without deliberately constructed interdependencies between their components, post-acquisition organizations often lose time, money, and market position to unproductive conflict and indecision.  

At Kates Kesler, we use a time-tested framework called Jay’s Ladder, named after Jay Galbraith’s pioneering work on designing complex human systems at scale. 

The ladder provides a fit-for-purpose set of tools for connecting organizational entities. For example, one of the tech firm’s acquired companies had a small portfolio of well-funded, long-term clients and a flat team that rolled into a single leader. It had operated in a simple way that fit the size and complexity of the business. Informal connections at the bottom of the ladder with a light touch were sufficient. Co-location and a few strong scrum leads were enough to ensure the organization could deliver against its goals.

Once the organization was acquired, however, it needed to execute on a more complex strategy that was closely connected to the legacy company. The strategy was to generate organic revenue growth through integrated offerings across its broadening portfolio. This strategy required a more tightly wired and sophisticated set of connections between the acquired entity and the system it was joining. Now leadership needed to move up Jay’s Ladder to ensure that metrics and incentives were aligned between teams. They also put in formal integrator roles tasked with facilitating fast and efficient collaboration.

Finding the right integrating mechanisms requires deliberate design. Too light touch and the collaboration is left to chance or based solely on informal networks. When people leave so does knowledge and client relationships. Too high up on the ladder and you risk creating unrewarded management complexity that slows decision making.

Our role was to help the leadership team define the horizontal connections appropriate to the strategy. We helped the CEO and her leadership team to create a new offering development role that sat at the intersection of business units. This role was accountable for identifying cross-sell opportunities and shaping deals that leveraged the company’s full portfolio while eliminating waste from tension and indecision. We also supported them to shape an incentives approach based on profit sharing to fuel growth across old and new business lines.

Once the right lateral integration mechanisms were in place, the organization was positioned to harness its cross-sell potential and realize the return from its acquisitions. Had the CEO waited on her company’s legacy and acquired components to come together on their own, the likelihood of this value realization would be left to chance.

To learn more about effective lateral integration, watch Kates Kesler founders Amy Kates and Greg Kesler discuss HERE HERE and HERE

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Molly Maymar is a Manager in Accenture’s Operating Model & Organization Design global practice and a member of the Kates Kesler team.