Synergy:  The Superpower of Successful Companies, Part 2

For business, synergy is a team amplifier.  Instead of 1 + 1 + 1 + 1 + 1 = 5.  Synergy makes 1 + 1 + 1 + 1 + 1 = 10 or 15 or 20 or 50.  It happens when all of the members of the team are in sync and able to work together in a way that magnifies each individual’s contributions as they work together and minimizes their friction and waste.  Synergy is about economy of motion and effort while capitalizing on opportunities in unique ways and eliminating or reducing waste of time and energy.  It’s about synchronicity, ability to build on one another with minimal effort, and respect and trust for what each brings to the table. 

The Search for Synergy

There is a lot of focus and effort in business to find synergy.  Companies will do many things in the search for internal and external synergy:

1. Internal synergy – Within organizations, Zoom meetings and corporate retreats are held to devise ways to collaborate more often and more effectively.  Cross-business teams are created to nurture key accounts, craft ideas for product development, and brainstorm new ways to cross-sell. Complex compensation schemes and programs are developed to incentivize sharing of knowledge, leads, and customers. Processes and procedures are put in place to harmonize work flow.  

2.  Mergers and acquisitions – In the search for synergy, companies will buy or team up with a complementary business and joining forces to grow faster.  Case in point.  The merger of Disney, Pixar and Marvel was pure synergy.  First, the acquisition of animation heavyweight Pixar in 2006 by mass media conglomerate Disney made perfect synergistic sense. Disney and Pixar have since produced a plethora of blockbuster hits.  In fact, 15 of Pixar’s top 22 highest grossing films of all time were produced after their merger with Disney.  In just those movies alone, Disney/Pixar generated $10.228 Billion.  In fact, eight out of 10 of Pixar’s top grossing movies happened post-merger.  It is unlikely that this is a coincidence.  And most of those movies were further leveraged by Disney to generate even more revenue through merchandising and theme park entertainment.  That merger not only allowed Disney to more than double their $7.4B investment in just 15 years, it also gave Disney access to Pixar’s advanced animation technology.  But, by keeping Pixar’s culture distinct, Disney was able to generate significant additional value without destroying what made Pixar unique or successful.  They found synergy.

Then Disney acquired Marvel Entertainment for $4B in 2009.  With a highly lucrative string of Marvel films premiering at the box office since then, the merger has already proven a massive ROI, with more to come, no doubt.   And, Disney’s merger with Pixar and Marvel then set the stage for Disney to enter the streaming market with the launch of Disney Plus in 2015.  Featuring an enviable arsenal of programs and films in its streaming library, Disney was able to move from entertainment producer to entertainment delivery.  Now that is corporate synergy exemplified.

3.  Substantial new products and/or service lines – Synergy is found by adding products and services that complement those already offered.  But, these additions can also be in a completely new range.  For example, Google added to its product and service lines when it acquired Android, a mobile startup that had been founded only a few years before.  Android gave Google the mobile operating system (OS) it needed to compete with Apple and Microsoft in the growing mobile market, and expand their reach far beyond desktops.   It’s estimated (exact number is unknown) that the deal was worth approximately $50 million.  While that’s not chump change, it’s a fraction of the $130 million Google spent on acquisitions that year (2005) alone and a drop in the bucket of the $1.65 billion spent buying YouTube just over a year later.  Even now in 2022 — 17 years later — Android continues to maintain its position as the leading mobile operating system worldwide, controlling the mobile OS market with a close to 70% share. 

4.  Franchising – Creating a business model that can be replicated and sold to franchisees is another form of synergy.  McDonalds, for example, retained control of the core business elements but did not need to be involved in the everyday running of the franchised fast-food locations.

Why Synergy?

The focus on helping management and staff to sync into perfect harmony is all an effort to achieve synergy.  Given the examples listed above, it is no wonder why there so much fuss about achieving synergy.  Synergy is what leaders see as the ultimate differentiator between scarcely indistinguishable brands.  Whether its entertainment, computers, cell phones, airline travel or software, companies are all vying to get a leg up on the competition and synergy is the ultimate game-changer because it is so elusive.

But that’s the double-edge sword.  Synergy is desired because it is can potentially deliver amazing results and yet is elusive.  But, the fact that it is elusive often makes trying to achieve it a waste of time.  In fact, the pursuit of synergy often produces no result or worse, a poor result.  This search for synergy draws attention away from the nuts and bolts of the business.  It also often pushes aside other initiatives that could potentially generate real benefits. Sometimes, synergy programs even backfire, doing more harm than good.  They can erode customer relationships, damage brands, and undermine employee morale.  However, when it is achieved, synergy is like magic. 

How Does a Team Achieve Synergy?

Businesses seek to encourage synergistic behavior among employees and departments with the view that a cohesive team’s impact exceeds the sum of its members’ individual effects.  For companies that want to promote corporate synergy, here are a few suggestions that help create the groundwork for synergy to happen.

• Craft a Mission Statement and Vision.  Crafting and promoting a Mission Statement and Vision for the organization that applies to all departments is one way to spark synergy. When all members of an organization work toward the same goal, corporate synergy often follows.
• Cut redundancies. Synergy describes a combined effort that exceeds the sum total of individual inputs. When employees or departments do redundant work, they can get in each other’s way and contribute to disunity and dissent, a state where the combined output is less than the individual inputs. Business leaders achieve cost synergies by eliminating redundant tasks and reassigning employees whose jobs overlap.
• Enhance workplace communication.  Clear and effective communication is the foundation for a team to sync since it allows everyone to express themselves openly and accurately, resulting in greater synergy.
• Boost employee engagement and sense of belonging in the company.  The more employees connect to the organization, the more their productivity will increase and encourage team buy-in. 
• Cut employee turnover.  The ideal employee turnover rate for a business is roughly 10% or less, according to a study by A. Gallant in 2013.  But U.S. employee annual voluntary turnover has jumped to nearly 20% YOY according to Gartner, Inc.  That level of turnover not only drives up costs (recruiting, hiring, training), but it also destroys teamwork and virtually guarantees there will be no synergy.  If a company wants to create synergy, it must first reduce turnover to less than 10% and allow employees to work together long-term and get processes and systems to work like a well-oiled machine.

Sometimes the search for synergy is more trouble than it’s worth.  But all great leaders pursue it because when it happens, synergy is exciting, elevating and empowering.  It transforms good companies into great ones, and great ones into behemoths.  It is what all great leaders aspire to achieve. It just helps to remember that synergy is rare.  When you have it, do everything you can to hold on to it.  Conjuring it again will not be easy.

Quote of the Week

“Team synergy has an extraordinary impact on business results.” Patrick Lencioni

© 2022, Keren Peters-Atkinson. All rights reserved.

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