Beware the Synergy Scalpel


I love accountants. Heck, my grandfather is in the Accounting Hall of Fame (I’m not kidding, check out the Web site). But when I see an article pairing an acquisition of a company with a widely lauded culture with plans to achieve substantial cost savings, my blood runs cold.

The article in question described Roche Holding AG’s $44 billion bid for full ownership of Genentech. For close to 20 years, Roche has masterfully managed a controlling economic interest in the biotech pioneer. One key to success has been allowing Genentech to follow its own course and reaping the benefits of products that would never have come out of Roche’s labs.

Today, Roche hopes that tighter integration will help to spur its own development process. And, of course, it hopes to achieve substantial cost savings “by combining the two companies ‘ clinical research teams and sales, manufacturing, and administrative departments in the U.S.”

So-called cost synergies make perfect sense–on paper. Through an accountant’s eyes it appears wasteful to duplicate functions that perform the same basic task.

What’s hidden however is how combining functions can destroy what’s unique about a company.

You see, a company’s capabilities go beyond the human beings it employs. A company’s capabilities rest in its process (how it goes about doing its work), its priorities (the mechanisms by which it allocates resources), and the underlying, often unstated assumptions on which the business rests. It’s hard to quantify these things, but they are real, and can be unintentionally destroyed in the name of cost savings.

Everyone agrees that one reason Genentech is special is its culture. Perhaps Genentech and Roche have been working together long enough that Roche can wield the synergy scalpel surgically enough to maintain Genentech’s unique culture as it combines processes. If not, Roche’s move is going to end up being a dud.

If you find yourself in a situation where a strategic decision rests on quantified cost savings, at least ask whether you are destroying anything to achieve the savings. Just because you can’t quantify something doesn’t mean that it isn’t important.


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