The sale of LinkedIn to Microsoft for the, some would say staggering, amount of $26.2 billion is the latest in quite a long line of acquisitions by the tech big boys keen to keep up with the digital giants. This one is notable not just for its size but because once again tha tthis seems quite incredible when you think that LinkedIn doesn't actually make a profit. It is also a bold move from a company whose last high profile acquisition was an unmitigated disaster, with a $7.6 billion writedown from its Nokia deal announced in July 2015.
The success of this latest deal will depend on a whole range of factors but what interests me most is how Microsoft will deal with the culture clash and the integration of two businesses who belong to such different generations.
Mergers have always been difficult to do successfully. I have first-hand experience of the difficulties involved in bringing together organisations of such different culture and ethos. It isn't just the physical and financial aspects (in fact in many ways these things are the most straightforward), it is the values and belief systems.
Companies like LinkedIn, that were born and grew up in a digital age, actually have far less of a physical infrastructure than more traditional companies. The market cap of companies like AirBnB and Uber compared to the number of people they employed and the offices they have is remarkable. You might therefore assume that this would make their acquisition easier.
This assumption would be a dangerous one however. Although physically the integration might be easier, culturally it is likely to be much, much harder.
In some ways the LinkedIn-Microsoft partnership is actually not the best example of what I am talking about. In digital terms LinkedIn is practically a pensioner. It was born right at the start of the digital transformation so culturally it is perhaps closer to a Microsoft than many that have come along since. However what it is not is a technology company and that in itself is a challenge.
When I talk about 'technology companies' I am referring to companies that make money selling technology products and services. That is very different from a technology-BASED organisation (like almost all digital ventures) that leverage technology to sell other products and services. Microsoft is definitely one of the former and although it is trying to reinvent itself, it is still lead by techies and mainly sold to techies too. LinkedIn is definitely one of the latter and this will mean there is a cultural divide. Technology companies have always struggled to get away from the product first approach - something that is an anathema to an organisation like LinkedIn for whom tech is the means to an end and not the end in itself.
But the issue of cultural goes much deeper than the difference between the technical and the non-technical. Digital businesses behave in a quite different way to non-digital businesses. And when I talk about digital businesses I am talking about those were designed, built and grown on digital platforms - businesses that have digital at the heart of their DNA. It is not just about the way they deliver services it is everything about them. Many of the businesses will have been built with agile principles at their core. Their structures will be flat and their teams multi-discipline. They will collaborate across all disciples and all levels using digital platforms as the key infrastructure rather than siloed systems and applications and they will embrace and relish challenge and adventuring into the unknown, seeing it as the catalyst for innovation and growth rather than a risk to the business.
In my experience the biggest challenge for big companies seeking to acquire digitally native organisations is that they kill the very thing that they were hoping to capture. Often it is the agility, innovation and culture of these organisations that is attracting attention in the first place and yet in the rush to 'integrate' all of that can be crushed. Even if the culture and approach are secondary to a particular product or solution, the talent that produced it will be talent that you want to keep and it is highly unlikely to stick around if the culture changes significantly.
The critical thing here is that the importance of culture is all too often underestimated in the process of a merger or acquisition and actually, now more than ever, culture has a huge role to play in the value and success of a company. Physically the process might have become easier but culturally it has actually become much harder.
From a CIO's perspective this can become a bit of a headache. Digital companies come with a range of tools and techniques for encouraging innovation and collaboration and a culture that is built around their use. Instead of seeing these as a problem however, something adding more complexity to the existing infrastructure, they need to appreciate these systems are part of the fabric of the business. They are part of the value, not the cost and may even one day bring value to their company too.