“Synergy” is perhaps the most frowned up, derided, and misunderstood word in business today. According to Webster, it is defined as the action of two or more entities to achieve an effect of which each individually is incapable. Integrated into a diversified business environment it can be a spark that ignites an extraordinary divisional cross-promotion, elevating projects to new heights and dizzying corporate profits. In fact, the word “synergy” is so considered a foolish corporate buzzword that big business has chosen to disguise it with euphemisms that better capture the mindset of the 21st century such as “business intelligence,” “franchise marketing,” “information building,” and “cross facilitation.” It’s synergy.
Synergy came into fashion in the 70s just when organizations began to explode with diversification, divisional expansion and mergers. CEOs jockeyed for position to see who could acquire the most toys, as it were. The key, of course, was, and is, how to exploit those assets for a profitable return on investment. And what accounted for this corporate acquisitiveness, this driving force, this urge to merge? The evidence points to dollars, Big Dollars, generated to elevate the bottom line and to make investors willing, if not eager, to pay higher prices for shares in the company’s stock.
In turn, the conglomerate attains more assets and if successful, renews the process again and again, ever expanding its horizons. But with each new acquisition, more often than not, the company becomes more decentralized with no common distinction. Each spoke in the wheel is tunnel-vision focused on their business segment, becoming a segmented silo. If divisions don’t relate in product or services, Business A doesn’t deal with Business B or Business C with Business D even though they all fall under the umbrella of the parent company. Yet, despite that shortcoming, the success factor can still be amazing .
But, how much more successful might they be if they were able to better utilize their internal forces to cross-promote from within, to stimulate overall business in addition to each faction meeting individual goals? Even in a single-focused operation, does the research and development department ever speak with the accounting folks or the marketing department dialogue with the sales division? Do the creative people spend any time with the operations force? More simplistically, does the person in the next cubicle converse over the partition about the company or how they might use their knowledge together to generate something even greater than each could accomplish alone?
Within organizations, boundaries exist between levels of the corporation and across departmental and geographic lines. While there are some good reasons for structuring organizations this way, strict adherence to boundaries can inhibit collaboration and have profound impacts on an organization’s success or failure.
Looking back over the 20th century, the boom in American business one hundred years ago was characterized by singular mass: steel, machinery, bridges, big ships; things that took brawn to build and transport, and things whose workings, once invented, seemed more or less self-evident. In contrast, progress is driven today by tiny chips, by exploitation of invisible electronic impulses and by mega-corporations. But then as now, communication within the organization was and is the key to capitalizing on the strengths within to influence the overall bottom line. The battle for success in every diversified corporation on the playing on the field is much greater. The stakes are higher and the competition more fierce. Take a look at the following chronology of company mergers just in the 80s and 90s when “merging” seemed to be the name of the game.
January 3, 1986 – Capital Cities Communications Inc. purchases American Broadcasting Company for $3.5 billion to create Capital Cities/ABC Inc.
June 9, 1986 – General Electric buys RCA Corp., parent company of the National Broadcasting Company and the NBC television network for $6.4 billion. At the time, the deal was the largest non-oil acquisition in U.S. history.
November 7, 1989 – Sony Corp. buys film and television producer Columbia Pictures Entertainment Inc. for $3.4 billion
January 10, 1990 – Warner Communications Inc. and Time Inc. complete $14.1 billion merger, creating the world’s biggest media conglomerate.
January 3, 1991 – Matsushita Electrical Industrial Company of Japan buys MCA Inc. for $6.9 billion.
September 31, 1993 – The New York Times Co. buys Affiliated Publications, Inc., parent company of The Boston Globe, for $1.1 billion, the biggest takeover in U.S. newspaper history.
July 7, 1994 – Viacom Inc. buys Paramount Communications Inc. for $10 billion after winning a bidding war against QVC Inc. to buy the movie, publishing and sports company.
August 29, 1994 – Viacom Inc. buys video rental chain Blockbuster Entertainment Corp. for $8 billion.
June 5, 1995 – Seagram Co. buys MCA Inc. from Matsushita for $5.7 billion and renames it Universal Studios.
November 24, 1995 – Westinghouse Electric Corp. buys CBS Inc. for $5.4 billion.
February 9, 1996 – Walt Disney Co. buys Capital Cities/ABC for $19 billion, creating a media conglomerate in movies, television and publishing.
October 11, 1996 – Time Warner and Turner Broadcasting System complete $7.6 billion merger.
December 31, 1996 – Westinghouse Electric Corp.’s CBS unit buys Infinity Broadcasting Co. for $4.7 billion, combining the nation’s two biggest radio station operators.
December 1, 1997 – Westinghouse Electric Corp. changes its name to CBS Inc. shortly after deciding to sell its traditional businesses such as power-generation equipment and light bulbs.
December 9, 1998 – CBS Corp. raises $2.9 billion by selling a 17 percent stake in Infinity Broadcasting Corp., its radio and outdoor advertising business. The initial public offering of stock is the largest ever in the media industry.
December 10, 1998 – Seagram Co. buys Polygram NV music company for $10.4 billion.
Other than The Walt Disney Company, did any of these other mega-corporations enable a synergy process in their very diversified organizations? If they did, it was not anywhere near what Disney accomplished. I know because I was at Disney at that time as a marketing and PR executive before I was promoted to the role of Director of Corporate Synergy. My charge was to develop an internal synergy communications program which I did very successfully and have chronicled in my new book Inside the Disney Marketing Machine – in the Era of Michael Eisner and Frank Wells. Why even incorporate a functioning synergy department to “work” the process day in and day out? Corporate profits, of course. They are at the heart of integrating a formal synergy process in any organization.
Beginning in the 1970s, companies began gobbling up other companies. Diversification under one corporate umbrella was growing at a rapid pace, especially through the 1990s and into the new century. The opportunities for cross-promoting from within were mind-boggling, and yet incorporating a synergy component to company-wide marketing strategies remained mostly unsupported in corporate America.
In today’s world, just ten mega-corporations control the output of almost everything you buy from household products to pet food to jeans. It may be obvious that Corn Flakes and Frosted Flakes are both made by Kellogg’s, but did you know that Hot Pockets and L’Oreal share a parent company in Nestlé? A ginormous number of brands are controlled by just 10 multinationals, according to this amazing infographic from French blog Convergence Alimentaire. Now we can see just how many products are owned by Kraft, Coca-Cola, General Mills, Kellogg’s, Mars, Unilever, Johnson & Johnson, P&G and Nestlé. (Disclosure – this infographic reflects the year 2012).
Eighty-four-billion-dollar company Proctor & Gamble, the largest advertiser in the U.S., is paired with a number of diverse brands that produce everything from medicine to toothpaste to high-end fashion. All tallied, P&G reportedly serves a whopping 4.8 billion people around the world through their network.
Two-hundred-billion-dollar corporation Nestle—famous for chocolate, but the biggest food company in the world—owns nearly 8,000 different brands worldwide and takes stake in or is partnered with many others. Included in this network: shampoo company L’Oreal, baby food giant Gerber, clothing brand Diesel, and pet food makers Purina and Friskies.
Unilever, of soap fame, reportedly serves two billion people globally, controlling a network that produces everything from Q-tips to Skippy peanut butter.
Control of the media arena in which Disney resides today is controlled by just five companies down from 50 companies in 1983. They are:
Time-Warner with notable properties that include: HBO, Time Inc. Turner Broadcasting System, Warner Bros. Entertainment, TMZ, New Line Cinema, Time Warner Cable, Cinemax, Cartoon Network, TBS (Turner Broadcasting System), TNT (Turner Network Television), America Online, MapQuest, Moviefone, Castle Rock, Sports Illustrated, Fortune, Marie Clair and People Magazine.
The Walt Disney Company owning Disney/ABC Television Group, ABC Television Network, ABC Family, Disney Channels Worldwide, ESPN, Walt Disney Studios Motion Pictures, Walt Disney Animation Studios, Pixar Animation Studios, Disney Music Group, Disney Theatrical Group, DisneyToon Studios, Marvel Studios, Touchstone Pictures, Disneynature, Disney Publishing Worldwide, and Disney Interactive, among others.
Viacom has MTV Films, Nickelodeon, Paramount Animation, Paramount Pictures, BET (Black Entertainment Network), CMT (Country Music Television), Comedy Central, Logo Network, MTV, Nick at Nite, Nick Jr., Spike, TV Land, and VH1.
NewsCorp. owns 20th Century Fox Filmed Entertainment, Fox Broadcasting Company, MyNetworkTV, Fox Sports Networks, FX Networks, National Geographic Channel, The Sun and The Times UK newspapers, The New York Post, Wall Street Journal, Barron’s, MarketWatch, Financial News, Dow Jones news wires, and HarperCollins.
Lastly, Comcast Corporation that counts among its holdings two primary businesses, Comcast Cable and NBCUniversal. Comcast Cable is the nation’s largest video, high-speed Internet and phone provider to residential customers under the XFINITY brand and also provides these services to businesses. NBCUniversal operates news, entertainment and sports cable networks, the NBC and Telemundo broadcast networks, television production operations and television station groups, Universal Pictures and Universal Parks and Resorts.
These five giants control a staggering 90% of what we read, listen to, or watch. Some additional facts related to the Big Five, as compiled by Business Insider:
- A total of 232 media executives control the information diet of 27 million Americans.
- Total revenue in 2010 for the Big Five was $275.9 billion; that’s $36 billion more than Finland’s gross domestic product, enough to buy every NFL team 12 times, and five times the government bailout of General Motors.
- The Big Five control 70% of cable programming and one of every five hours of television overall, and their 2010 box-office sales hit $7 billion—that’s twice the box-office sales of the next 140 studios combined.
These are very powerful statistics. Imagine elevating profits for companies large and small to even higher levels if they were able to better utilize their internal forces to cross-promote from within, to stimulate overall business in addition to each faction meeting individual goals?
In my experience as a professional synergy executive within The Walt Disney Company during the Michael Eisner and Frank Wells era, (although Disney was synergizing in a big way as far back as the 1950s), the real problem facing CEO’s is not that they do not understand the concept of 1+1=3, their problem is how, how, HOW, to make it systematically work.
How do you get the marketing folks from another business segment to understand that your project will help them meet their goals as well? How do you convince the movers and shakers in your company to extend themselves beyond their individual silos to work with other divisions when they are already overextended where they are? Where does the CEO and senior corporate staff fit into working the synergy process? How much time and effort must be extended on their part to make it work? Who serves as the traffic cop to direct the the movement of synergy across divisions to avoid collisions and mishaps? And most importantly, how to you motivate divisional marketers to play synergy ball when none of them reports to those who have been charged with fostering synergy across the entire organization?
Very challenging questions, most of which stump corporate leaders in so many companies. This is why synergy is so often laughed off. But it does work, it is not an empty concept by any means. All of these questions are addressed and discussed in detail in my book. Not only did we, as internal communicators, weave synergy into the very fabric of The Walt Disney Company, but we did it with flare, fun, and unbelievable success. It can happen anywhere, in companies big and small. Follow the path I set at Disney, adjust for your corporate culture, and you’ll find your company reaping greater profits than you ever imagined.
Group Photo Above – The 1990s Disney Synergy Team. Magic marketers all!