Three ways to get a techquisition right

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The fintech revolution is right here: Over $34 billion of venture-capital funding went to fintechs within the second quarter of 2021.

As know-how continues to disrupt the normal means of doing issues and innovation strikes at an rising tempo—some say a “frenetic” tempo—the leaders of the monetary companies trade might want to transfer quick to reply.

In Accenture’s Banking Cloud Altimeter, our colleague Simon Cooper states: “Tech is the No. 1 enabler to deliver enterprise worth. I consider it like this: I’m a financial institution, however I do know that the way in which I develop income and enhance my margins is thru the clever implementation of know-how options. Due to this fact, know-how needs to be a a lot larger a part of enterprise technique than it has been prior to now.”

At the moment, the message is obvious: adapt and develop or lose. From the consulting trade to the retail sector, firms are embracing revolutionary methods. And know-how is a serious driving pressure. Within the monetary companies, these essential methods are used to help the acceleration of innovation:

New pathways: Rising productiveness by means of know-how and new methods of working
Shifting budgets: Re-structuring from working the enterprise to altering the enterprise
Techquisition: Quickly buying new merchandise, market and expertise

The primary two methods are deep transformational, technology-enabled approaches with cloud companies, fashionable engineering, agile and services-based structure. They will take years and require important funding. It could possibly additionally take years for these methods to meet up with buyer expectations developed from their experiences in different industries.

For these causes and others, we see the ‘techquisition’ technique—the acquisition of know-how firms—gaining consideration.

The time of techquisitions

It’s no secret that know-how has a seat on the M&A desk, a lot in order that the time period ‘techquisitions’ is now in our vocabulary. Monetary companies acknowledge the necessity to purchase tech firms as “a strategic device to drive quicker and simpler adoption of know-how”.

These acquisitions deliver benefits comparable to enhancing customer support, streamlining processes, offering aggressive benefit, and extra.

Not too long ago, Goldman Sachs bought the purchase now, pay later firm GreenSky, whereas Capital One acquired journey tech startup Lola.com to develop payment-related services for enterprise prospects. Moreover, USAA acquired insurtech firm Nobler to supply usage-based insurance coverage to its members. And that is solely naming a current few.

It’s no secret that know-how has a seat on the M&A desk, a lot in order that the time period ‘techquisitions’ is now in our vocabulary. Monetary companies acknowledge the necessity to accumulate tech firms as “a strategic tool to drive faster and more effective adoption of technology”.

These acquisitions deliver benefits comparable to enhancing customer support, streamlining processes, offering aggressive benefit, and extra.

Not too long ago, Goldman Sachs bought the purchase now, pay later firm GreenSky, whereas Capital One acquired travel tech startup Lola.com to develop payment-related services for enterprise prospects. Moreover, USAA acquired insurtech company Nobler to supply usage-based insurance coverage to its members. And that is solely naming a current few.

For firms that wish to benefit from all the advantages of techquisitions, the query is: How are you able to guarantee the success of a techquisition? To be extra direct, how will you get it proper? Let’s reply that.

Find out how to get it proper

A profitable techquisition means you can shave years off your cloud and product rejuvenation journey. To do that, firms should get three issues proper:

Guarantee the techquisition suits into your product imaginative and prescient
Create a plan to attach the techquisition to your present programs
Defend the innovation tradition that you’re incorporating

Imaginative and prescient comes first. Don’t purchase and construct round it. It’s best to have a transparent product imaginative and prescient and use techquisitions to fill its holes. This requires a deep understanding of the aggressive panorama, buyer targets and product wants.

Moreover, it is advisable to stability danger and reward. The bottom-risk strategy is in your rapid ecosystem, whereas a extra aggressive strategy is to accumulate a goal from an adjoining trade with capabilities you want. Navigating this chasm requires readability of product imaginative and prescient.

It additionally requires you to vary your working mannequin to make sure that the product capabilities can circulation by means of your present channels to your present prospects. Keep in mind: Rivals are in your heels.

We additionally suggest a plan to suit the tech into your present panorama. At instances, the architectures between the techquisition and present programs are like chalk and cheese—that’s to say, extraordinarily completely different. Use this to your benefit.

These cloud-native, event-driven, fashionable architectures with absolutely automated testing and have toggles could possibly be the magic you are attempting to experiment with elsewhere. Harvest and scale it up, as this can speed up your innovation cycles.

It’s value noting that this would require a mixture of engineers in a position to ‘combine’ merchandise, quickly certify new applied sciences for safety and compliance and/or swap out elements of the stack the place you wish to match your individual tech. It will pressure you to re-engineer your core merchandise to plug and play with new techquisitions.

As our colleague, Ray Daly, explains in Making up or breaking up: the challenges of M&A, “those that can shortly notice the advantages of ‘the brand new’ whereas concurrently determining how you can remodel to an revolutionary goal state, can be ideally positioned to leverage the very best of each.”

This is applicable to your tradition too. A well-defined and adopted tradition could be the distinction between transformation and disruption. We perceive that normally it has taken years to construct tradition, with arduous classes alongside the way in which. If there are elements of the present path you’re trying to appropriate, the techquisition can act as a welcomed jolt.

An entrepreneurial, questioning however gifted tradition can shake up a longtime “this is how we’ve all the time performed it” perspective. Stitching collectively two cultures does require surgical-like precision. So, you ought to take into account the roles, reporting alignment, incentives, abilities assessments and the essence of what makes every firm tick. Be open to adopting new methods of working and inspiring data sharing whereas guarding in opposition to the potential pitfalls that accompany a “let me present you the way issues are performed round right here” perspective.

Our colleague, Dr. Bridie Fanning, sums it up within the put up, Solving the skill gap in banking’s cloud journey: Banks “want individuals with the suitable perspective (development mindset), the suitable abilities (competencies for fulfillment) and imaginative and prescient (to see worth for themselves and the corporate). A digital skilling initiative ought to account for every of those three components.” We agree.

When it involves techquisitions, success additionally comes down to 3 key components: a stable imaginative and prescient, a plan for connection, and help for a tradition of innovation. And that’s how one can get a techquisition proper.

In case you’d like to debate extra about techquisitions and the way Accenture might help, we might love to listen to from you. Please contact us.

Connect with Chad on LinkedIn.

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