So you've devised a plan for a more synergistic organization. But have you properly weighed the risks?
Synergy is one of the more elegant concepts in business, and every successful company strives to achieve it. But it's not idiot proof. Because synergy requires so much of our energy and focus, it can cause damage that can creep up on us. In this way, synergy can actually hurt the company more than it can help it.
But by recognizing the risks of synergy, managers can execute the strategy more wisely. Below we first explain synergy in more detail. Then, we discuss its risks. Finally, we go over some common managerial mistakes that often foil the company for synergy's sake.
WHAT IS SYNERGY?
When two separate entities join forces, they can produce benefits far greater than either one could have produced on its own. In other words, the whole can be greater than the sum of its parts. This is synergy.
We see this in business all the time. Two different business units in the same company, for instance, may align their strategies to reduce cannibalization of each other's products. Or two divisions may want to combine manufacturing facilities to reduce machine downtime, cut overhead, and increasing economies of scale. Departments may even want to share their knowledge to improve processes and avoid future mistakes.