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Post-Merger Culture Clashes Can Imperil Innovation

  • Written by  Adam Blair
Post-Merger Culture Clashes Can Imperil Innovation

blairThe very nature of a successful startup is that it offers something different from the status quo. That difference can be in the products it makes, the technology it uses — even the way it advertises and sells a boring commodity item. The cheeky advertising campaigns used to promote Dollar Shave Club were a big factor in the company’s being taken over by CPG giant Unilever in a billion-dollar deal.

But that takeover/merger/acquisition can also be the beginning of the end for what made the startup unique in the first place. The very things that made the company attractive to bidders can be crushed by corporate conformity. It’s a particular problem in the retail industry, where brands operate very much in the public eye, and where customer loyalty can hinge upon the startup company’s sometimes expensive commitment to customer care, or its offbeat sense of humor.

(Un)Happy Hour At Jet.com

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The Walmart acquisition of Jet.com in August 2016 has been seen as a win-win for both entities overall, but apparently there have been a few rough spots on the road. The Wall Street Journal recently reported that one of Walmart’s changes was the removal of liquor from the Jet.com offices in Hoboken, N.J.:

“The startup’s regular Thursday evening happy hour would have to be moved out of the office to the Wicked Wolf Tavern and other local bars,” wrote Sarah Nassauer and Brian Baskin. “Casual deskside drinking had to go. ‘People were not thrilled,’ says Liza Landsman, a Jet executive who in 2015 helped launch the web site, which sells everything from detergent to designer purses, and is now president.”

Jet.com CEO Marc Lore and Walmart CEO Doug McMillon had discussed the potential for a culture clash prior to the acquisition, and they have continued to monitor the situation. After noting that the off-site happy hours were not attracting many employees, Walmart reversed course, reinstating the Thursday happy hours with beer, wine and food.

That’s Not Funny!

Another recent Walmart acquisition, Moosejaw Mountaineering, is well-known for its quirky, sometimes naughty approach to customer communication. But when CMO Dan Pingree spoke at the 2017 Retail Innovation Conference, he revealed that sometimes something meant as a joke can go too far. A catalog listing “10 Best Places to Do It in Detroit” identified the boathouse of a prestigious prep school as one of these prime trysting spots. When couples began showing up there to practice what Moosejaw had preached, the school became annoyed. Pingree noted that Moosejaw will not be repeating this campaign.

It’s easy to imagine that the things that make Moosejaw Moosejaw could be stamped out in a more rigid corporate culture, either through active restrictions or self-censorship. That would be a lose-lose for both sides. Pingree has been quick to report that this has not been the case: “So far they [Walmart] have been awesome; they are very supportive of our experiential marketing strategy, and we hope they can help us learn how to do this better.”

However, the strangling of a startup culture is a very real problem, according to Zach Ware, Managing Partner, VTF Capital. In a 2016 Q&A, Ware said: “When a retailer looks to buy an innovative startup, they should understand that this company has innovation characteristics that the retailer lacks. Simply buying a company and bolting the brand to your own doesn’t work anymore. There’s innovation at play at the startup company that you want to allow to thrive, and if you suck them into your existing machines, you’ll kill it. That happens a lot, and it’s unfortunate.”

Of course, some startup cultures can contain toxic business practices within their success cocktail. This seems to be the case at Uber, where a combination of sexual harassment and discrimination charges, accusations of an unrestrained culture and allegations that Uber used technologies to deceive regulators forced out CEO Travis Kalanick in June 2017.

Can merging retailers discard the worst and keep the best of both companies? Perhaps, but it doesn’t happen automatically. Frequent and open communication, and a willingness to be flexible, are important ingredients in a successful corporate “marriage.”

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