Digital Transformation Through Digital Acquisitions
When considering M&A deals, business leaders generally look at things one learns in business school: market penetration, brand awareness, client base, earnings, cashflow, and balance sheets.
As companies transform digitally to compete, business leaders should also consider information technology assets, such as applications built on modern platforms. Technical debt and product management capabilities won’t appear on a balance sheet but can be crucial when evaluating a potential deal.
When digital assets drive M&A (aka digital M&A, techquisitions, or digital deals), organizations must take a different approach. Instead of just trying to integrate legacy IT assets as quickly and as cheaply as possible, the acquiring enterprise must focus on leveraging the digital assets they’ve acquired as the drivers of new business models and as key components of their digital transformation.
Information systems research shows that executing digital M&A helps companies build their digital knowledge base. Digital M&A can accelerate innovation, increase digital agility, and drive performance improvements. You can, in part, buy your way to digital transformation.
But to do this well, organizations must employ effective enterprise architecture (EA) practices and programs. EA programs provide the organization with the visibility required to make effective decisions about the layered, modular architecture connecting information systems to business capabilities.