Sanity Amidst The Urge To Merge
By Keith Clark
Editor, Install Sound

Consolidation abounds. Banks, airlines, media companies… More than ever, one of the most prevalent business growth strategies seems to have been modeled on a Pac Man video game, where a larger entity scrambles through a maze, gobbling up smaller businesses at an alarming pace.

The pro audio industry has not been immune to the model, first on the manufacturing side, and more recently, on the independent contracting side. Whether this is a good or bad thing depends largely on which side of the fence you happen to be standing.

But in cases where the primary goal appears to be total market domination and/or getting big for big’s sake, consolidation is not a good thing. I’ve seen, first-hand, the ups and considerable downs of consolidation through affiliations with a number of manufacturing entities. My observations:

The Ups
Combining technologies, with meticulous planning and vision, can be great for the marketplace;
Combining talents of previously independent entities can result in tremendous innovation;
Distribution can be streamlined, simplifying the lives of customers;
Product pricing can be more competitive through more efficient production systems, greater component purchasing power, reduction of facilities and redundant positions and more.

The Downs
At the outset, confusion can reign, hurting the entity’s short-term progress and damaging customer confidence;
Lack of a clear plan and vision for the successful integration of companies is often lost in the excitement of “the urge to merge”;
Turf wars and political battles slow the organization, sometimes to the point of almost complete inertia;
The task of managing an ever-growing entity is complicated business indeed, and frequently a lack of delegation creates a bottleneck on key decisions;
Unique cultures of independent entities often clash, resulting in miscommunication, strife and ultimately, the departure of valuable individuals. And often, a unique culture is a primary attraction to customers;
Larger companies inevitably can’t provide the “human touch” in dealing with customers directly and personally. Service issues often suffer as well;
Technologies and innovations can’t automatically be shoehorned together into bigger better best products that will capture the market’s imagination. In fact, the direct opposite often occurs;
"Necessity is the mother of invention” – quite often, true innovations are produced by smaller, struggling companies that must think creatively and look for unique developments that will put them on the map. The comfort of ample resources can lead to complacency.

A long-time friend of mine in this industry recently offered this observation: “The fact that a lot of companies seem to be offering very similar new products is a reflection of the maturation of the audio industry. Toothpaste with whitener, toothpaste with mint flavor, toothpaste with tarter control, etc. - all are still toothpaste. But people buy a lot of toothpaste and everyone wants a piece of the action.

"Most likely, for some time improvements in pro audio technology will mostly consist of lowering costs, making gear easier to install and use, and other incremental advances, mostly small in nature. This is most probably good for users and contractors."

Great point, and one that points to the positive side of consolidation. At the same time, I have a suggestion. While reaping the benefits my friend outlined, why not foster innovation as well?

If a smaller, unique company is doing a great job, they should be supported, regardless if a conglomerate comes out with a "me too" product that's less expensive. Jumping ship should be a carefully arrived at decision that goes beyond price and into areas of respect, trust, support and innovation.

And when acquiring smaller companies that innovate, rather than automatically rolling them into the fold of the mother ship, can’t they instead be supported, their fresh ideas and unique culture fostered?

Certainly this is a longer-term approach in the quest for almighty profits, but the benefits to the industry in terms of advancing technology and sound quality will likely be tremendous. At the same time, products that are truly different, enhance the cause of quality and exceed the market’s expectations hold the greatest profit potential, wouldn’t you agree?

The entrepreneurial spirit can co-exist with the desire to “grow grow grow” that’s so much our modern business environment. The vision to not dominate smaller entities simply because they can be purchased will produce rewards well beyond the next quarterly P&L statement.

PSW Install Sound Editor can be reached at keith@prosoundweb.com