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Adcock Ingram
The deal with Ciplamed -what went wrong?
Dear Dr Louw,
Thank you for consulting with us regarding the failed deal between Adcock Ingram and Ciplamed, we have evaluated the available material and have identified a number of opportunities for improvement that you can apply to future endeavours.
Below we identify the cognitive biases and emotions that appeared to adversely influence the decision making process during the deal. We hope you appreciate our candour as we: describe each for you; relate it to where it was evident in the case material; and follow up with suggestions of how to avoid the same issues in the future.
Biases and Emotional Influences covered:
* Framing bias
* Confirmatory bias
* Overconfidence bias
* Illusory correlation
* Champion bias
* Sunflower Management
* The role of 'gut feeling'
* Self-serving bias
Framing bias
The framing bias is a cognitive bias whereby individuals subconsciously simplify a complex matter by focussing on a certain aspect of it. This can result in limiting the options for consideration in addressing an issue.
It is evident from the case material that your objective once taking leadership of Adcock was to grow, through acquisition - a significant frame for a business's strategy. This was likely due to your prior success in executing acquisitions.
It further appeared that the acquisition target needed to be a pharmaceutical (or health care) firm in South Africa. This framing limited the primary acquisition target to Ciplamed (although the small acquisition of Tender Loving Care in 2009 is noted). Figure 1 summarises how Adcock's strategy led to Ciplamed being the only significant acquisition target, due to the framing biases that appeared at each step.
Figure 1 - Adcock's strategic process in targeting Ciplamed
In order to avoid framing bias in future strategic planning, we recommend that you think explicitly about the boundaries placed on the decisions at each step and try to identify alternative options. For example, Figure 2 illustrates alternative options that Adcock could have considered at the time of Ciplamed.
The deal with Ciplamed -what went wrong?
Dear Dr Louw,
Thank you for consulting with us regarding the failed deal between Adcock Ingram and Ciplamed, we have evaluated the available material and have identified a number of opportunities for improvement that you can apply to future endeavours.
Below we identify the cognitive biases and emotions that appeared to adversely influence the decision making process during the deal. We hope you appreciate our candour as we: describe each for you; relate it to where it was evident in the case material; and follow up with suggestions of how to avoid the same issues in the future.
Biases and Emotional Influences covered:
* Framing bias
* Confirmatory bias
* Overconfidence bias
* Illusory correlation
* Champion bias
* Sunflower Management
* The role of 'gut feeling'
* Self-serving bias
Framing bias
The framing bias is a cognitive bias whereby individuals subconsciously simplify a complex matter by focussing on a certain aspect of it. This can result in limiting the options for consideration in addressing an issue.
It is evident from the case material that your objective once taking leadership of Adcock was to grow, through acquisition - a significant frame for a business's strategy. This was likely due to your prior success in executing acquisitions.
It further appeared that the acquisition target needed to be a pharmaceutical (or health care) firm in South Africa. This framing limited the primary acquisition target to Ciplamed (although the small acquisition of Tender Loving Care in 2009 is noted). Figure 1 summarises how Adcock's strategy led to Ciplamed being the only significant acquisition target, due to the framing biases that appeared at each step.
Figure 1 - Adcock's strategic process in targeting Ciplamed
In order to avoid framing bias in future strategic planning, we recommend that you think explicitly about the boundaries placed on the decisions at each step and try to identify alternative options. For example, Figure 2 illustrates alternative options that Adcock could have considered at the time of Ciplamed.