Derived from the Greek word "synergos", which means working together.
In Business:
Sought by many, achieved by few. Synergy happens when the value created from the combination of two business units exceeds the value of the two units working independently. The sum of the two is less than the whole.
It creates interdependence between two units by sharing resources (people, technology ect). Synergy creates a wealth that shareholders cannot duplicate by diversifying their own portfolio, thus, justifies the firm's investment.
A good sample of synergy is Sharp, which uses its display technology from calculators to personal organizers. Another example is Disney, whose marketing not only sells their movies, but their theme parks and toys.
However, synergy fails far more frequently than it succeeds. For example, when Starbucks went from coffee peddling to on-line retailer of furniture on living.com. Starbucks lost millions trying to overstretch the marketing ploy called the "Starbucks Experience".