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1. Introduction
In a recently formed collaborative partnership, Intel and IBM
came together to speed up the development of wireless applications based on
Intel’s servers and clients and IBM's WebSphere middleware. Having a
pan-Scandinavian focus the initiative also allowed teams located at IBM's
Helsinki-based mobile e business centre and Intel’s wireless competence centre
in Stockholm to work together with greater ease. The deal extended both
company's existing relationship in the wired world, and paved the way for
further partnerships with application developers.
Increasingly, companies like Microsoft,
Linux, IBM, Intel, BP, Benetton, 3M, Oracle, Dell and Proctor and Gamble are
creating competitive advantage by collaborating inside and across their
organizational boundaries to create new knowledge to take on and overcome
complex business challenges. Over the past two decades, management innovations
enabled by information technology (IT) have moved companies toward the ideal of
the "boundary less" organization (Winograd and Flores 1987), (Morgan 1993). In
these organizations, formal reporting structures and detailed work processes
have a diminished role in the way important work is accomplished. Instead,
informal networks of employees are encouraged to exist alongside the formal
organization and these communities of common interest are increasingly at the
forefront of new idea development. The general health and "connectivity" of
these groups has a significant impact on their knowledge creating capability,
strategy execution and organizational effectiveness. Many corporate leaders
intuitively understand the benefits of this flexible approach, but few spend any
real time assessing or supporting them. And because they do not receive adequate
resources or executive attention, these groups are often fragmented, and their
efforts disrupted by management practices or organizational designs that are
biased in favour of task specialization and individual rather than collaborative
efforts. (Gadman 1996)
Not surprisingly, the best examples of I.T.
enabled collaborative practices are to be found in companies where information
technology both defines competitive strategy, as in the case of Microsoft,
Intel, Linux and Dell and where it enables competitive strategy, as in the case
of BP, Benetton, 3M and P&G. For example at BP, knowledge creation through
collaboration is considered a critical factor in their ability to adapt to
rapidly changing market forces. B.P. manages a vast range of activities
including exploration and production of crude oil and natural gas; refining,
marketing, supply and transportation; manufacturing and marketing of
petrochemicals. The company used to be mired in procedures, but now has
processes that foster learning and tie people’s jobs to creating value. It is
flat and lean and every individual in the company has the basic capability to
communicate, collaborate and share information routinely, without the underlying
infrastructure acting as a barrier to information flow.
2. Integrating business and collaborative
strategies
Results showed that, when it comes to
strategic collaboration, companies do not adopt a standard approach. They employ
two very different strategies depending on their competitive focus, their
financial goals, how they create value for their customers, their willingness to
take risk and the degree of trust existing between members of the collaboration.
In some companies, their strategy centres upon adaptation. Knowledge is required
to deepen penetration of existing markets with existing products/services, or to
extend into new markets. Adaptive strategies apply existing knowledge structures
to new opportunities. Consequently, strategic partnering is predominantly closed
or internally focused. For example, when GM introduced their Saturn line of
automobiles they were targeted at a specific market. The attractive, inexpensive
but high-value cars appealed to young adults just starting out in their careers.
While initially assessing the tastes and values of that generation, Saturn
subsequently introduced newer models that reflected the increasing affluence of
its core customer base. This example illustrates the limited use of external
collaboration as a source of knowledge creation and innovation. Similarly, Dell
operates in the highly commoditized personal computer market where there is
little to differentiate one PC from another. Consequently, they are constantly
looking for ways to secure their future. Their strategy is not to innovate or
spend on R&D. Instead, they adapt existing knowledge to build on the ideas of
their competitors and then enter the market later with cheaper prices enabled by
an extremely efficient in-house manufacturing process. Their strategy is to
adapt within a well-defined strategic domain. Their intention is to deploy
validated knowledge to another task. Consequently, Dell looks for markets where
standards have emerged. It then innovates with its processes - the area where it
does hold a large number of patents - and, perhaps most importantly, gives
customers what they want, not what it thinks they need.
By contrast, other companies studied
adopted a business strategy centred upon innovation. In these companies,
knowledge is required to introduce new products/services into existing markets
or to introduce new products/services into new markets. This innovating strategy
requires the application of new knowledge to new opportunities. It emphasizes
experimentation as a natural and spontaneous way of working, whereas adaptation
emphasizes a more planned and controlled approach. Consequently, innovative
strategies are predominantly open or externally focused. Open Source is one
extreme example of this approach where software development programmers are able
to read, redistribute and modify the source code for a piece of software and the
software evolves. (Raymond 1999) People improve it, adapt it and fix bugs and
this all happens at a speed greater than that of conventional software
development. By working together, a community of users and developers improve
the functionality and quality of the software and it appears that this rapid
evolutionary process produces better software than the traditional closed source
process where a privileged few programmers have access to the source and others
use an opaque block of bits. A less extreme, but equally effective innovating
approach is adopted at Oracle when forming new technology partnerships to build
new software applications. They are highly skilled at creating strategic
partnerships with smaller companies. Their aim is to leverage and combine with
their own, the unique knowledge and talent of these companies to create new
products and to quickly exploit highly lucrative markets dominated by their
competitors. While this approach is more radical than the fine-tuning of their
adaptive counterparts it is less extreme than Open Source. The primary concern
when making decisions about degrees of openness in the amount of risk involved
in exposing proprietary assets to outside agents who could potentially put them
to their own advantage. On the other hand the risk is balanced by the benefits
to be gained from spreading their knowledge creating capacity among a wider
community of people.
While Open Source software development
communities appear to be an idea whose time has come, it is important to
remember that knowledge creating communities have been operating across a wide
range of industry sectors for many years. (Amidon and Skyrme 1997) Companies
like Xerox, Proctor and Gamble, Intel and 3M pretty much lead the way in
intentionally creating and managing communities of common interest (Seeley Brown
and Solomon Gray 1995). While there is growing interest (Von Hipple and Von
Krogh 2003), (Lee and Cole 2003) in Open Source strategies, it is important not
to hype them as the next wave, but to be informed by them as we continue to
develop new and creative ways to increase a company’s ability to gain
competitive advantage through strategic collaboration.
3. Balancing adaptive and innovative strategies
The major distinction between innovating
and adapting strategies is that the former approach requires the harnessing of
learning & innovation through natural and spontaneous experimentation. From a
management perspective, this means ensuring and maintaining knowledge
connectivity, recognizing patterns in environmental data, creating and
supporting new ideas that don’t necessarily conform to corporate culture but
provide options to pursue new challenges. (Savage 1996) This is enabled by
knowledge creation from external knowledge sources working in concert with
internal knowledge sources to form a community of innovation. As mentioned
previously, in their purest form, Open Source strategies such as Linux and
Apache take an innovative approach. But more typically businesses opt for a
balance of adaptive and innovative approaches when it comes to managing their
business. (Groves 1996) For example, in an attempt by Microsoft to make one of
its operating systems more competitive with open-source software developers, the
company introduced its "shared source" programme. This allows some governments
and technology companies access to selected Microsoft code. In addition,
Microsoft has added a new category to those eligible to view its code: so-called
Most Valuable Professionals (M.V.P.’s), individuals who have been recognised by
the software maker for their contributions to Microsoft's online support
community. While there are obvious risks attached to giving people access to
their most valuable proprietary asset, the benefit is that they increase
reliance on the Windows platform. In an attempt to limit this risk, those
eligible for Microsoft's various shared-source programmes are permitted to see
some of Microsoft's code, but they can't make changes or use it for their own
projects. Unlike open-source projects like Linux, where developers see the code,
make changes and then distribute the modified product.
3.1 Finding the Best Fit
As the above examples show, a company’s
choice of strategy is far from arbitrary and has a lot to do with their
competitive strategy, an analysis of the risks and benefits associated with
taking on any new venture, their knowledge creating capacity and, as Microsoft
illustrates, the degree of trust existing between collaborating members. All of
these factors have a significant influence on their ability to successfully
exploit information to make better decisions that are highly knowledge intensive
and entail significant business risk. This does not mean that adapting and
innovating strategies are mutually exclusive but that one takes precedence and
is supported by the other. It is the role of strategic management to understand
the unique balance of each and to align financial and intellectual resources
accordingly. Remarkable companies are those that have mastered the art and
science of striking the fine balance between adapting and innovating. See figure
1. They are remarkable because they are made up of people who know how to live
alongside one another even though their purposes are not obviously aligned. For
example, when Apple Computers decided to develop the “Mac” they went out of the
way to protect it from the traditional Apple culture. A new location was found
and organizational processes; systems and structures were designed specifically
to support its unique purpose and mission. The new facilities they occupied
proudly flew the pirate skull and crossbones flag and its people, many of whom
were new to the company considered themselves to be part of something very
special. They also knew, however, that at some point they would have to involve
people from the wider Apple community if they were to successfully transform
their prototypes into product that could be manufactured by the existing
organisation. The success of the Apple Mac was due, to a large part, to their
ability to work alongside the original business with people who did not share
the same interests or priorities. This did not happen by accident, it is the
single most important aspect of any collaborative effort and the job of every
manager and member of the collaboration to ensure that this is anticipated up
front and managed throughout the life of the programme.
Figure 1: Adaptive and Innovative
Strategies
C1 – In low complexity environments where
knowledge creation is not considered mission critical, partnering of any kind
tends not to be regarded as a priority. The objectives of strategic management
in these situations is to maintain tight control by managing the input – output
relationship between the company and its environment through ensuring clear
product – market positioning, resource allocation, planning, organizing, human
resource management, and control. Management practices and organizational design
principles are biased in favour of task specialization and individual rather
than collaborative endeavours. Consequently, self-organization among workers is
discouraged. Detailed plans rather than guidelines tend to be the norm.
Knowledge connectivity is low. Relationships are based on power, control, and
hierarchy. Interaction essential to the generation of new knowledge and problem
solving are captured, categorized and stored for retrieval. Knowledge networking
is neither valued nor encouraged and access to networks via phone, Internet,
face to face and videoconferencing are discouraged. There is a significant
downside to this strategy, as many in the banking industry are realising. Their
historical dominance in none cash transactions from debit cards to electronic
transfers-is under assault from nimble competitors never before imagined.
Companies like Tesco in the United Kingdom and Wal-Mart in the United States are
ready to serve customers demanding choice, convenience, lower costs, and better
service. Additionally, there is increasing competitive pressure from within
their industry to “off shore” their back office work to low cost locations in
India and the Far East. Failing to review pricing and partnering strategies,
product ranges, infrastructure, and customer needs in the face of this challenge
could have serious consequences.
C2 – In situations where there is low
environmental complexity yet high need for knowledge creation that cannot be
delivered by people locked into formal structures, alternate collaborative
strategies are formed within the four walls of the business. Known by a variety
of names these communities of common interest or communities of practice (Seeley
Brown 19??) are designed to create knowledge by encourage free idea exchange
among their members. However, while both communities share this fundamental
philosophy, their motivation is entirely different. In business, these
communities exist predominantly within the boundary of the business. They are
formed with the purpose of increasing competencies, reducing time to market,
increasing the value of intangible assets. They are designed to appeal to our
natural desire to take on a common challenge, the experience of working with
high-calibre colleagues, the opportunity for learning and personal development,
collaboration and teaming. Businesses create reward mechanisms for sharing
knowledge; in some cases these are linked to the main performance review
process, and therefore become a mechanism for penalty as well as reward.
Typically, the individual’s knowledge-sharing abilities are related to
measurable contributions to “knowledge- bases”, the number of presentations
given to fellow employees, participation in training courses. The reward is
increased chance of promotion, an extra percentage of salary increase, or a
bonus.
These groups may range in size from small
working groups of less than 20 members to full communities of hundreds of
participating individuals.
Their survival depends on how well
interests are met by the community resources. In the course of a successful
project, different communities will come and go. New ones will spring up, grow,
and possibly become dormant or die. As long as thriving communities still exist,
the larger project can be considered alive and well. The death of a community
does not equal failure. Consider a community that arose to develop a new
microchip process.
§ After the standard process
developed was tested and accepted by the firms lines of business the process
development community, having achieved its purpose was no longer be necessary.
§ If in the future revisions to
the standard process are called for, the community might be resurrected.
Information technology and the Internet
enable these communities to gather for social and commercial interaction.
Networks provide strategic and operational benefits by enabling members to
collaborate effectively. Boundaries are permeable. The number and density of
connections to the environment is increased to speed information flow and
adaptation. Information is transparent and diversity of opinions and experience
to speed innovation is promoted. The challenge is to recombine to reinvent and
people are encouraged to borrow ideas and practices liberally, making every
product upgradeable, breeding ideas and processes early and often, and viewing
interchangeable modules for people and products essential for mass customization.
These experiments are aimed at continuously upgrading the performance of
services and products, understanding the requirements of customers, knowing
where to target their products, how to market and sell their products and
developing new channels to market. Dell and B.P. fit well into this category
because they have successfully used their strategic knowledge to develop and run
proprietary processes and practices that give them a significant competitive
advantage over the competition. Sharing this with others outside the business
would not be to their advantage.
C3 – In high complexity environments where
existing knowledge assets are in place and highly capable of creating new levels
of knowledge required, partnering tends to be predominantly externally focused
and designed to enable self-organization among workers. The objectives of
strategic management are to balance control with experimentation. Consequently,
guidelines rather than detailed plans tend to be articulated. Knowledge
connectivity is also an essential aspect of relationship building because it
enables interaction essential to the generation of new knowledge and problem
solving. In such a culture, group memory is really the holy grail of knowledge
management efforts. However, the effort to capture and categorize is often more
hassle than workers and managers are willing to put up with. If the
organization's or team's culture is suitable to a conversational working style,
the best I.T. solutions offer a combination synchronous collaboration tools such
as videoconferencing, instant messaging and screen sharing with asynchronous
environments that allow teams to work across geographic and chronological
boundaries. In this way, they can quickly produce both a highly effective online
workspace and an instant archive that becomes searchable group memory. New team
members coming on board can easily get up to speed and ask questions that
haven't already been answered. Managers can tune in and get a solid pulse on the
state of the project. Customers can be an integral part of the project team,
viewing the process and giving feedback along the way. Trusting and stronger
working relationships are established for future contracts. And everything is
embedded in a clear context (the flow of the conversation), which makes for
better, more integrated work and learning. Sun Microsystems fits well into this
category. For example, in their recent NetBeans open source project, the company
used an open source community to develop an integrated development environment
for the Java language. The benefits company benefited because it was able to
increase not only its own population of Java skilled programmers but that of its
customers. Also, because their servers run well on Java, they were in a position
to sell more of them. Lastly, an unexpected outcome from the community was an
innovative idea that created the potential for a future geographic information
systems market, which had never before been contemplated.
C4 – Where environmental complexity is
high, but requirements for knowledge creation are low having been already been
established and held in patents etc., the C4 domain is that of the expert
entrepreneur. These partnerships are characterized by highly knowledgeable
people delivering products/services that are the result of extensive research
and have become the de facto solution. For example, a biomedical start-up
company focusing on the product development of biomaterials for orthopaedic
applications might incorporate some key expertise in its founding team, this
team might also include graduate students who had developed and refined some of
the earlier key processing technology. This may also foster other relationships
with the original laboratory, and with those who had tacit understanding of how
the idea really works, by adding many of those people to its scientific advisory
board this company would become adept at drawing complex ideas and external
scientists into its R&D group without upsetting its existing ideas and culture.
These partnerships are highly skilled at measuring, valuing and managing their
intellectual assets. They acquire and retain highly skilled employees and they
are knowledge driven in that they are able to embed individual-based knowledge
in the company and make it accessible and useful across the organization.
Typically, this category is occupied by companies that have been in some or all
of the previous categories and are now able to benefit from the results of their
experiences. The benefits of this are stable, safe and reliable products and
services protected by time based patents like those seen in the aerospace,
academic, pharmaceutical and nuclear sectors. The risk of being in this category
is that of complacency and those who occupy this category must remain vigilant
to replacement opportunities when patents run out.
4. Managing collaborative relationships
The Buddhist principle of “dependent
co-arising,” states that, every recognizable entity on every scale of existence
participates in the universal exchange of energies, supporting and being
supported by the existence of others (Thich Nhat Hanh 1975). Successful
collaborative relationships, whether predominantly adaptive or predominantly
innovative follow this principle. They possess a potential source of wisdom,
compassion and timing that allow their members to thrive in highly complex and
fast changing environments. They do not come about by accident but are designed
and managed to ensure they possess a balance of symmetry (unity of form), a
syntopy (unity of field), and synchrony (unity of flow) (Richardson 2003) and
that these elements form an integral, integrated and interactive part of the
whole organization. Such integration is made possible through a strong
foundation of valuing and trust where people in the partnership interact with
one another in mutually dependent ways. The measure of an effective partnering
relationship is how much they encourage intellectual, emotional and spiritual
growth and personal insight through a deeper understanding of and tolerance for
the perspectives of others.
4.1 The Business Benefits
The business benefits to be gained from
adopting the most appropriate partnering strategy and organizational design are
significant. Whether it’s a desire to tap expertise globally to solve problems
locally, a wish to respond faster to changing customer demands or a desire to
develop and launch new products/services faster than the competition, a
company’s partnering strategy and its design and execution must be inextricably
linked. Whether it’s a case of doing the same things better, doing better things
or doing entirely new things a company’s choice of one of the four partnering
strategies will be influenced by the nature of its business environment and its
confidence in the knowledge of its people to successfully take on and overcome
the challenge. In cases where environmental disruption is considered high and
knowledge levels well suited to maintaining existing product/service offerings,
a company will tend to favor a predominantly adapting strategy over an
innovating one. Consequently, any efforts to innovate will be more controlled
and iterative in nature with partnerships designed to foster knowledge creation,
capture and dissemination inside and across the organization. On the other hand,
in situations where environmental disruption is tolerable and knowledge levels
high, a company might favour a more innovative approach to delivering its
portfolio and take on a more experimental approach. In such cases, partnerships
are more externally focused and designed to challenge existing knowledge with
radically new ideas.
Strategies aimed at adapting and innovating
must be balanced with the right blend of partnering. If companies intend to
stimulate knowledge development through external partnerships they have to
consider the state of the organization when they decide how much experimentation
is enough. To manage external partnerships, managers must continually assess
when experimentation is moving away from the guiding values and core mission of
the company. Such loose/tight control is essential if knowledge generation is to
continue to feed the strategic aspirations of the firm. Managers should also be
open to making use of new perspectives which might ultimately change the core
mission of the company. They should carefully observe the impact of new ideas on
existing culture and gauge the degree of stress people in the organization are
willing and able to accept (Cooper and Sutherland 2000) (Meyer 2002) Ultimately,
the difference between going it alone and going with others is a personal choice
but I hope that the information presented here will make that choice more
informed.
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