Paul Lawrence of CNA International Executive Search, recently met with Peter Westbrook a well renowned Change Management Consultant and asking him for his views and experiences on company collaborative working this article is an insight into his thoughts on the subject of collaboration through open innovation.
The world is increasingly volatile, uncertain, complex and ambiguous (VUCA). Complex issues, increasing inter-dependence and the increasing need for greater innovation confound even the most superbly efficient and well-controlled organisations. To put it simply there is a ‘dense fog’ through which organisations must navigate their way. Consequently, organisations must not only be efficient, they must be effective. As Peter Drucker (Founder of the Drucker Institute and world management consultant) said ‘efficiency is doings things right whilst effectiveness is doing the right thing’. For most organisations one of the ‘right thing’ is to enter into strategic partnerships. This can radically improve their organisational agility to identify and capture opportunities more quickly and effectively than their rivals. The trick is, to do it well.
Collaboration allows organisations to achieve goals and objectives that they are not able to do on their own. Some key drivers for collaboration include:
- Access to new technology
- Ability to strengthen innovation capabilities
- Access to new markets and customers
- Access to larger contracts
- Risks Reduction
According to a recent McKinsey report over 70% of CEOs expect to engage in new joint ventures in the next 5 years. However, another recent report, cited in the Harvard Business Review is that over 55% of joint ventures fail! Moreover, many of the ‘succeeding’ joint ventures fail to achieve the expected results. Indeed 70% to 80% of mergers and acquisitions fail in terms of creating extra stock market value (strategic Management Journal investigation covering 75 years). Collaboration is a strategic issue, yet organisations are not very good at it.
Some of the major reasons for this failure are:
- Insufficient attention to setting clear goals for the collaboration
- Not discovering strategic conflicts early enough
- Not recognising that everyone must be a winner: the need for mutual benefit
- Insufficient attention to building trust and demonstrating transparency
- Not knowing when and how to exit
Underpinning these reasons for failure is the prevailing organisational business model or as Professor Donald Sull in his book ‘The upside of Turbulence’ calls it, the organisations mental map of how the world works. This is a set of assumptions which is ‘hard wired’ into the organisation’s way of thinking. Peter Drucker says ‘the assumptions on which the organisation was founded will not be the ones which take it forward’. Yet leaders make sense of situations, taking speedy and appropriate action based on their understanding of what happened in the past. They try to simplify a complex world. Innovative solutions for customers are therefore limited by what people at the top imagine! This is not because they are incompetent but is because every human being tries to simplify and give the illusion that they can predict and control the future. Encouraging both external and internal collaboration widens the assumptions and makes the business model more fit for the future.
Current assumptions, ‘gut feel decisions’ and a lawyer led contracts often characterise many strategic collaborations. The reasons for collaborative failures demonstrate the need for a better approach. It must be a systematic approach all the way from an organisation’s strategy to a collectively agreed way of working. After much research we now have a comprehensive framework for successful collaboration. This is BS11000: Collaborative Business Relationships. It has 8 stages namely:
1. Strategic awareness of the areas and associated benefits of collaboration and its alignment with the organisation’s goals
2. Strategic knowledge of the risks of strategic collaboration and the key requirements for successful implementation
3. Internal assessment of the organisation’s capacity and ability to collaborate
4. A structured process for partner selection
5. A structured approach to define how the organisations will collaboratively work together
6. A joint focus for innovation and the creation of mutual added value
7. A well thought out way for monitoring and sustaining the relationship over time and through different challenges
8. A mutually agreed set of conditions and way of ‘exiting’ the relationship.
Each stage has a full list of requirements but this article is a reflection on some critical elements of strategic collaboration.
Our increasingly turbulent world brings both big challenges and new opportunities. Strategic collaboration improves organisational agility to respond more effectively to new opportunities. BS11000 is a very helpful framework to avoid the mistakes of the past and maximise the potential of partnerships.