Corporate alliances require managers who are good at building personal networks across boundaries.
Why Collaboration?
Why all this interest in interorganizational collaboration? Some companies have moved away from the idea of remaining independent to allow themselves to develop mutually dependent relationships with other organizations and accomplish things none of the organizations could do alone.
There has been a tremendous surge in the formation of strategic alliances, for example, over the past three decades, with both large established firms and small entrepreneurial firms taking advantage of the benefits of collaboration.
Some key reasons for collaboration include sharing risks when entering new markets, mounting expensive new programs and reducing costs, and enhancing the organization’s profile in selected industries or technologies.
Cooperation and collaboration are prerequisites for greater innovationOpens in new window, adaptation, problem solvingOpens in new window, and performance. Partnerships are also a major avenue for entering global markets, with both large and small firms developing partnerships overseas and in North America. Joint ventures with organizations in other countries, for example, make up a substantial portion of U.S. firm’s foreign investment and entity strategies.
North America companies traditionally have worked alone, competing with each other and believing in the tradition of individualism and self-reliance, but they have learned from their international experience just how effective interorganizational relationshipsOpens in new window can be.
Both Japan and Korea have long traditions of corporate clans or industrial groups that collaborate and assist each other. North Americans typically have considered interdependence a bad thing, believing it would reduce competition.
However, the experience of collaboration in other countries has shown that competition among companies can be fierce in some areas even as they collaborate in others. It is as if the brothers and sisters of a single family went into separate businesses and want to outdo one another, but they will help each other out when push comes to shove.
Interorganizational linkages provide a kind of safety net that encourages long-term investment, information sharing, and risk taking. Organizations can achieve higher levels of innovation and performance as they learn to shift from an adversarial to a partnership mindset. Consider the following examples:
To make “The Lego Movie,” Denmark-based Lego A/S negotiated partnerships with several companies, such as digital studio Animal Logic, which developed the animation and visual effects, and Warner Brothers Pictures, which provided financing and distribution. Thanks to partnerships, “The Lego Movie” was made on a $60 million budget and it grossed more than $450 million in the year following its release.
Ford Motor Company and Toyota compete fiercely to sell cars and trucks, but to fend off new rivals such as Alphabet getting into the auto business, Toyota teamed with Ford to integrate Ford’s apps platform into Toyota vehicles.
A study by PwC (PricewaterhouseCoopers) found that 27 percent of responding CEOs said they were considering or were already working with a competitor in some type of partnership.
Roche Holding AG and AstraZeneca PLC developed a partnership to share data on early-stage drug design to increase the odds of developing safe and effective drugs. The data will also be shared with a third company, MedChemica Ltd., which specializes in scrutinizing chemical compounds to pinpoint chemical structures that might create safety problems.
The companies say they hope other pharmaceutical companies will join the data-sharing partnership, leading to the creation of safer, more effective drugs. Pharmaceutical companies have until recently been protective of their research data, but there is a noted trend toward collaboration, such as the Accelerating Medicines Partnership.
In Practice, Accelerating Medicines Partnership
Companies have spent billions of dollars racing to beat one another to find breakthrough drugs for diseases like Alzheimer’s. Now, 12 biopharmaceutical and life sciences companies have joined with the National Institutes of Health (NIH), the Food and Drug Administration (FDA), and numerous non-profit agencies in a collaborative agreement to find new cures and reduce the time and cost of finding them. The companies will share scientists hope to interpret Alzheimer’s, Type 2 diabetes, autoimmune disorders such as lupus and rheumatoid arthritis, and Parkinson’s disease in a way none of the companies have been able to do on their own and identify targets for new drugs.
Called the Accelerating Medicines Partnership, the group includes companies that compete vigorously, such as Bristol-Myers Squibb, Pfizer, GlaxoSmithKline, Eli Lilly, Sanofi, and Merck. The pact prevents any company from using a discovery until the project makes data on the discovery public. “The moment the project results are out,” said David Wholley of the NIH, “all-out competition resumes to develop the winning drug.”
Getting the pact pulled together wasn’t easy. At times, some of the participants “weren’t even talking with one another.” Jan Lundbert, who leads Eli Lilly & Company’s research laboratories, said figuring out how to collaborate despite being rivals had a “bonding role: Do we respect each other as scientists and as human beings?”
From Adversaries to Partners
Fresh flowers are blooming on the battle-scarred landscape where once-bitter rivalries once took place. In North America, collaboration among organizations initially occurred in nonprofit social service and mental health organizations, where public interest was involved. Community organizations collaborated to achieve greater effectiveness and better use of scarce resources.
With the push from international competitors and international examples, hard-nosed American business managers soon began shifting to a new partnership paradigm on which to base their relationships. Figure X-4 provides a summary of this change in mindset.
Rather than organizations maintaining independence, the new model is based on interdependence and trust. Performance measures for the partnership are loosely defined, and problems are resolved through discussion and dialogue.
Managing strategic relationships with other firms has become a critical management skill. In the new orientation, people try to add value to both sides and believe in high commitment rather than suspicion and competition.
Companies work toward equitable profits for both sides rather than just for their own benefit. The new model is characterized by lots of shared information, including electronic linkages and face-to-face discussions to provide feedback and solve problems.
Sometimes people from other companies are on site to enable very close coordination. Partners develop equitable solutions to conflicts rather than relying on legal contracts and lawsuits. Contracts may be loosely specified, and it is not unusual for business partners to help each other outside whatever is specified in the contract.
In this new view of partnerships, dependence on another company is seen to reduce rather than increase risks. Greater value can be achieved by both parties. By being entwined in a system of interorganizational relationships, everyone does better because they help one another. This is a far cry from the belief that organizations do best by being autonomous.
The partnership mindset can be seen in a number of industries. For example:
Auto companies have formed numerous partnerships to share development costs for self-driving vehicles.
By breaking down boundaries and becoming involved in partnerships with an attitude of fair dealing and adding value to both sides, today’s companies are changing the concept of what makes an organization.
Remember This!
The collaborative-network perspective is an emerging alternative to resource dependence. Organizations welcome collaboration and interdependence with other organizations to enhance value for all.
Many executives are changing mindsets away from organizational autonomy toward collaboration, often with former corporate enemies.
The new partnership mindset emphasizes trust, fair dealing, and achieving profits for all parties in a relationship.
Figure X-4 Changing Characteristics of Interorganizational Relationships | Credit — Slideplayer Opens in new window
