4 Types of Business Collaboration: Which One is Right for You?
The Digital Age has revolutionized everything – from thinking patterns to education, healthcare, jobs, entertainment…. all of it. Likewise, the whole collaboration process for innovation hasn’t really stayed immune to this technological advancement either. Just like Gen Y will never encounter a world without the internet and smartphones, businesses will never go back to a lesser state of connectivity.
How’s that? That’s the beauty of open innovation.
As they ponder their outsourcing decisions, businesses start by considering various factors – time, talent, money everything weighs in. However, when this decision takes place, the parameters dramatically multiply. In this hyperconnected fast-moving world that we live in, from consumers to suppliers and complementors to competitors and even governments, everyone has a stake in the outsourcing decisions and its probable consequences.
Back in the 1970s, from the first partnerships in healthcare and IT to the present ecosystems of co-created value, innovation through collaboration is taking new and interesting shapes. For example, see the recent alliance between VR specialists and journalists for the immersive journalism concept.
With time, businesses have started understanding the importance and benefits of the collaboration for innovation for the greater good. Let’s discuss in brief the various types of business collaboration.
- Alliances
Strategic alliances are one of the most basic and long-lived forms of collaboration. These are like agreements between two or more independent companies that unite their resources and efforts temporarily in order to achieve their individual strategic goals.
Alliances started hitting the headlines when MNCs in IT, semiconductor, and biotechnology industries were finding themselves struggling to get enough of their own internal resources. Consequently, they started tapping into the assets available outside to improve competitiveness and accomplish more complex goals.
The main reasons to enter into a strategic alliance and ensure constant innovation through this were:
- To make up for internal flaws or technological gaps
- To set up brand new product lines and portfolios
- To break into new markets successfully
- To better serve their customers
- To minimize new product development (NPD) risks, cost, and time
In the era of strategic alliances, collaboration meant making comprehensive, precise, and legal agreements that let companies cast a substantial influence on their allies or partners. From equity stakes, technology swapping to joint ventures, partners had a significant say in all these aspects. And well stating the obvious, to take advantage of the profits.
- Portfolios
The portfolio is the second type of business collaboration, which is used quite often even today.
Once the businesses started realizing the advantages of alliances, they were now looking forward to upholding these benefits for a more extended period. Therefore, collaborations started being managed centrally, and eventually, the practice of creating portfolios came into existence.
Essentially, portfolio management was all about drawing out the best exercises from alliance experiences and then outspreading them internally. In this process, a supposed ego firm built agreements with independent firms but then controlled the flow of knowledge through particular functions.
Generally, big pharmaceutical firms have been great portfolio builders. In the beginning, these firms started collaborating with small biotechnological businesses to grasp knowledge and licenses in the most effective and efficient way. However, the small biotech companies started feeling robbed of their primary resources very often. While conflicts took place frequently, the collaboration continued to advance.
As the portfolio management started growing in popularity, new concepts began popping up in the minds of collaborators, giving rise to the “co-creation” concept, which we will discuss in a bit.
- Networks
The network is the third type of innovative collaboration. Networks involve groups of businesses that share Research & Development goals related to business models, processes, products, or services.
Massive network structures are natural advancements of alliances and portfolios. New methods of structuring innovative activities emerged, as collaboration tools and practices spread from high to medium to low-tech sectors. The main difference was that now all businesses were interconnected, composition became less strict, and cut-throat battles for survival were replaced by low-medium competition.
In due course, networks began competing against each other while competitors, suppliers, complementors, and even consumers were now able to contribute to the innovation process in surprisingly new ways. Moreover, the businesses were now no longer worried about managing individual tie-ups and collaborations; instead, they were now concerned with managing their network position.
In spite of the higher collaboration costs, the usefulness of networks soon became evident. The primary uses of networks were:
- To scan organizations’ environments for technological progressions
- To grow individual as well as group capabilities
- To secure long term survival
In a nutshell, networks emphasized the collective wellbeing of the collaborators.
- Ecosystems
Last but not least, Ecosystems is the fourth and most advanced type of innovative collaboration. Although there is no precise definition of ecosystems that we all can agree to at the moment. Here are a few derivations that we have made as per studies and resources.
Ecosystems are controlled by specific rules and norms that impact the relationships between the collaborators. Collaborators or customers uniquely determine the value of ecosystems. Meaning the innovation is no longer working for the focal firm. Instead, it is now a cooperatively organized activity.
In a nutshell, typically, ecosystems are distinguished by:
- A formal authority’s absence
- Solid dependence among collaborators
- A mutual set of objectives and goals
- A joint set of skills and knowledge
A mutual vision and enterprise, commitment to each other, helping each other build value, and pursuing mutually formulated goals and strategies become the norm.
However, collaboration is not meant for every business. SO before you jump into a strategic alliance, building a portfolio, innovative networks, or setting up ecosystems, you need to ask yourself, “Does collaborating for innovation fit my company’s goals?”
A Quick Guide to Find Out If Collaboration Is for You
Before entering a partnership, ask yourself:
- What are my firm’s goals? What do my customers need?
- Can I accomplish these objectives on my own?
- Will this collaboration help compensate for my weaknesses and boost my strengths? If yes, how?
- What happens if I do nothing and continue my current course?
If collaboration is essential, continue asking these:
- As a partner in the alliance, what is my value? What am I bringing to the table?
- What are my expectations from my partner(s)? What do I expect out of this partnership?
As you move forward with selecting your partner, consider:
- Strategic Fit: Make sure you share a common vision and mission, that there is little possibility of becoming direct competitors of each other, have similar future plans for your business, etc.
- Operational Fit: Think about geographic coverage, workforce, decision-making strategies, incentive schemes/performance metrics, etc.
- Chemistry Fit: Make sure your work ethics are compatible; you both have a longstanding commitment to the industry, stability of the staff, innovation and flexibility, etc.
Conclusion
In a nutshell, effective collaboration can take many forms. From the strategic alliances to present-day ecosystems, firms are coming together in partnerships to solve problems and challenges that they couldn’t on their own. By the end of this blog, you must have understood whether or not collaboration is meant for you. If you think you are ready to step into an alliance, then keep all these things in mind, and you will be all set to go!