Is your Firm Prepared to Collaborate?

Most product and technological innovations come from knowledge-intensive industries like computers, biotechnology, health care, and national defense. In those industries, the ability to collaborate, both within and across organizations, is a must. Collaboration has been shown to reduce risk, speed products to market, decrease the cost of product development and process improvement, and provide access to new markets and technologies.

Collaboration is a capability that many companies would like to leverage in their particular business. But even though those companies may be strong competitors in their respective industry, the ability to practice collaborative behavior can be elusive. In order to develop that capability, management must clearly understand the behavioral dynamics underlying competition, cooperation, and collaboration.

Competitive behavior is driven by organization members’ desires to achieve as large a share of the rewards available in a given situation as their energy and abilities will allow. This motivational assumption is explicit in economic theory: Individuals and firms act in their own self-interest, and they seek to maximize their returns. When the primary purpose of engaging in an activity is the economic reward it will bring, psychologists refer to the underlying motivation as “extrinsic” – the reward comes from a source external to the doer. On the other hand, when an individual engages in work or other activity for the sheer enjoyment of it, he or she is said to be motivated “intrinsically” – by the activity itself and not the external reward of pay or a promotion. Although few activities are undertaken purely for either their intrinsic or extrinsic rewards, the primary form of motivation that drives an individual is important in differentiating among competitive, cooperative, and collaborative behaviors.

Participants in many settings, from business to politics to sports, expect fellow participants to learn and follow the basic rules of the game or activity. Those who do not are quickly spotted as people who are not to be trusted. Unfortunately, cheaters can and do win on occasion, so the level of trust that exists among participants in competitive situations is an important determinant of how they behave in those situations – how they treat the other party, how they handle relevant information, how they negotiate, and so on. The minimum level of trust that organization members expect of their superiors is that they will apply sanctions as specified in the rules (both the organization’s rules and general moral and ethical principles). A higher level of trust exists when superiors can be counted on to allocate rewards in a similarly fair and principled manner. In short, organization members in competitive situations seek sufficient trust to assure that basic rules and traditions will be followed.

Cooperation occurs when one person or group helps another in carrying out a task whose outcome benefits both parties. The primary determinant of cooperative behavior, with respect to both individuals and organizations, is that the desired or chosen task cannot be accomplished alone. Sometimes, individuals and groups are forced to cooperate in order to survive, such as in ancient societies based on farming, hunting, or fishing. In today’s world, however, most cooperative ventures arise because the parties choose to work together to accomplish their mutual objectives. Parties engaged in cooperation still act in their own self-interest, but their interdependence requires different ways of making decisions and handling information than in competitive situations.

Both individuals and organizations must come to grips with the issue of trust in cooperative situations. Cooperation succeeds when the parties bring their respective resources to the venture and then jointly determine how to leverage and use those resources. If one of the partners exploits the situation in some way, then the overall venture cannot be successful and may not be sustainable. Most cooperative ventures, even those in which the parties trust each other, are secured by contracts. Contracts protect the cooperating parties against risk and damage.

In recent years, the phenomenon of “co-opetition” has been growing. The word itself refers to simultaneous cooperation and competition. Advocates of co-opetition argue that the maximization of total benefit occurs when firms cooperate in the generation of wealth (creating the pie) while still competing for their own share of the enhanced outcome (dividing the pie). From a game theoretic perspective, co-opetition is the rigorous search for mutually advantageous agreements that lead to a higher potential gain for both parties. Strategies following co-opetition principles rely on complementary value-adding behaviors such as, for example, those between Microsoft and Intel or those between credit card companies and airline frequent flier programs. Such programs benefit two or more parties without constraining their individual efforts to obtain maximum returns. Similar strategies have been used in other settings involving bidding, negotiations, and customer and supplier relationships.

Co-opetition strategies highlight similarities in the underlying motives of both competitive and cooperative behavior. That is, in either a competitive or cooperative approach, the primary outcome that each party is pursuing is an improvement of its own position. Co-opetition is behavior that is extrinsically motivated, calculative, and self-serving.

Collaboration is a process of shared decision-making in which all the parties with a stake in the problem constructively explore their differences and develop a joint strategy for action. Collaboration can be directed toward any mutually desired objective: solving a complex problem, resolving a persistent conflict, creating a new business, and so on. Collaboration works best when certain conditions are present, such as when the relevant knowledge base is complex and diffuse, and therefore the parties must work together to combine knowledge and develop joint solutions. Also, it is crucial that relationships are voluntary and the parties care for and are committed to each other. Overall, collaboration is most effective when competent, mature individuals/organizations treat each other fairly and value their relationship as much as their own self-interest.

Collaboration differs from competition and cooperation in two main ways. First, cooperation is motivated by the benefits each party expects to receive from combining ideas, information, and resources. Therefore, while cooperative behavior may be enjoyable in its own right, it is primarily extrinsically motivated. Second, because cooperative behavior ultimately involves the pursuit of self-interest, it requires periodic or even continual assessment by each party of the amount of trust and commitment of the other party. In collaborative relationships, on the other hand, each party is as committed to the other’s interests as it is to its own, and this commitment reduces the need for the continual assessment of trust and its implications for how rewards will be divided. Because it is the relationship itself that is valued, collaborators can focus on its intrinsic aspects confident that any future returns will be equitably allocated. Thus, a collaborative relationship is built on intrinsic motivation and caring trust.

The behavioral characteristics of competition, cooperation, and collaboration are summarized in the table:

Behavior

Competition

Cooperation

Collaboration

Trust

Arm’s length

Secured by contracts

Caring

Motivation

Extrinsic

Extrinsic

Intrinsic

Information and

communications

Tightly held

Selective

dissemination

Open, shared

Goals

Succeed over

competitors

Work together to

achieve mutually desirable outcomes

Work together to

develop new solutions

If your firm wants to pursue innovation via internal and external collaboration, how should it proceed? Any organization that is heavily steeped in a culture of competition is not going to easily become “collaborative.” A true transformation is likely to occur in only a portion of the total organization, and it will require considerable commitment, investment, and ongoing development. A good starting point is to decide on the units to be involved in the developmental effort. Those units should be the knowledge-intensive units in the company because that is where collaboration is most needed and useful.

Next, the overall goal of the reorganization should be to foster self-organizing. In a self-organizing system, the actors share knowledge and other resources, and they themselves control and coordinate their activities using protocols, processes, and infrastructures instead of hierarchical mechanisms. Finally, management must learn how to resist the temptation to intervene in the new collaborative system. If the reorganization goes well, this portion of the organization will now be more entrepreneurial, innovative, and self-reliant – and management must allow the “new” organization to continue to grow and become stronger.

Dr. Charles Snow

Chairman, Organization Design Community

Professor Emeritus, Penn State University

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