Why do organizations collaborate?

As the economy endures a post-Covid downturn, joint ventures and partnerships are expected to play a major role in helping businesses weather the storm and return to growth. There are multiple benefits of collaborating with other organizations. Working with other businesses can help companies build a wider reach, gain new customers and extend influence into new areas.

Partnerships and joint ventures are also an opportunity for organizations to learn. They can provide fresh perspectives and insights which can be priceless when a company collaboration goes well. Whether it’s skills, sales, market share, innovation or resources, a collaboration could help you amplify your strengths and broaden your capabilities quickly and with little upfront cost.

What are the benefits of company collaboration

Collaboration may help businesses with:

• Scaling up. An organization may not have the staff, resources or infrastructure to fulfill a task or contract. Working together with another business can be a way of increasing capacity quickly without capital investment, and taking on bigger challenges when the opportunity arises.
• Injecting new ideas. Organizations can become more inward-looking over time. Bringing in an outside perspective gives people a fresh perspective on processes, problems, and solutions, and can help organizations to innovate, as well as encouraging your employees to develop individually and as a team.
• Adding skills. Sometimes the necessary expertise for a project isn’t available in-house and it makes sense to collaborate with another business rather than build new teams or roles, especially if you’re not sure you want to grow your business in that direction.
• Adding value. Companies who have related – but not competing – market niches may get together to provide joint packages or discounts on complementary products and services as a way to make a more compelling offering to customers. A great example is the decades-old joint venture between Barnes & Noble bookstores and Starbucks cafés. Who wouldn’t enjoy the idea of sitting down for a coffee with their newly purchased bestseller?
• Staying competitive. Many influential organizations now see collaboration as a tool for gaining competitive advantage, either by entering into formal long-term agreements or collaborating on specific one-off projects.
• Moving into emerging sectors. Emerging technologies such as green hydrogen and circular economy manufacturing require companies to adapt their existing skills and strengths in brand new ways. Collaborating with others and pooling skills and experience is essential for driving new industries forward.

Even if things don’t work out, collaboration ventures can offer you valuable lessons to help you do better next time.

What makes a business collaboration successful?

As well as having the right tools, effective collaboration in business depends on:

• Clear aims. Having a clear strategy/objectives is one of the key reasons for the success of joint ventures, according to Bain & Company. Teams need to understand the objectives of the collaboration and keep these front of mind when carrying out their work. Sharing business collaboration ideas openly at all levels of your business can help make this more likely.
• Clear processes. Prospective collaborators should decide these at the outset. How will the flow of business communication work? What are the checkpoints for the projects? Will there be regular group communication? When will online/in-person meetings take place?
• Established rules. The parameters of the collaboration should be clear, both in terms of the overall responsibilities and expectations, and day-to-day work practices. For example, the people involved in the work should know what information they can and can’t share with one another.
• Robust collaboration tools. Communication is essential when you’re integrating two companies on a project or workstream. Working in multi-company groups can be challenging, so having the right collaboration tools in place is essential when working towards a shared goal.

What are the risks of a business collaboration?

Like most potentially advantageous choices, collaboration between businesses also brings a certain element of risk. When you pool together the opportunities to gain profits, you’ll also need to share the possibility of making a financial loss, which could mean that it could have more of an impact than if you were working alone.

You’ll also be linking your brand with someone else’s, potentially for the long-term, which means you’ll need to be sure that their values and business practices are consistent with your own.

For these reasons, it’s a good idea not to rush the selection process when you’re looking for a collaboration partner, and for both sides not to skimp on due diligence. When you do decide to work together, make sure you seal the deal with a solid contract or business collaboration agreement.

Collaborating in the age of remote work

Geography and language are no longer barriers to collaboration. The wholesale shift to remote working during the pandemic has made collaborations with other businesses more accessible than ever – even with businesses based thousands of miles away. In fact, one of the reasons you might collaborate with another business is to enter new and more distant markets.

Today’s workforce is now completely accustomed to using digital connections and remote collaboration tools to work with colleagues, and it’s a short leap from team collaboration to working with new business partners using digital channels.

But you need to make sure that you have the right tools in place to communicate effectively at a distance. Using digital collaboration platforms, for example, can help you overcome language barriers and join up global, multi-company groups.

Finding a company to collaborate with

For some organizations, it might be immediately obvious who they should collaborate with. For others, it might need a bit of strategic thinking to find potential matches. Here are some of the criteria you might consider when choosing a collaboration partner.

1. Mutual trust. There must be respect and understanding between the collaborating organizations and their key people. Any imbalance or tension around the collaboration is likely to breed ill feeling and lead to unequal contributions that hamper success for both sides.
2. Shared values. A shared value system that aligns with both brands is a huge asset to a collaboration. With a similar ethos on all sides of the venture, collaboration will work much more smoothly.
3. A similar culture. It might be difficult to engage if your corporate culture and ways of working are very different. For example, if your potential partners have a rigid hierarchical structure, and you don't, this could lead to less effective collaboration. In fact, a poor cultural fit and/or lack of trust is one of the main reasons for joint venture failure.
4. Complementary skills. One of the biggest benefits of a collaboration is using the skills and resources of your partners to strengthen the value proposition. Your prospective partner organization may have strengths and specialisms in the areas where you are least developed, and vice versa. The benefits of cross-sector collaboration include being able to make a match with almost no overlap on expertise, although you do need to have cultures and values that fit.

Choosing a business collaboration model

So, you've found the right business to collaborate with. Now you need to refine the plan for your shared venture and hammer out the ways you’ll work together.

There are many different models for business collaboration. They range from collaborating around a single issue or product to formal partnerships to creating a new joint organization. Depending on where you are in the world, there may be different legal definitions for different types of collaborative arrangement.

Hype Innovation puts forward four main types of collaboration:

1. Alliance. Two or three businesses agree to temporarily pool their skills, knowledge, products, services or resources for a limited period of time in order to achieve a common goal, for example breaking into a new market.
2. Portfolio. A centrally managed collaboration that is more long-lasting than an alliance. A portfolio arrangement involves several independent businesses agreeing to share knowledge under the control of an overarching organization which coordinates the group.
3. Innovation network. Here, the emphasis is on knowledge-sharing. A group of interconnected businesses share innovations and R&D efforts to test and refine their ideas and come up with new or improved products, services or processes more efficiently.
4. Ecosystem. Considered the most advanced type of collaboration, an ecosystem is where various organizations – and even end customers – form long-term connections governed by shared ideas and agreements. The members are highly interdependent and almost always cooperate towards shared goals rather than competing. Entrepreneur and author Tony Robbins makes a useful distinction between people-based and resource-based collaboration arrangements.
5. Personnel-based joint ventures. The element being shared is the people within each business and their ideas and knowledge.
6. Equipment-based joint ventures. Companies share their specialized equipment and technologies, for example one company offering its manufacturing facilities to another in return for a share of profits.

Whichever approach you take, effective collaborations build on your ability to share. Sharing knowledge and resources or skills and experience – and ultimately, sharing success or failure.

You may also be interested in:

• What is agile collaboration?
• Cross-team collaboration
• 7 tips for better multidisciplinary collaboration