collaboration

  • Media Embraces The Bounty Effect’s Structural Change

    There are encouraging signs that the media is recognizing that the structure of organizations must change to enhance collaboration and maximize value. And when the media gets on board, organizations often follow.

    Several media outlets that have featured The Bounty Effect: 7 Steps to The Culture of Collaboration have focused on changing organizational structures from Industrial Age command-and-control to Information Age collaborative. This is crucial, because The Bounty Effect is about seizing opportunities to design and build new organizational structures that exigent circumstances provide. So, reviewers and journalists have clearly understood the central theme of the book.

    Reviewing The Bounty Effect in The Washington Times, James Srodes describes the big picture of why changing organizational structures is necessary. He relates the need for collaborative structures to the changing “hinges of history” in which a decades-long trend suddenly shifts. Srodes mentions a global economic state where little or no growth is the norm and dwindling raw materials and political instabilities among other trends impacting the planet. This insightful review endorses the book’s approach:

    “If you recoil at the notion of folks sitting around a boardroom campfire singing “Kumbaya,” Mr. Rosen offers an ingenious example of the essence of the collaboration strategy. The “Bounty” in his title is in fact the HMS Bounty, famed in Hollywood’s bogus history for its portrayal of a despotic (command-and-control) Captain Bligh.”

    In a question-and-answer article with me entitled “Can Collaboration Be Forced?” in Talent Management magazine, Kellye Whitney also focuses on changing the organizational structure. My answer to a question about what talent leaders can do to change command-and-control structures echoes the “hinges of history” shift in the Washington Times review:

    “In the workplace we should constantly be working to create value. It used to be that companies could make a decent buck by just telling people what to do. A few people were paid to do the thinking and everybody else was paid to carry out orders. But with globalization, increased competition and the boom and bust cycles, companies are realizing that it’s all hands on deck.”

    In another question-and-answer article entitled “The New Way We…Collaborate” in Avaya Innovations magazine, Eric Lai focuses the interview on changing organizational structure and culture. Here’s my response to his question about the role of technology in changing the structure and culture:

    “The Greek philosopher Socrates believed that the way to truth is through dialogue. Socrates rejected writing because it meant—quite literally in Ancient Athens—that ideas were set in stone or wax and that the process of developing those ideas was dead. Email is the modern equivalent of setting ideas in stone. If given the choice, Socrates would have found a lot more truth in using real-time tools rather than email. Email is essentially an updated version of the old memorandum. In command-and-control organizations, people send an email and wait for a response. An email is often a report or a request for a decision. There is no real-time dialogue in email, so Socrates would have found little truth in email.”

    So the media is beginning to join the growing numbers of organizations that have jumped on the structural change bandwagon.

    Categories: , , ,
    Tags: , , , , , , , , ,

  • World Bank, Microsoft Changing Structure for Collaboration

    More and more organizations are recognizing that obsolete organizational structures are impeding collaboration. I identify this issue and detail solutions in my new book, The Bounty Effect: 7 Steps to The Culture of Collaboration®.

    One of the latest organizations to begin adopting a collaborative structure because of The Bounty Effect is the World Bank. The World Bank has announced that it’s moving away from a command-and-control organizational structure that is compromising value. The World Bank will instead adopt a collaborative structure for greater speed and efficiency. The new structure will enable internal collaboration across functions, groups and regions. Plus the new structure will enhance external collaboration particularly with the private sector.

    World Bank President Jim Yong Kim announced the shift after a survey of ten thousand team members revealed a “culture of fear” and a “terrible environment for collaboration,” according to an October 6, 2013 story by Annie Lowrey in the New York Times. Further, Kim told the New York Times he feared the World Bank’s culture and structure might short-circuit its new goals of eradicating extreme poverty by 2030 and ensuring “inclusive growth.”

    The Bounty Effect for the World Bank is that the organization, which is financed by 188 member countries, faces increasing competition in supporting developing economies from many groups. One of these is the Bill and Melinda Gates Foundation. Incidentally, Bill Gates also chairs the Microsoft board of directors. In July, Microsoft announced it would change its organizational structure to reduce internal competition, curb silos and enhance collaboration. Bill read an advance copy of The Bounty Effect: 7 Steps to The Culture of Collaboration®. The book shows how to change the structure and culture of organizations from Industrial Age command-and-control to Information Age collaborative.

    Microsoft, the World Bank and many organizations suffer from similar shortcomings. While many have embraced collaboration as a concept and have even developed pockets of collaborative activity, the broader organization remains mired in command-and-control.

    Remnants of Industrial Age command-and-control compromise value creation. These remnants include 19th Century vertical organization charts, the need to go through channels, traditional meetings, and recognition and reward systems that reinforce internal competition among many others. The Bounty Effect: 7 Steps to The Culture of Collaboration® identifies these remnants and details how to replace them with infinitely more valuable collaborative building blocks.

    As the World Bank, Microsoft and growing numbers of organizations recognize The Bounty Effect’s impact on them, they can use the opportunity to implement the 7 Steps to The Culture of Collaboration® and ultimately create far greater value.

    Categories: , , ,
    Tags: , , , , , , , ,

  • Big Data, Measurement Mania and Collaboration

    The world is drowning in data. The term “Big Data” appears in most technology trend articles in 2013 and reverberates at seemingly every conference regardless of industry. This reminds me of a quote attributed to Mark Twain that I used with my senior picture in the high school yearbook: “Collecting data is much like collecting garbage. You must know in advance what you are going to do with the stuff before you collect it.”

    Now companies and government agencies have an idea what they’re going to do with the data they collect. And a leading use of data is measurement. Measurement mania has spread throughout every function of seemingly every organization from government agencies and universities to public school systems and corporations. Organizations can now measure traits among applicants and team members ranging from emotional intelligence to flexibility. Plus companies can calculate transactional cost-per-hire.

    The relentless drive to measure people can reduce value creation and compromise collaboration. Measurement mania breeds fear and internal competition among team members and encourages leaders to focus on short-term results which create less sustainable value than achieving longer-term objectives. In a numbers-obsessed organization, leaders are more likely to cut corners by booking phantom sales or sacrificing safety in manufacturing plants. With hidden agendas running rampant, collaboration towards common goals becomes impossible.

    Media reports suggest that Zynga, the company that develops online games including FarmVille, has thrived on numbers. “Relentlessly aggregating performance data, from the upper ranks to the cafeteria staff,” is the way Evelyn M. Rusli of the New York Times describes the company in a November 27, 2011 story. According to a November 28, 2011 blog post by Ryan Fleming of Digital Trends, executives nurture “fierce competition both between the groups and within each department.”

    Apparent measurement mania is one of many structural and cultural issues that have plagued Zynga. A September 8, 2010 story in SF Weekly by Peter Jamison indicates that the company’s values are sub-optimal and that rather than focusing on innovation, Zynga has instead pushed team members to appropriate ideas from competitors. If these assessments are accurate, it appears that Zynga would benefit from changing the structure and culture of its organization. Principles is one step that I explain in my new book, The Bounty Effect: 7 Steps to The Culture of Collaboration.

    In perhaps the most sober indication of problems with Zynga’s focus, the company reported second quarter results last Thursday that contained few bragging rights. While the results exceeded analyst expectations, the number of daily active users declined 45 percent in the quarter from the same period last year. In the three months ending June 30, Zynga’s sales fell 31 percent to $231 million. According to the Wall Street Journal, Zynga CEO Don Mattrick indicated that “getting a business back on track isn’t quick, and isn’t easy.” Mattrick recently replaced founder Mark Pincus as CEO.

    While Zynga clearly faces challenges on many fronts, the company’s structure and culture are likely factors in Zynga’s woes. The company is by no means alone in the issues it faces and the possible structure and culture elements. Organizations of all kinds face exigent circumstances ranging from new competitors and disruptive market forces to natural disasters and terrorist attacks. These storms that blow through businesses provide opportunities to change.

    In The Bounty Effect, I discuss how to replace command-and-control remnants including measurement mania and how to adopt collaborative principles, practices and processes among other steps. Creating value through collaboration happens only when organizations change their structures and cultures from Industrial Age command-and-control to Information Age collaborative.

    Categories: , , , , , ,
    Tags: , , , , , , ,

  • Seven Steps to The Culture of Collaboration

    My new book, The Bounty Effect: 7 Steps to The Culture of Collaboration, has received two favorable reviews: one in Publishers Weekly and the other in Library Journal. Both reviews focus on the 7 Steps: Plan, People, Principles, Practices, Processes, Planet and Payoff.

    I’m delighted that both reviewers understood the book’s premise that businesses must abandon obsolete organizational structures designed for the Industrial Age and replace them with infinitely more valuable collaborative structures suitable for the Information Age. Leigh Mihlrad of the National Institutes of Health reviewed The Bounty Effect for Library Journal. “Rosen declares that while the control method might have worked in the Industrial Age, it does not work in today’s Information Age,” according to the review. Mihlrad concludes with the Library Journal's verdict: “For those in positions to bring about organizational change, this book provides many useful examples.”

    The Publishers Weekly review highlights my point that The Bounty Effect is by no means limited to corporations. “Rosen argues that collaboration moves well beyond organizational boundaries, as it applies to neighborhoods, communities, and government,” according to Publishers Weekly.  “Collaboration creates greater value, enhances achievement, and produces sustainable business models; the question then becomes how quickly can an organization free itself from the Industrial Age and operate to its maximum capacity in the Information Age.” The sooner an organization starts the seven steps, the faster it can migrate from command-and-control and maximize value through collaboration

    Categories: , , , , , ,
    Tags: , , , , , , , , , ,

  • Changing Organizational Structures for Collaboration

    My new book entitled The Bounty Effect: 7 Steps to The Culture of Collaboration® is now available. It’s the second book in a series which includes The Culture of Collaboration®: Maximizing Time, Talent and Tools to Create Value in the Global Economy. The Bounty Effect shows how to change the structure of organizations for collaboration.

    Why do organizations need to change their structures? The Industrial Age was command and control. The Information Age is collaboration. Yet Industrial Age structures render collaboration dead on arrival in the Bounty Effect Jacket JPGInformation Age. Remnants of these structures—including organization charts, performance reviews, meetings and mission statements—inhibit organizations from using new collaborative methods and tools that spark innovation. Now we’re at the point where many organizations—from corporations and small businesses to universities and government agencies—have a desire to collaborate.  Some have taken action to instill collaborative culture. But what’s holding back collaboration is obsolete organizational structures, which we must change.

    The Bounty Effect gets its name from the mutiny that occurred on the H.M.S Bounty in 1789. Before the mutiny, Captain William Bligh used a well-worn management technique: command-and-control. The mutiny forced the structure and culture to change as Bligh became a collaborative leader and his loyalists participated in decisions as they struggled for survival aboard a small boat. The mutiny was an exigent circumstance, one that compels immediate action.

    The Bounty Effect happens when exigent circumstances compel businesses, governments and organizations to change their structures from command and control to collaborative. Triggers include disruptive market forces, new competitors, regional slowdowns, natural disasters, terrorist attacks and global downturns.

    The book is about how to seize the opportunity that The Bounty Effect provides and change the organizational structure in seven steps.  My objective in writing the book is to provide a framework for structural change necessary to transform organizations into collaborative enterprises. And The Bounty Effect demonstrates how collaborative enterprises create far more value than command-and-control organizations. Using the framework, people and organizations can determine how to redesign and adopt a collaborative structure that fits. I welcome your input.

    Categories: , , , , ,
    Tags: , , , , , , , ,

  • Clinton Foundation Collaborates to Improve Health

    Collaborating across sectors—government, private industry, non-governmental organizations (NGOs) and education—can solve some of the world’s greatest challenges. These challenges include global health, economic inequality, childhood obesity, climate change, and health and wellness—which, incidentally, are the five main areas in which the William J. Clinton Foundation works.


    Health and wellness was front and center last Tuesday as President Bill Clinton and his daughter, Chelsea, assembled a few hundred people in the California desert for the Clinton Foundation’s Health Matters conference. Despite the focus, themes are interrelated. So global health, economic inequality, and childhood obesity crept into the discussion. In his opening remarks, President Clinton noted that the rising cost of health insurance premiums often prevents employers from increasing wages. “We cannot ignore the link between health and the economy,” said President Clinton.

    Clinton Health Matters

     

    Invited guests and speakers at the La Quinta Resort in La Quinta, California included hospital and insurance executives, health policy experts, and veterans of government service including Dr. David Satcher, Surgeon General of the United States during the Clinton Administration. Others including Dr. Deepak Chopra, Dr. Dean Ornish, and actress Barbra Streisand are partnering with the Clinton Foundation to advance health and wellness agendas. Long-standing relationships among some participants coupled with the relaxed resort atmosphere sparked an exchange of actionable ideas. President Clinton and Chelsea seemed as comfortable sitting in the audience asking questions and refining ideas as they were on stage.

    “We’re moving into an era where the only way you can create enough jobs for people and generate enough wealth to have decently-rising wages is if you have creative networks of cooperation. I think the same thing is true of this health challenge,” President Clinton insisted during a discussion with NBC News Chief Medical Correspondent Nancy Snyderman, a friend of the former president for thirty years. “It’s the only thing that works. It works everywhere in the world.” This is another way of saying that collaboration creates value.

    I practically muttered “Amen” aloud when President Clinton cited a study that found that if you put a group of people with average IQs together and ask them to work on a problem for a year and you give the same problem to a genius, over the long run the group of people with average intelligence working together will do better than one genius acting alone.

    One of the most impactful ways that collaboration can improve healthcare is to remove the barriers that exist between front-line doctors and other health professionals. Too often primary care doctors practice in silos. Dr. Mark Weissman rose from the audience to insist that he and other primary care doctors are awash in patient data but lack regular access to other medical professionals who can collaborate with them on the data and on patient care. Pediatrician Donald Berwick, former administrator of the Centers for Medicare and Medicaid Services and a possible candidate for governor of Massachusetts, responded to Weissman that it’s necessary for doctors to learn that “I’m no longer the hero who saves the day, but I’m interdependent with others to give care. That’s what works.”

    I’ve written often in this space and in The Culture of Collaboration book about how engaged team members working in a collaborative culture create far more value than do team members working in a culture of fear and internal competition.  Dr. Deepak Chopra noted that employee disengagement costs the United States economy $300 billion a year. “If your supervisor ignores you, you start to get disengaged and within a few months you start to get ill,” Chopra explained. “If your supervisor doesn’t ignore you but criticizes you, you actually get better.” This is because we would rather be acknowledged than ignored even if we’re receiving criticism. “And if your supervisor notices a single strength that you have, your rate of disengagement goes down to 1 percent,” according to Chopra.

    The Health Matters conference is as much about taking action as about exchanging ideas. Corporations, government entities, non-profit organizations, and individuals pledged to take action in preventing disease and improving health. Financial pledges total over $100 million. One such pledge by entrepreneur and philanthropist Vinod Gupta will support a new Clinton Foundation program to address prescription drug abuse. Gupta’s son, Benjamin, died accidentally after taking prescription painkillers and consuming alcohol in December of 2011. Gupta and the Clinton Foundation will educate the public, particularly college students, about the dangers of prescription painkillers.

    As I was checking out of the La Quinta Resort, I noticed that Surgeon General Satcher was next to me in line. We chatted about his recent work guiding the Satcher Health Leadership Institute at the Morehouse School of Medicine in Atlanta. Dr. Satcher noted that at Morehouse he’s building on his work as surgeon general by collaboratively focusing on neglected diseases and underserved populations. Like so many other disciplines, improving health and wellness requires collaboration.

    Categories: , , ,
    Tags: , , , , , , , , ,

  • Multicultural Collaboration Produces Unique Spa

    Bridging cultures, particularly regional cultures, produces a broader perspective that gives collaborators an edge. In disciplines like aerospace engineering, team members trained in one country’s engineering tradition may view a creative challenge differently than their colleagues who were trained in a different country’s system. Drawing from their collective global knowledge, cross-cultural collaborators can spark synergies and create greater value. In The Culture of Collaboration book, I call this the Dynamic Dimension of Cross-Cultural Collaboration.

    This dimension is alive and well at Archimedes Banya, a spa complex that opened in San Francisco last New Year’s Eve after twelve years of development and construction. People from twenty different countries collaborated on the project. Managing partner Mikhail Brodsky of Russia had the original idea. Reinhard Imhof of Switzerland led the indoor construction. Architect Sam Kwong of China developed the plans. Other partners are from countries including Korea, Israel, Germany, Japan, and Mexico.

    The concept began when Brodsky, a mathematician, arrived in San Francisco from Moscow in 1989. A lBanya2over of Russian bath complexes or banyas, Brodsky was disappointed to find no such facilities in his adopted city. He longed to start a banya. In the summer of 1998, Brodsky, then a professor at the University of California at Berkeley, applied for a job as chair of the mathematics department at San Francisco State University. SFSU’s rejection sparked Brodsky’s interest in doing something significant in San Francisco while delivering on his banya dream.

    Brodsky, Imhof and two other partners formed a company, and in 1999 bought a lot in India Basin near San Francisco’s former Hunters Point Shipyard. Though in an obscure neighborhood, the lot provided sweeping views of San Francisco Bay. To construct the building, Brodsky and his partners would need to recruit more partners. Like many ethnic groups living in the United States, many Russians do business only within their community. Therefore, logic would dictate engaging Russians to finance, design and build the project. But some Russians who Brodsky approached had difficulty seeing past the many roadblocks to the project ranging from building permits and location to construction costs and customer base. So, Brodsky decided to broaden his reach, involving people from as many countries as possible. The common thread was a passion for the Banya project plus mutual trust and common goals, two of the Ten Cultural Elements of Collaboration I identify in The Culture of Collaboration book.

    In a departure from the command-and-control approach to business in which “stars” grab the credit, Archimedes Banya recognizes multiple contributions in much the same way Adobe Systems includes a Banya Wallcredit role in its software products. When I visited Archimedes Banya recently, the first thing I noticed was a wall near the entrance listing the names of the multicultural collaborators who turned the concept into reality. Also apparent was the amazing art ranging from mosaics depicting bathing traditions to murals and inlaid ceiling tiles. Including art in public bathing facilities is a tradition dating back to the Roman Empire.

    Artist Vadim Puyandaev of Kazakhstan collaborated with Brodsky to evoke the right atmosphere. “I
    wanted very simple, clear images of emotion,” says Brodsky. And the images also reflect action. “In a Russian banya, people move. It’s an active place. It’s not just sitting and sweating.” The complex is geared to socializing and offers facilities ranging from a rooftop sun deck with a San Francisco Bay view to private reception rooms replete with bars and kitchens.

    The Banya offers a spa experience reflecting the cultural melting pot. I checked out two Russian saunas, the Finish dry sauna, the steam room, warm soaking pools, cold plunge and relaxation room. After loosening up in the various saunas, I experienced a Russian venika platza treatment that involved a tall Moldovan fellow clad in a towel and sweat-soaked Banya hat brushing and lashing bunches of Latvian birch leaves on me to increase circulation.

    Following this, I laid on a table as an attendant scrubbed me with an exfoliating soap and then rinsed me with buckets of warm water. Then my muscles were relaxed enough for a massage from a masseuse from the United States. Afterwards, I headed to the café upstairs for pelmini or Russian dumplings, stuffed cabbage, hearty Russian beef soup, fresh-sqeezed juices spiked with kombucha, which is fermented tea and housemade kvass, a non-alcoholic beer made from fermented rye bread.

    An ambitious spa project that began as one person’s vision ultimately reflects the combined vision and execution of multiple people from many cultures. Collaboration involves marrying talents that are worth far more collectively than individually. Brodsky describes himself as a “starter.” But to make the project a reality, he collaborated with Imhof, a “finisher.” Because of the Swiss tradition of quality workmanship, Imhof shared Brodsky’s values of using the best materials and constructing a banya for the long term. The concept of “starters” and “finishers” has broad ramifications. A starter may have an incredible idea, but creating a company that produces substantial value may require collaborating with a finisher.

    As we collaborate, we can create awesome value by engaging and involving people with multiple talents and backrounds and, yes, from multiple cultures. The Dynamic Dimension of Cross-Cultural Collaboration delivers results otherwise unattainable.

     

    Categories: , , , , , ,
    Tags: , , , , , , ,

  • Cross-Sector Collaboration for Sustainable Development

    Accomplishing massive goals requires massive collaboration—far beyond collaborating within an organization or within an industry or among government agencies.

    Making meaningful progress on issues including eradicating global poverty and protecting the global ecosystem requires collaboration among governments, non-governmental organizations (NGO’s), private industry, farmers, indigenous peoples and unaffiliated individuals with ideas. This cross-sector collaboration is driving the agenda for the United Nations Conference on Sustainable Development which happens this June 20-22 in Rio de Janeiro, Brazil. The conference, dubbed Rio+20, marks the twentieth anniversary of the United Nations Conference on Environment and Development. The 1992 conference established the Rio Declaration, which includes 27 principles mostly addressing sustainable economic development.

    Last Friday, at the invitation of the United States Department of State, I attended a planning meeting for Rio+20 at the Center for Social Innovation at the Stanford Graduate School of Business. The purpose was to distill ideas from cross-sector collaborators on how to bridge connection technologies with sustainable development. In a brainstorming session on “sustainable economic growth,” we tackled wasted talent and connectivity.  Think of the many people in developing countries with talent and ideas who have no outlet to connect and collaborate. This is our collective loss as global citizens until we tap that talent.

    The world’s wasting of talent in developing countries is analogous to the command-and-control organization that pays “knowledge workers” to think and pays everybody else to carry out orders. See my January 11, 2011 column for BusinessWeek.com on this topic. Such an organization squanders talent. This is because people throughout the organization—from the loading dock to the call center—have knowledge to contribute.

    One participant noted that wasted connectivity involves using the Internet frivolously, perhaps for pirating movies and other content, rather than for working together to eradicate poverty, create new markets and protect the environment. Similarly, wasted connectivity within organizations involves using networks and tools for chatter rather than for developing and producing products and services.

    Since the 1992 Rio Declaration, the Internet has grown from less than 16 million users to over 2 billion users, according to internetworldstats.com. Mobile phone users have grown from less than 23 million in 1992 to more than 6 billion in 2011, according to nationmaster.com. The current level of connectivity creates an opportunity for a more distributed, peer-to-peer (read inclusive) approach in collaborating for sustainable development. 

    Old models of cross-sector collaboration were minimally effective, because they involved “decision makers” or “thought leaders” shaping ideas and developing solutions which they would hand down to people impacted by the decisions. Now people in developing countries without affiliations can shape ideas with ministers and private sector leaders globally. Well, at least this is technically possible.

    As important to cross-sector collaboration as global connectivity and enabling technologies is a cultural shift in which governments, NGO’s and private industry embrace input from people regardless of affiliation or location. This is analogous to organizations adopting more collaborative cultures and tools so that people far from the home office or from executive corridors can participate in making decisions. The State Department has chalked up success with an emerging collaborative culture and tools including Secretary Clinton’s Sounding Board. For more on this, see my September 14, 2010 post.

    One of the people hashing out ideas in the sustainable development brainstorming session was Rio+20 Secretary General Sha Zukang, who is also the UN Under Secretary General for Economic and Social Affairs. Zukang, who demonstrated particular talent at defining and outlining sustainable development issues, brushed against a live wire as the workshop concluded: intellectual property. The brainstorm was exactly three weeks after the collapse of U.S. House of Representatives support for the Stop Online Privacy Act and Senate support for the PROTECT IP Act backed by media and entertainment companies and opposed by Google and Wikipedia among other online interests.

    Zukang described the need to “find a balance” between protecting intellectual property and disseminating information. This balance impacts cross-sector collaboration in that people in developing countries often lack access to the same information accessible to their collaborators in developed countries. Providing affordable access will help level the playing field. Contrary to some viewpoints, collaboration—cross-sector or otherwise—by no means requires eliminating or dismantling intellectual property protection. IP protection creates incentives for people and organizations to collaboratively develop and produce products and services.

    Cross-sector collaboration takes collaboration beyond organizational and sector boundaries to create value on a global scale.

    Categories: , , , , ,
    Tags: , , , , , , ,

  • BMW, Toyota and Collaborating with Competitors

    They compete in the marketplace, but now they’re also collaborating.

    BMW Toyota CollaborationBMW and Toyota have announced they will collaborate in two areas: the companies will share costs and knowledge for electric car battery research, and BMW will supply diesel engines to Toyota. Toyota owns the luxury brand, Lexus, and therefore BMW and Toyota directly compete in the luxury car segment. Both companies have a significant collaboration track record.

    In The Culture of Collaboration book, I describe how BMW and Toyota create value by collaborating internally and with business partners. The preface, which you can read here, reveals how my visit to the BMW design center in Munich some years ago sparked the book.

    So why would two competitors collaborate? Collaborating makes sense within enterprises and with partners, but the marketplace requires pure competition. Right?  Well, that depends.

    Collaborating among competitors makes sense when the collaboration:

    1. Creates value for both parties
    2. Begins with structure and clarity
    3. Involves non-differentiating processes

    Clearly, the BMW/Toyota collaboration nails number one. “We think that this collaboration will allow for development of next-generation batteries to be done faster and to a higher level,” Toyota Executive Vice President Takeshi Uchiyamada said at a news conference. Both companies will share the costs of battery development. 

    Toyota will reportedly use BMW’s 1.6 and 2-liter diesel engines for cars sold in Europe beginning in 2014. This is reportedly the first time Toyota has procured an engine from a competitor. According to a story by Yoshio Takahashi and Kenneth Maxwell in the December 2, 2011 edition of the Wall Street Journal, the collaboration will reduce BMW’s engine production costs per unit by increasing volume. So, value creation is at the heart of this collaboration.

    What about #2, structure and clarity? Based on what I know of BMW and Toyota and their approaches to collaboration, chances are this effort involves much of both. In any collaboration among competitors, both parties must establish boundaries for collaboration at the outset. Most importantly, the competing collaborators must determine use and ownership of existing and jointly-created intellectual property. Far fewer problems arise when business unit people, engineers, marketing folks, lawyers and others from both companies hash out these concerns rather than simply handing off the issues to lawyers to hash out in a vacuum.

    Regarding #3, I’ve found that collaboration among competitors works best when the effort involves eliminating redundancy in non-differentiating processes. These are typically under-the-hood processes that are not part of a company’s market or product perception.  Two companies that each make hot sauce might use the same bottling equipment. Two newspapers in the same market might use the same printing presses. Entire industries participate in consortiums for purchasing, saving each competing company substantial money. These shared, non-differentiating processes are invisible to the customer. 

    Engines are invisible to all but the most die-hard car enthusiasts, so collaborating on this process arguably fits the bill as non-differentiating. Typically, car batteries have nothing to do with the vehicle perception in the marketplace. In the case of electric cars, though, the jury is still out whether the battery is invisible to the consumer. The technology is in its infancy, and therefore the market consists primarily of early adopters. These consumers are more techno-savvy, realize the lithium-ion battery is intrinsic to the product’s technology and performance, and therefore may place a heavier emphasis on the battery in their purchase decisions.

    So, it remains to be seen whether battery research and development is non-differentiating for BMW and Toyota. Nevertheless, if both companies can save substantial money on development and bring vehicles to market sooner and customers perceive and actually get better electric vehicles, this collaboration will prove successful.

    Categories: , , , ,
    Tags: , , , , , ,

  • Slow Money Collaboration

    In a cavernous, nearly empty room above the Readers Café & Bookstore in Building C of San Francisco’s Fort Mason Center, Woody Tasch sits at a corner table by a lone window looking out on the Bay. It’s the eve of the Slow Money National Gathering, and the organization’s chairman is putting the finishing touches on his opening remarks. He must fend off criticism that his model is “fantasy economics” and impress on the three hundred investors and five hundred or so other attendees that our industrialized food system has become as imbalanced as the financial system was during the depths of the 2008 crisis.

    Woody, a former New York venture capitalist who now lives off the grid near Taos, New Mexico, wants to change how we finance food businesses as dramatically as he has changed his own life and career. In the 1980’s, Woody worked as a self-proclaimed “small-time VC” making healthcare investments for Prince Ventures, owned by the Prince family of Chicago.  Ultimately, he transformed himself from a mathematics-driven investor to one with a social conscience with stops along the way as treasurer for a foundation and chairman of an angel investor network called Investors Circle.

    “It’s no longer about how much we can take off the table for ourselves,” Woody insists. After getting involved with the global Slow Food movement, the antithesis of fast food in its promotion of sustainability, Woody and his collaborators sought to address the difficulty many sustainable food businesses have getting financing. “It hit me that patient capital plus slow food equals slow money,” he explains.

    Woody and his colleagues are enabling microfinance for the food industry and, since 2009, have sparked $6 million in micro loans. Slow Money links growers, restaurants, organic farm suppliers and other food entrepreneurs with consumers willing to lend businesses a few thousand—or even a few hundred—dollars.

    “This is not a typical fiduciary model,” Woody explains. “What we are going to be proving over the next decade is that collective intelligence and local knowledge of groups of individuals effectively collaborating will produce positive outcomes both in arithmetic and impact on the community.” In other words, investors can do good and simultaneously get a modest return on investment. At the moment, 3 percent a year in interest is typical.

    Slow Money is evolving from advocating individual investments to promoting investment clubs. Compared to angel investing, for which investors must have assets of at least a million dollars or a yearly salary of at least $200,000, the investment club barrier to entry is much lower. As a model, Slow Food organizers point to the No Small Potatoes Investment Club, which provides low-interest loans to Maine farmers and food producers. So far, fifteen investors have each put up five thousand dollars.

    After talking with Woody, I stop by the rehearsal for the entrepreneur pitches. These five-minute presentations are not unlike those for technology companies at venture capital conferences. But there is something perhaps more wholesome and genuine and, yes, rougher around the edges, about these pitches.  Some of these food businesspeople have never before spoken at an event. George Weld, owner of both Egg restaurant in Brooklyn and a farm in Oak Hill, New York, speaks of the need to curb the “recurring alienation between rural and urban that plagues the food economy.”

    One of the better-received pitches comes from Dr. Hubert Karreman, a veterinarian and founder of Bovinity Health. Hubert’s company manufactures natural alternatives to antibiotics for livestock. He clicks through financials including $250,000 in sales in 2011, provides market share projections and leaves the rehearsal audience whispering "he's gonna get funded."

    Slow Food’s goal is for a million Americans to be investing one percent of their money in local food systems within a decade. Meantime, Woody Tasch offers his prescription for the economy. “What we need is rebalancing. Right now we’re lurching towards the global race to the bottom. It’s buy low, sell high, GMO [genetically modified organism], CDO [collateralized debt obligation] capitalism. We have to compete for cheap labor around the planet subsidized by cheap oil and ignoring the medium and long-term social and environmental impact.” Collaborating requires a longer-term focus, and Slow Money is helping enable that evolution.

    Categories: , , , ,
    Tags: , , , , , , ,

ABOUT

Email Me

CATEGORIES