When Internal Collaboration Is Bad for Your Company...

Morten T. Hansen, a Danish professor in Entrepreneurship at INSEAD business school, has a terrific piece in the April edition of the  Harvard Business Review entitled 'When Internal Collaboration Is Bad for Your Company'.

Hansen discusses the political realities of cross unit collaboration very eloquently: 'Collaboration can deliver tremendous benefits (innovative offerings, new sales). But it can also backfire if its costs (including delays stemming from turf battles) prove larger than you expected '.

Hansen's material is hinged on the reality that 'working across organizational boundaries can create tremendous value—or destroy it'. There is currently a business and marketing fashion wave for collaboration as the miracle cure for all that ails business which isn't helpful in differentiating good from bad ideas, and this piece helps clarify that problem.

Collaboration can just as easily undermine performance as enhance it without proper guidance. HBS is publishing Hansens' book 'Collaboration: How Leaders Avoid the Traps, Build Common Ground, and Reap Big Results' next month, and the HBR article is in some ways an exercise to sow fear and doubt and promote the solution as being in the book. Having said that the article is eminently sensible and addresses the commonly very underestimated realities of internal politics.

Hansen cautions on overestimating the return on investment of organizing collaboration and/or underestimating costs. He also cites examples of ignoring 'opportunity costs' : essentially other ways of solving business problems which might prove more successful than combining business units collaboratively to attempt to achieve the same objective.

An issue I run into over and over again while consulting is helping people envision scale - Hansen talks about huge mergers and acquisitions projects such as Daimler’s $36 billion acquisition of Chrysler in 1998 and the intended synergies/reward as the 'collaboration premium'.

(Collaboration premium is defined by Hansen as the difference between the projected financial return on a project and two often overlooked factors—opportunity cost and collaboration costs.)

The sale nine years later of  80% of Chrysler for $1 billion was clearly a financial M&A disaster and the 'collaboration premium' non existent. Huge scale such as this example is obviously completely different to cross department innovation in a much smaller company.

This context and pre existing technology is an area where I am confident of bringing real value as a consultant  in dealing with scale and planned growth of collaboration environments to meet business needs at future scale. I'm looking forward to reading a review copy of Hansen's book shortly and will be interested to see if it addresses this important pragmatic reality.

In a recession Hansen proposes three types of collaboration are especially valuable: Cross-Selling, Best Practice Transfer and Cross Unit Product Innovation.

Internal collaboration, often intended to spur new product development or increase revenue, may seem a low priority in a period of profit-focused cost cutting.

That’s a big mistake. Collaboration ought to be a crucial element of your recession strategy, because it will allow you to generate profits by exploiting existing assets—to do more with what you already have.

Overall this is a very useful, sober piece, and Hansen clearly has a good grasp of the turf war realities of internal collaboration - the blocking and sheer bloodymindedness of people fighting to protect their fiefdoms and control others - that can eat time and money in intractable wars of attrition. I

What can go wrong is as interesting to those with their necks on the line organizing collaboration and associated infrastructure as the success stories. This piece is a useful reality check for those who have been drinking too much kool-aid about grass roots adoption, crowd sourcing, the wisdom of the crowd or following some of the wackier social media marketing memes...

I'm looking forward to reading the longer form book and will review it here in the next few weeks. The Economist has a review here. Interestingly I see two of the companies showcased at the upcoming Enterprise 2.0 Conference - Lockheed Martin's Unity Project and P&G's internal collaboration strategic planning - are also discussed in the Hansen's book.