October 25, 2023

In the digital world,

collaboration is a critical success factor even if it’s with your competitors

When is it to your advantage to collaborate instead of compete?

Business leaders are taught from a very early age that winning is about beating their competition and being able to sustain that competitive advantage. Strategic planning models are filled with take-no-prisoners hyperbole and a what-it-takes-to-win vocabulary.

As such, I was very interested to read recently that Amazon has committed more than $1 billion to license Microsoft 365 cloud productivity software for 1 million of its corporate and frontline workers from their biggest cloud competitor. Amazon had previously been reluctant to use cloud-based technologies from Microsoft given the rivalry between Azure and AWS.

My takeaway from this unusual decision is that the senior leadership team at Amazon saw it as the best alternative to enhancing their cloud operating model and sustaining their industry leading position in the cloud software market.

Making the business case for collaboration

The speed and magnitude of digital technology disrupting well-established operating models and business planning processes dictates the need to reset how companies think about the boundaries of competition.

  • Twenty years ago, business collaborations counted for less that 3% of a company’s total revenue. Today that number averages 28%.
  • For every $1 of Microsoft revenue, the partner ecosystem generates over $9.
  • Revenue from business collaborations generates 19% higher margins.

A major research study conducted in 2018 by Accenture Strategy surveyed 1,252 C-level global executives to understand how their companies are creating competitive advantage by building business collaborations.

The survey results documented that aligning business partner interests along mutually agreed upon outcomes exponentially increased their combined value proposition and distributed market risk equally across the partners. The results also forecast that when enabled by digital platforms, collaborations could unlock $100 trillion in value for business and society over the next 10 years.

Overcoming the barriers to successful collaborations

While there is compelling evidence of the exponential value that collaborations can generate for companies, more than two thirds of business collaborations underperform or fail. One major barrier to successful collaborations is the silo-based organizational structure/mindset that still exists in most companies.

Other barriers include:

  • Lack of agreed upon accountability for mutually beneficial outcomes
  • Lack of trusted market/customer data
  • Lack of transparency and delays in operational performance reporting
  • Difficulty and inability to properly quantify results
  • Communication gaps within and across companies

Using the 4 Zones Model as a strategic framework for constructing business collaborations

  • Constructing and orchestrating well-designed, multi-faceted, business collaborations necessitates companies acquiring the critical skills, tools, and resources required to make them successful. The 4 Zones Model provides a framework to help you identify and assemble a portfolio of partner collaborations designed to deliver market leading customer experiences as shown on the slide below:

Successful business collaborations share common principles and critical success factors including:

  • A shared vision for a mutually beneficial business outcome
  • Clear accountability and decision-making responsibility
  • Total go-to-market alignment across the entire collaboration portfolio
  • Real time collaboration performance metrics and reporting
  • Willingness to share proprietary data and information
  • Mutual trust to protect against cyber security threats

Besides expanding your product and service offers, business collaborations are also a potential source to onboard new skills and capabilities that your company may lack.

By example, Apple & Cisco have teamed up with insurer Allianz SE to offer discounts on cyber insurance to businesses that primarily use equipment from both technology companies. The alliance also includes insurance broker Aon Plc, who provides customers with more favorable terms on cyber coverage such as lower deductibles, as well as support services in the event of an attack.

Like a business investment portfolio where risk and return are spread across multiple investment options, the 4 Zones business collaboration portfolio is designed to create and deliver new value in four different categories.

The 4 Zones collaboration value creation portfolio approach provides a framework, vocabulary, and decision-making process that enables senior leadership teams to discuss, segment, and prioritize multiple business collaborations. It also enables them to successfully deploy digital technologies as a primary source of value creation that generate market differentiating results.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please email them to me on linkedin. And, if this content could be useful to someone you know, please share it here: