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xxiv Contents The Era of Collaborative Business PART ONE 2 Part One ❘ Part Title ❚ Tuesday, September 11, 2001, started out like any other summer day. But by day’s end, the world as we knew it had changed. Forever. W e are living in volatile times. Uncertainty reigns. Busi- ness patterns are changing as the result of social, po- litical, economic, and technological developments. Most tragically, recent global events have complicated the busi- ness landscape in ways we have yet to fully understand. Even before the terrorist attacks of September 11, 2001, the global economy was undergoing a transformation felt through consolidations and downsizings. Now we are in a phase, at least for the foreseeable future, in which conservation of resources is the order of the day. It seems that everything that was true about business no longer holds. Why? Because of two fundamental truths of the networked economy: 3 The Collaboration Imperative CHAPTER 1 1. The power in business relationships has shifted to customers. As a result . . . 2. Traditional business and industry structures are dying. Not all businesspeople have equated these two major devel- opments with declining sales, plummeting valuations, and soar- ing layoffs. Others have a sense of the association and are trying to see their way clear. Not all of the economic malaise of the years 2000 to 2002 is due to these two developments, or factors; some of it is certainly due to the uncertainty elevated by the attacks of Sep- tember 11. However, it would be a mistake to disregard the pro- found impact these two factors have had. Think about it. Why should the business and industry structures that worked during the business-centric era be expected to work now that we are in the customer-centric era? They shouldn’t and they don’t. But all is not bleak. The economic transformation caused by the ongoing shift from product-centric to customer-centric busi- ness models resulting from rapid changes in communication and information technologies may, in fact, turn out to be our trump card. This shift in the balance of power in business relationships to customers has led us to a new business paradigm that is devel- oping across industries, embracing both customers and business partners. It is the era of collaborative business, where commerce is done in trading communities (what we call Collaborative Com- munities) built by creating win-win relationships with customers and business partners through a continuous stream of value propositions that help each party achieve its respective goals. ❚ In the era of collaborative business, commerce is conducted in trading communities built by creating win-win relationships with customers and business partners. When business is practiced in trading communities, it changes everything about how business gets done. Every aspect 4 Part One ❘ The Era of Collaborative Business of business is impacted—from what constitutes a business entity and the products and services it offers to the jobs we perform each day and how we produce value and improve company per- formance. And most assuredly, the attacks of September 11 crys- tallized the complex interdependencies that exist between companies and nations and further demonstrated the necessity to work with like-minded people to achieve shared goals and the benefit from doing so. THE NEED TO COLLABORATE It is the new business mantra—collaborate, collaborate, collab- orate. But what is collaboration and why is everyone talking about it? Collaboration has many meanings, depending with whom you speak. Some call collaboration the ability to work with oth- ers in distant locations just as you would if they were physically across the table in the same room. For others, collaboration is about the free flow of information across boundaries. And for still others, it is the sharing of resources and goals. More precisely, Merriam Webster’s Collegiate Dictionary (10th ed.) defines collaboration as “(1) working jointly with others with whom one is not immediately connected and (2) cooperat- ing with, or willingly assisting, an enemy of one’s country.“ What’s interesting is that during World War I and World War II, the word collaboration took on a sinister meaning. It was used al- most exclusively as cooperating with the enemy, and no one wanted to be accused of being a collaborator. But that was then. Today, collaboration is used more positively. Both in business and in war, collaboration is viewed as essential for success. Collaboration is considered vital because companies and na- tions realize that they can no longer go it alone. To survive in the networked economy where the balance of power has shifted to the customer, companies are learning that they must collaborate 1 ❘ The Collaboration Imperative 5 with their customers and other businesses in the design, develop- ment, and delivery of the market basket of goods and services if they expect to profitably satisfy their customers’ personal needs. Listen to how Bob Evans, editor-in-chief of InformationWeek, a trade publication that made collaborative business an editorial focus, describes the importance of collaboration in business: The 21st century will force companies of all stripes to collaborate aggressively and religiously, both inside the company and outwardly with its partners. . . . More than ever before, the intertwined worlds of business and technology will wrap into one unified thread: busi- ness goals and objectives outlined and defined by all parties, metrics and milestones determined in partner- ship, stewardship of various projects taken up by the appropriate leaders . . . The issue—the reality—is col- laboration. (Reprinted with permission of Information- Week, CMP Media, Manhasset, NY) Likewise, nations now realize that they must collaborate with the people of other nations to survive and prosper. British Prime Minister Tony Blair’s speech to the Labour Party confer- ence following the September 11 attacks couldn’t have argued more eloquently for collaboration: “Our self-interest and our mutual interests are today inextricably woven together.” From our point of view, we see that building the coalition to fight terrorism resembles the new business paradigm. As U.S. President George Bush stated in an October 11, 2001, press con- ference: “The attack took place on American soil, but it was an attack on the heart and soul of the civilized world. And the world has come together to fight a new and different war.” From this global perspective, the United States assumes the role of what we call the “choreographer,” the entity that sees the vision and works to bring order and direction to the movements 6 Part One ❘ The Era of Collaborative Business of the community members, in this case the people and nations of the world who stand opposed to terrorism. Whether in business or in geopolitics, the choreographer’s role is to build relationships by identifying value propositions that could exist between and among the parties based on what each party brings to the relationship. In building this collabora- tion, the U.S. has structured value propositions with countries such as Pakistan that previously supported the Taliban. Fearing instability, Pakistan offered information about, and access to, the Taliban and Afghanistan to the United States. In return, the United States offered to lift previously ordered economic sanc- tions (imposed because of the testing of nuclear weapons), and Pakistan’s leaders hope that the lifting of sanctions will promote prosperity and political stability by easing the hardships of the Pakistani people. ❚ The choreographer’s role is to build relationships by identi- fying value propositions that could exist between and among the parties. Certainly, value propositions between nations are fluid and have always iterated as each nation learns more about how the other can help it achieve its goals. In essence, what this Col- laborative Community of nations is doing is trading cash and non-cash currencies so that each country moves closer toward meeting its individual goals. At the same time, the Collabora- tive Community moves closer to meeting its shared goal of root- ing out terrorism. How do we even begin to comprehend what these events will mean for us as individuals and in the way we go about doing our jobs? What will it mean for our families, our compa- nies, our customers, and our business partners? Where it will all lead, we must confess we do not know. But we do know that whatever bright future is possible, the way to work toward that 1 ❘ The Collaboration Imperative 7 goal is through collaboration. Whether we are looking at busi- ness or geopolitics, the benefits of, and the necessity for, work- ing across traditional boundaries with like-minded people to achieve shared goals is undeniable. BUSINESS TRADING COMMUNITIES In the era of collaborative business, commerce is done in trading communities that embrace both customers and business partners in trusting, purposeful, win-win relationships. Or stated differently, a Collaborative Community is a seamless al- liance of trading partners and customers where everyone bene- fits by focusing on profitably satisfying the set of needs and wants of the customers who define the community. It is impor- tant to understand that regardless of whether these trading part- ners and the competencies they bring to the community are found in a division of General Electric or in an individual free agent, each entity has to gain value from its participation in the overall business structure, that is, in the community. In other words, each of these entities must believe that the benefits of col- laboration exceed the cost of membership. Each entity must see a clear value proposition, just as each customer sees a clear value proposition in a traditional customer–business relationship. In the era of collaborative business, every relationship must be thought of as a customer relationship. A Collaborative Community focuses on satisfying the needs and wants of each customer on an increasingly personal- ized basis. Thus it requires the entity that builds the community to have as its core competency the ability to develop a relation- ship with, and understand the needs of, the customer. This mem- ber must also build the alliance of business partners that provide the additional competencies required to profitably satisfy the customer. This member is the choreographer, as noted before in the example of the United States–led coalition against terrorism; the choreographer is the entity that sees the vision for the com- 8 Part One ❘ The Era of Collaborative Business munity and works to bring order and direction to the move- ments of the members in pursuit of their shared goals. And just as we call this role player the choreographer, we call the give and take of information, access, goods, services, and money between and among the trading partners and the customers the “dance.” Of course, one can say this dance with customers and busi- nesses has always gone on. And certainly this is true. However, what is different today are the profound developments in infor- mation and communication technologies that are transforming the relationships between and among businesses and their cus- tomers into Collaborative Communities. As Peter Drucker said at the Collaborative Commerce Summit in June 2001, “The great- est impact of the Internet is the elimination of distance.” More than ever, new technologies are allowing people at whatever dis- tance to work closer together. And it is these new information and communication technologies that require us as business- people to adopt new perspectives and master new communica- tion and relationship skills. ❚ New information and communication technologies require new perspectives and new communication and relationship skills. EVERYONE IS A CUSTOMER As companies today realize that to profitably satisfy their customers’ needs, they must focus on what they do best and col- laborate with both their customers and other business entities in order to provide a complete solution, they are also realizing that all parties involved must receive something they value for the col- laboration to work effectively. And if every party must receive something of value, then by definition everyone is a customer. When you look at business relationships from the perspec- tive that each party in a relationship is a customer, the way to develop these relationships becomes more obvious. “If you are 1 ❘ The Collaboration Imperative 9 [...]... This is the iterative process of building a business, developing relationships one interaction at a time In iterative relationships (and all relationships are iterative), each relationship starts with an assumption about the needs and wants the relationship is trying to satisfy and how the relationship should go about satisfying them Then, in the actual process of conducting the relationship, the assumptions... look at the myriad relationships that your company has, or rather that you and your colleagues have, and evaluate whether they are adding value? Because the foundation of collaborative business lies not in the technical tools for communication and information processing but in the underlying human relationships that are ultimately responsible for the activities that take place within the collaboration,... collaboration, collaborative business is not easily quantified and controlled This lack of analytical mechanisms puts collaborative relationships at risk ❚ The lack of analytical mechanisms puts collaborative relationships at risk Observing this problem, we developed an iterative methodology for effectively analyzing both how to decide with what individuals and companies to form collaborative relationships and then... collaboration 16 ❚ Because collaborative business is relationship based as opposed to transaction based, it is not easily quantified and controlled This lack of analytical mechanisms puts collaborative relationships at risk CHAPTER 2 Collaborative Communities B ecause of the shift in power to customers, we are in the era of collaborative business Collaborative business is conducted within networks of. .. between the individual people who interact Companies only interact as the result of the actions people take on their behalf 15 ❚ The foundation of collaborative business lies not in the technical tools for communication and information processing but in the un- 1 ❘ The Collaboration Imperative 17 derlying human relationships that are ultimately responsible for the activities that take place within the collaboration... clear gain Today’s efficient businesses should use an iterative approach to discovering and satisfying the needs and wants of 1 ❘ The Collaboration Imperative 11 their customers And today the term customer not only means the traditional customer but every entity that interacts with you in a significant manner Of course, The customer is in control,” “Whatever the customer wants,” or The customer is king”... However, what isn’t understood is the reason these alliances fail It isn’t financial; it is because of breakdowns in the relationships between the participants Does this mean that although collaboration works in theory, it can’t be practically applied? Not at all But the question does strike at the heart of the problem, which is that relationships are advertised as being between companies, whereas in reality... result of the frequency of interactions and depth of information you must build and maintain in your efforts to form successful collaborative relationships The value creation process in the era of collaborative business begins and ends with knowledgeable and powerful customers who require satisfaction of their personal needs Therefore, throughout your business every relationship must be viewed as a customer. .. looking at business or geopolitics, the benefits of, and the necessity for, working across traditional boundaries with likeminded people to achieve shared goals is undeniable 16 Part One ❘ The Era of Collaborative Business 8 ❚ A Collaborative Community is a seamless alliance of trading partners and customers where everyone benefits by focusing on profitably satisfying the set of needs and wants of the customers... reality relationships are built between people And that’s a very important distinction Relationships by definition are always between the individual people who interact Companies interact only as the result of the actions people take on their behalf A company’s relationship with another company is really the sum of the individual relationships between and among the people in the different companies So, in . plummeting valuations, and soar- ing layoffs. Others have a sense of the association and are trying to see their way clear. Not all of the economic malaise of the years 20 00 to 20 02 is due to these. the collaboration, collaborative business is not easily quantified and controlled. This lack of analytical mechanisms puts collaborative relationships at risk. ❚ The lack of analytical mechanisms. time. In iterative relationships (and all relationships are iterative), each relationship starts with an assumption about the needs and wants the relationship is trying to satisfy and how the relation- ship