Vantage Point

Business collaboration as a new competitive paradigm

By Lisa Renner

Almost all of today’s business leaders are facing the reality that they must do more with less, and the strategies that have worked for them in the past are falling short. Many are deciding they can no longer go it alone. Survival in today’s new business environment increasingly depends on the ability to leverage relationships that can foster innovation, accelerate entry into new markets or create new operational efficiencies.

In other words, more businesses will need to start collaborating with other organizations, sometimes even with their traditional competitors, if they want to sustain long-term growth, innovation and profitability.

Too often, business collaboration is misconstrued as merely a feel-good activity. However, in reality, collaboration is a business growth strategy that creates new value, reconfigures processes to achieve greater efficiency and proportionally distributes rewards and risks according to the shared contributions of the participants. In fact, some of the most common problems businesses in a wide variety of industries are solving through collaboration include decreasing operating expenses, improving asset efficiencies, minimizing regulatory compliance burdens, increasing access to new markets and increasing sales revenues.

Sometimes, however, people look for the benefits of collaboration from business relationships that aren’t true collaborations. A common error is confusing outsourcing with collaboration. Outsourcing contracts are transactions in which vendors provide a service or product instead of customers doing it themselves. While it serves a definite purpose, outsourcing, in its most common form, cannot produce the benefits of true collaboration.

True business collaboration involves parties that agree to share in the rewards in proportion to the risks they take in a relationship. The power of the partners working together through business-minded collaboration has an amplifying effect on their contributions. Together they can save more or generate a greater return on a shared investment than each business could realize on its own.

Moreover, the opportunity to share in a greater outcome encourages each business to invest time and effort into the collaborative arrangement and to find ways to work smarter and faster, thus increasing the amplifying effect of the shared arrangement. The result is more innovation and greater value for both businesses.

Problems solved

My book, “1 + 1 = 3: The New Math of Business Strategy,” identifies three primary so-called Tiers of Collaborative Growth: cost savings, expansion and co-creation. Think of these tiers as “the problems collaboration is solving.” Most organizations begin collaborating at the cost savings tier—collaborating to create economies of scale, better utilize assets or mitigate risk.

Core IT systems are among the most expensive assets on a bank’s books. Every community bank has to have a core processing system, so why not share the common costs of one? One such successful collaborative arrangement among community banks was highlighted as a feature in this year’s March issue of ICBA Independent Banker, titled “Coop Data Centers: An Idea Whose Time Has Come Again.” The 43-year-old technology and core network cooperative is still going strong today and serving the core processing needs of its four community bank partners.

In another example, taking the shared IT platform concept into the realm of retail banking, a group of credit unions has rolled out a shared branching network for their customers. The network allows credit union customers to transact their banking business at any of 4,500 credit union branches participating in the collaborative effort.

Collaboration is not merely a cost savings strategy. It can also help a business expand into new markets or help create new products. In July, six competing banks in Poland announced they would work together to develop a single solution for mobile payments. Early volume is critical to success in mobile payments, and banks have a competitive advantage against new startups in this space—brand recognition and established trust. Most consumers already have a bank they trust with their money. By working together, these six Polish banks estimate they can capture 70 percent of the mobile payment opportunities within their combined markets.

For community banks, possible collaboration efforts might involve a jointly-operated call center or mailing facility, a shared mobile app development project, combined lending efforts to serve the largest businesses within a marketplace, providing common ATM network access for their customers or funding joint marketing campaigns promoting community banking. The possibilities are only limited by the willingness of community banks to think differently about their operations, particularly about those they either want to maintain control over or reap greater revenues or savings from.