DisciplinedCollaboration

Morten T. Hansen

MIIC March 2, 2009

The Apple iPod story

iPod introduced in Cupertino, California, in October 2001

September 11 2001 October 23 2001

iPod a combination of existing pieces

Apple as Masterful Collaborator

External• 1.8 inch drive (Toshiba)• Hardware blueprint (PortalPlayer)• MP3 decoder controller (PortalPlayer)• Codec (Wolfson• Lithium battery (Sony)• Power management (Linear Technology)• Basic software (Pixo)• iTune software (Soundjam)• Interface controller (Texas instrument)

Internal • Architecture• Hardware engineering• Display• Design• User interface• Scroll wheel

iPod a combination of existing pieces

Apple as Masterful Collaborator

External• 1.8 inch drive (Toshiba)• Hardware blueprint (PortalPlayer)• MP3 decoder controller (PortalPlayer)• Codec (Wolfson• Lithium battery (Sony)• Power management (Linear Technology)• Basic software (Pixo)• iTune software (Soundjam)• Interface controller (Texas instrument)

Internal • Architecture• Hardware engineering• Display• Design• User interface• Scroll wheel

“This was a highly leveraged product from the technologies we already had in place”

Rubinstein, head of hardware at Apple

Hardware Software Design

Steve JobsRubinstein

iPod had tight collaboration across three units inside Apple

Fast:Time to market was 8 months!

Nov 2001March 2001

iPod Introduced

iPod TeamLaunched

Xmas

8 months from concept to introduction

Amazing success: iPod/iTunes a $10bn business in 6 years

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006in

$mln

iPod iTunes

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

quarter

cum

. uni

ts so

ld

Growth of iPods sold … .. has become a $10bn business

Sony’s Connect Story

Sony had all the pieces in-house- How hard could it be?

Sony had all the pieces in-house- How hard could it be?

“We can do this in nine months. We got the product, hardware, software.”

Executive Philip Wiser telling Howard Stringer (U.S. head) in 2003

Hard!Rivalry among 5 groups in Sony in 2003

PC Japan

Own musicplayer

WalkmanJapan

Own musicplayer

Sony MusicJapan

Own onlinemusic

Sony MusicUS

Own onlinemusic

SonyElectronicsUSOwn onlinemusic

Hard!Rivalry among 5 groups in Sony in 2003

PC Japan

Own musicplayer

WalkmanJapan

Own musicplayer

Sony MusicJapan

Own onlinemusic

Sony MusicUS

Own onlinemusic

SonyElectronicsUSOwn onlinemusic

“It’s impossible to communicate with everybody when you have that many silos.”

Howard Stringer, Sony CEO

“Sony has long thrived on a hyper-competitive culture, where engineers were encouraged to outdoeach other, not working together”

the Wall Street Journal

Connect launched 2004, a flop, takenoff, re-launched, terminated 2007

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2001 2002 2003 2004 2005 2006

in $

mln

Note: audio sales includes all audio products

A Long, painful decline in Sony audio

Howard Stringer appointed CEO of Sony in June 2005

One of the first steps?

Howard Stringer appointed CEO of Sony in June 2005

One of the first steps?

Sony United

Collaboration Traps

Bad collaboration is worse than no collaboration …..

Trap #1. Wrong organization set-up. Collaboration efforts run into a wall.

Example: Sony Connect- Decentralized structure hindering collaboration- Competition among units- Incentives skewed against working across the organization

Trap #2. Over-collaboration: Collaboration run amok. “Must be good to collaborate…..”

Example: BP“People always had a good reason for meeting…You’re sharing best practice. You’re having good conversations with like-minded people. But increasingly, we found that people were flying around the world and simply sharing ideas without always having a strong focus on the bottom line.” John Leggate,

CIO, British Petroleum

Trap #3. Over-shooting potential. Upside of Collaboration not as high

Example: Sony buying Columbia PicturesIdea was to that Sony’s electronics division should collaborate with film-makers on cross-promotions etc.- Last Action Hero Movie: soundtrack by Sony Music, joint marketing of TVs, video recorders, and the film. - But upside was far smaller and never large.

+

Trap # 4. Under-estimating costs of collaboration. Costs much higher

Example: DNV food case- For the IT consulting division, probably not the best project- Lots of hassles working across business units (costing time and money)

Trap #5. Getting the organizational problem wrong. Mis-understanding why people don’t collaborate.

Leaders mis-understand why employees don’t collaborate better-“We thought the key problem was difficulty in finding knowledge and people in our company, when in reality the key problem is people’s unwillingness to collaborate.”

IT manager, large U.S. company

Trap #6. Implementing the wrong solutions toorganizational problems

Leaders put in place the wrong solutions because they mis-understood the problem-“Because we thought the key problem was search, we invested in an elaborate IT and knowledge management system to help people find things in the company. But the key problem wasn’t search.”

IT manager, large U.S. company

Getting collaboration right

You must put discipline in collaboration!

Collaboration can getgreat results……

…Provided you have the discipline

Disciplined Collaboration

How much value—and where—from collaboration?

ECONOMIC OPPORTUNITY

Find them, tear them down

BARRIERS TO COLLABORATION

Tailor solutions to specific barriers, and don’t overdo

MANAGEMENT LEVERS

How much value—and where—from collaboration?

ECONOMIC OPPORTUNITY

Executives need to articulate goals of collaboration in three areas

BetterInnovation

RevenueGrowth

ImprovedOperations

BetterInnovation

Cross-unitproduct innovation

RevenueGrowth

ImprovedOperations

New businessesby combining

Procter & Gamble master at innovation through collaboration

“New study shows whiter teeth can lead to greater success in work and love” P & G website, 2007

$ 34.99

Procter & Gamble master at innovation through collaboration

“New study shows whiter teeth can lead to greater success in work and love” P & G website, 2007

$ 34.99

teeth whiteningexpertise

novel film technology

bleach expertise

Procter & Gamble master at innovation through collaboration

“New study shows whiter teeth can lead to greater success in work and love” P & G website, 2007

$ 34.99

teeth whiteningexpertise

novel film technology

bleach expertise

Oral Care

Division

Corp. R&D

Fabric &Home

Division

Executives need to articulate goals of collaboration in three areas

BetterInnovation

RevenueGrowth

ImprovedOperations

Cross-selling, Re-package

Customer serviceby coordinating

Wells Fargo: best in cross-selling products to banking customers

0

2

4

6

8

10

12

14

16

18

avg. consumer avg. Wholesaler Goal avg. U.S. allproducts

No.

pro

ducts

/custo

mer

Wells Fargo current

Best in U.S. with 5.2 products per consumer

Next goal togo from 5.2to 8 productsper consumer

Avg. U.S. bankingCustomer has 16 financial products

Wells Fargo: best in cross-selling products to banking customers

80 business units

0

2

4

6

8

10

12

14

16

18

avg. consumer avg. Wholesaler Goal avg. U.S. allproducts

No.

pro

ducts

/custo

mer

Wells Fargo current

Best in U.S. with 5.2 products per consumer

Next goal togo from 5.2to 8 productsper consumer

One Wells Fargo

Avg. U.S. bankingCustomer has 16 financial products

Executives need to articulate goals of collaboration in three areas

BetterInnovation

RevenueGrowth

ImprovedOperations

Costs/investmentssavings by sharing

Better decisionsby getting input

BP: lots of best practice transfers- example: retail in gas stations

BP UK

BP Netherlands

Best practice transfer

Best practice transfer

BP Atlanta

BP: lots of best practice transfers- example: retail in gas stations

BP UK

BP Netherlands

Best practice transfer

Best practice transfer

BP Atlanta

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

% c

hang

e af

ter

Much improved:

# SKUs WorkingCapital

RetailSales

-26%

+10%

-20%

Summary: assess opportunities for collaboration in three areas

BetterInnovation

Cross-unitproduct innovation

RevenueGrowth

ImprovedOperations

New businessesby combining

Cross-selling, Re-package

Customer serviceby coordinating

Costs/investmentssavings by sharing

Better decisionsby getting input

01020304050607080

Gap

Curremt

Assess opportunities: One high-tech company

Costs & Decisions Customers Innovation

Scale

Scale: 100=very high; 1 = very low

DNV assessment of opportunity;large gaps

0

10

20

30

40

50

60

70

80

costs problemsolving

cross selling crosspollination

gap

current

Costs & Decisions Customers Innovation

Provider of competencies/services

Business Unit

Maritime Energy Industry IT Global Services

Holder of customer relations

Maritime 1. Sell Energy’s competencies in material and testing, fire and explosion, and asset risk., to Maritime customers(20 million)

2. Sell Industry’s leadership systems to Maritime’s customers(10m)

3. Sell IT risk management services to Maritime customers(100m).

Energy 4. Sell Maritime’s Mobile offshore platform classifications to Energy customers.(200m)

5. Sell Industry’s integrated leadership systems toEnergy’s customers(10m)

6. Sell IT risk management services to Energy’s customers(100m)

Industry Low 7. Sell Energy’s competencies in material and testing, fire and explosion, and asset risk, to Industry customers(50m)

8. Sell IT risk management services to Industry’s customers(300m)

IT GlobalServices

Low 9. Sell Energy’s technology within risk and reliabilityTo IT customers(10m)

Low

The Collaboration Matrix:DNV example

Find them, tear them down

BARRIERS TO COLLABORATION

Four barriers to collaboration

#3. Search

Cannot find good help

# 4. Transfer

Cannot work together “wrong chemistry”

Ability

#1. Not-invented here

Do not want to reach out

# 2. Hoarding

Do not want to help

Motivation

Barrier #1: Not-Invented-Here

Not-Invented-Here:People are not willing to reach outto colleagues in other partsof the company to collaborate with them.

Insular culture: Interacting inside the group

Norm of self-reliance: Ought to fix your own problems

Status gap:Don’t want to cross status lines

Fear: Do not want to reveal problems or poor performance

Motivation

Barrier #2: Hoarding

Hoarding:People are unwilling to help and share what they know

Competition among units in acompany leads to less cooperation

Biased incentives: rewards for narrowgoals means people do not help

Time famine: people do not havetime to help and collaborate

Fear: people think sharing what theyknow makes them less powerful

Motivation

Barrier #2: Hoarding

Hoarding:People are unwilling to help and share what they know

Competition among units in acompany leads to less cooperation

Biased incentives: rewards for narrow goals

Too busy: people do not havetime to help and collaborate

Fear: people think sharing what theyknow makes them less powerful

Motivation

Barrier #3: Search

Search:People who look for information and people cannot easily find them.

Size: Big and complex companies make searching across it harder

Information overload: too much information makes search harder

Spread out: geographical distancemakes search difficult

Poverty of networks: fewHorizontal links undermine search

Ability

Barrier #4: Transfer barrier

Strangers:People are unable to transfer knowledge from one place toanother

No common frame: don’t knowhow to work together on a project

Weak ties: strangersdo not transfer knowledge well

Tacit knowledge: very difficult to transfer

Ability

Barriers vary by company- Example: DNV

Lowest quartile (lowest

barriers)

Second lowest quartile

Median Second highest quartile

Highest quartile (highest barriers)

First Barrier:Not Invented Here

Scores between 3 and 105

106 – 159 160 161 – 200 201 - 300

Second Barrier:Hoarding

3 – 60 61 - 99 100 101 - 140 141 - 300

Third Barrier:Search

3 – 90 91 - 134 135 136 - 180 181 - 300

Fourth Barrier: Transfer

3 – 110 111 – 167 168 169 – 210 211 - 300

Implication: Barrier not a problem

Barrier might cause some problems

Barrier might cause problems

Barrier a problem

Barrier a big problem

N=107 companies. “How to Build Collaborative Advantage.” SMR, 2004

169

180

133

194

BadGood

Example: Large high-tech company

Lowest quartile (lowest

barriers)

Second lowest quartile

Median Second highest quartile

Highest quartile (highest barriers)

First Barrier:Not Invented

Here

Scores between 3 and 105

106 – 159 160 161 – 200 201 - 300

Second Barrier:Hoarding

3 – 60 61 - 99 100 101 - 140 141 - 300

Third Barrier:Search

3 – 90 91 - 134 135 136 - 180 181 - 300

Fourth Barrier: Transfer

3 – 110 111 – 167 168 169 – 210 211 - 300

Implication: Barrier not a problem

Barrier might cause some problems

Barrier might cause problems

Barrier a problem

Barrier a big problem

N=107 companies. “How to Build Collaborative Advantage.” SMR, 2004

BadGood

137

72

184

169

Tailor solutions to specific barriers, and don’t overdo

MANAGEMENT LEVERS

Unification Lever

•Big Common Goal

•Teamwork Value

•Language

Tailor Three Levers

Unification Lever People Lever

•Big Common Goal

•Teamwork Value

•Language

•Collaborative leaders

• Selecting: promotion, recruiting

• Development

Tailor Three Levers

Unification Lever People Lever Network Lever

•Big Common Goal

•Teamwork Value

•Language

•Collaborative leaders

• Selecting: promotion, recruiting

• Development

•Internal Networks

•External Networks

• Knowledge Management

Tailor Three Levers

Summary of Disciplined Collaboration

How much value—and where—from collaboration?

ECONOMIC OPPORTUNITY

Find them, tear them down

BARRIERS TO COLLABORATION

Tailor solutions to specific barriers, and don’t overdo

MANAGEMENT LEVERS